by Vic Patel

There are over a dozen major Clean Energy ETFs available to investors. But which one is the best one to put your hard earned money into? Best can mean different things to different people based on their investment preferences and risk profile.

In this article, I will provide a more empirical based reason behind why I believe that PZD is the most attractive Clean Energy ETF at the moment. I have based on my analysis of 4  primary factors: liquidity, diversification, recent price action, and last but not least expense ratio.

Liquidity has to be a major consideration in the selection of any financial asset. The lack of sufficient liquidity can lead to wider bid ask pricing, and difficulty in efficient trade execution

Top 5 Most Liquid Clean Energy ETFs (based on 3 month Avg. Daily Volume)

TAN –   135,000
PZD –    7,512
ICLN –   79,979
PBW –   13,373
QCLN –   15,318

Since I always want to reduce risk through diversification. ETFs with a larger numbers of holding and a lesser concentration in the top 10 are the most  diversified. So, next, I  analyzed the number of holdings within each ETF and the concentration of its’ top 10 holdings. You will find the results of that below.

Number of holdings

PZD                 51          (31% concentration in top 10 holdings)
PBW                 40         (36% concentration in top 10 holdings)
ICLN                31         (55% concentration in top 10 holdings)
QCLN               39         (57% concentration in top 10 holdings)

Clear Winner:  PZD

From here, I took a look at the price chart of each ETF on our list. What I primarily wanted to see for each was where the current price was trading in relation its 200 period moving average. The 200 period moving average is a widely watched metric by technical traders, in particular retail trend traders. When price is above the 200 period moving average, this group tends to stay on the long side of the market, and when price is below the 200 period moving average they opt to stay flat or on the short side of the market.

This can sometimes bolster prices or place additional pressure on the price of the ETF depending on the where price is trading in relation to this 200 MA. As such, we want to align our position with that order flow whenever possible. So, when prices are trading above it, it is considered a bullish sign. And contrary to that, when prices are trading below the 200 period moving average, it is considered a bearish sign. Essentially, I wanted to filter out any of these ETFs that were trading below their 200 period moving average.

PZD, PBW, and QCLN made the cut, as each was trading above its 200 period moving average. ICLN and TAN however needed to be filtered out due to their trading below its 200 period moving average.

So now we are down to three. The final piece of analysis involved comparing each of the remaining three ETFs to see how their Expense Ratios measured up. The results are below:

Expense Ratio Comparison

PZD     .68
PBW     .70
QCLN   .60

The expense ratios seem to be relatively similar for all three, so there is no clear winner or loser there.

Conclusion

So here what PZD (Invesco Cleantech ETF) has going for it and the reason I believe it is the best Clean Energy ETF to buy:

• PZD is a relatively liquid ETF.
• PZD has the largest number of holdings and the least concentration in the top 10% of its holdings.
• PZD is trading above the 200 period moving average.
• PZD has a reasonable expense ratio based on its peer class.

This market analysis was done by Vic Patel, He is an experienced trader with over 20+ year in the markets. He also runs a popular trading blog at Forex Training Group.

**Data Source – ETFDB.com

The post Screening For the Best Clean Energy ETF appeared first on Alternative Energy Stocks.

This list was last updated on 4/27/2022.

ETFs are Exchange-listed funds which pool investor’s money for the purpose of making Alternative Energy investments. Exchange Traded Funds (ETFs) track a specified Alternative Energy index. This list also includes closed-end mutual funds and other pooled investments which trade on exchanges.

ALPS Clean Energy ETF (ACES)
ASN Groenprojectenfonds (ASNGF.AS)
Bluefield Solar Income Fund (BSIF.L)
Defiance Next Gen H2 ETF (HDRO)
Evolve Funds Automobile Innovation Index ETF (CARS.TO)
First Trust Global Wind Energy Index (FAN)
First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index Fund (GRID)
First Trust NASDAQ Clean Edge Green Energy Index Fund  (QCLN)
Foresight Solar Fund Limited (FSFL.L)
Global X Lithium ETF (LIT)
Global X Uranium ETF (URA)
Global X Renewable Energy Producers ETF (RNRG), (formerly YLCO)
Greencoat Renewables Fund (GRP.IR)
Greencoat UK Wind PLC (UKW.L)
Harvest Clean Energy ETF (HCLN.TO)
Invesco Global Clean Energy ETF (PBD)
Invesco MSCI Global Timber ETF (CUT)
Invesco Solar ETF (TAN)
Invesco Wilderhill Clean Energy (PBW)
iShares Global Timber & Forestry Index Fund (WOOD)
iShares Self-Driving EV and Tech ETF (IDRV)
iShares S&P Global Clean Energy Index ETF (ICLN)
iShares S&P Global Nuclear Energy Index (NUCL)
KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)
KraneShares Global Carbon ETF (KRBN)
NextEnergy Solar Ord (NESF.L)
Pickens Morningstar® Renewable Energy Response ETF (RENW)
SPDR Kensho Clean Power ETF (XKCP)
The Renewables Infrastructure Group Limited (TRIG.L)
Triodos Groenfonds NV (TRIGF.AS)
VanEck Vectors Low Carbon Energy ETF (SMOG)
Van Eck Nuclear Energy ETF (NLR)
Van Eck Rare Earth/Strategic Metals ETF (REMX)

If you know of any alternative energy ETF or ETP that is not listed here, but which should be, please let us know in the comments.  Also for funds in the list that you think should be removed.

Thanks to Peter Smit for his extensive suggestions for updates to this list.

The post List of Alternative Energy and Clean Energy ETFs appeared first on Alternative Energy Stocks.

In my recent article about Green Energy Exchange Traded Funds (ETFs), I said that there were two main criteria investors should consider when choosing one (the fund’s expense ratio, and its investment universe.)  This is true for investors who are looking for a single investment in alternative energy, but if you are a more sophisticated investor or speculator, there’s another important criterion: Is there a market for exchange traded options on the ETF?

I personally love selling (a.k.a. "writing") options.  If the stock market is a casino, option sellers are the house.  Longtime readers will recall my article last year about cash covered puts.  Using cash covered puts, an option writer will either 1) end up owning a stock at a price that seemed good when he wrote the put, or 2) make a high return on the capital he risks (see the link above for details.)

The other type of option writing I use is covered calls. When I already own a stock or ETF, and would not mind selling at some price X, I write a call at X, and collect a premium.  This is an especially attractive strategy when you expect that the market is not likely to make large gains anytime soon.  I also use this strategy with any stock I want to sell…. I write covered calls with strike prices slightly below the current price, and either end up selling at slightly more than the current price, or collect substantial premium income.  I mentioned this strategy in my article When to Sell: Five Rules of Thumb last year (Rule #4).

Other Strategies

None of these ETFs have liquid enough options markets to execute more complex options strategies such as  spreads or straddles.  However, speculators looking for leverage and increased profit potential are likely to be interested in buying calls or puts.  For many investors, this is the first option strategy they try, partly because it is the easiest for which to get option trading authorization.  Although most options expire worthless, the potential loss is no more than the premium you pay, so monitoring overall risk is much easier than with option-writing strategies.

Clean Energy ETF Options

Since I focus on investing in individual renewable energy and energy efficiency companies, I don’t usually use renewable energy and energy efficiency ETFs or mutual funds.  The exception to this is when I have some expectation for the sector as a whole, or for one of the sub- sectors for which there are ETF trackers, such as Wind and Solar. 

The problem is, exchange traded options markets are always considerably less liquid than the markets in the underlying security.  In illiquid markets, it almost always makes sense to accept the risk that a trade may not go through in order to get a specified price by using limit orders.  But in order to have a chance of the trade executing with a limit order, the more liquid the market the better.

Therefore, when I dabble in ETFs, I seldom use the same ones I recommend to passive investors: I choose the ones with the most active options markets.  They are:

Whole-sector Clean Energy ETFs: PBW.  None of the other whole-sector ETFs (QCLN, ICLN, GEX, PBD) has exchange traded options on it, so the choice is simple.

Wind ETFs: FAN.  Again, the other sector ETF (PWND) does not have options traded on it.

Solar ETFs: TAN. Although the other Solar ETF, KWT, also has options which trade on it, the number of options outstanding on TAN is far greater, a clear indication of greater market liquidity.

Carbon ETFs: Neither of these (ASO, GRN) has options traded on it.

All of this explains my disclosure below.

Tom Konrad, Ph.D,

DISCLOSURE: Tom Konrad has written puts on PBW and FAN.

DISCLAIMER: The information and trades provided here and in the comments are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

The post Options on Clean Energy ETFs appeared first on Alternative Energy Stocks.