by Tom Konrad, Ph.D., CFA

2020 ended with a massive spike in clean energy stock prices.  From the end of October, election euphoria drove Invesco WilderHill Clean Energy ETF (PBW) from $63.32 to $136 at the close on February 9th, a 114% gain in 100 days.  

Joe Biden is as strong a supporter of clean energy as Donald Trump was a supporter of big fossil fuel companies, but even with control of the presidency and both chambers of congress, there is a limit to what a president can do in a short time.  This is especially true when their top priority is (as it should be) dealing with a pandemic.

Acknowledgement of this reality seems to be setting in. as I write on March 5th, PBW is now down almost 35% from its high.  If the Dow Jones Industrial Average or S&P 500 had fallen 35%, this would be the depths of a bear market.  Clean energy stocks are generally much more volatile than the broad market, but, even so, a 35% decline should make investors sit up and take notice.

I focus on clean energy income stocks because they tend not to be subject to such wild swings.  The benchmark I use, the Global X Renewable Energy Producers ETF (RNRG – formerly YLCO) is also down significantly- 26% from its high of $20.20.

Pop! Goes the Bubble

With these large declines, it’s time to assess what’s next.  Large drops like this don’t happen without some panic among investors.  As always in a panic like this one, we need to assess:

1. Has anything fundamentally changed which would justify the declines and possibly further declines.
2. Is the panic approaching capitulation, when there is no one left to get scared and sell, or does the panic have farther to run?

Fundamentals

The biggest fundamental change is that interest rates are creeping up. This is in reaction to the expected spending in the Biden rescue package, and fears that we may see a surge of pent-up consumer spending as the vaccine allows the end of lock-down measures this summer.

These higher interest rates make stocks, especially income stocks like the ones I focus on, less attractive compared to bonds.  Higher interest rates also make it harder for companies to use debt to finance new investments, and so can reduce future earnings expectations.

While all these things are true, I expect their long term impact to be limited.  Most importantly, I do not expect interest rate increases to be large.  Interest rates have been historically low: It would take a much larger rise than I expect to bring them to a level that is not still low.  

There may also be some demand driven inflation in the summer, but I do not expect the demand or inflation surges to persist.

Similarly, the effect on future earnings from higher interest rates is also likely to be limited.  Most companies have been very active refinancing in the recent low interest rate environment, often bringing plans for future debt offerings forward.  This means that most will have the flexibility to reduce borrowing in the short to medium term if interest rates rise significantly.

Will Panic Lead To More Panic?

This is just a feeling based on having watched many market panics over the years, but I feel that the panic seems to be reaching its maximum.  I think the short term bottom will happen in the next couple weeks.  

I’m buying (actually selling slightly out of the money cash covered puts), especially clean energy infrastructure stocks like Yieldcos that I had been selling because of high valuations in December and January.  These include AY, NEP, AGR, and CWEN/A.  The amounts of each depend mostly on the size of my current positions- this is less a call about individual stock valuation and more one of market timing.

Conclusion

It’s time to bring much of that cash I’ve been telling people to keep on the sidelines for the last several months back into the game.

DISCLOSURE: Long positions all the stocks mentioned.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Pop Goes the Clean Energy Stock Bubble appeared first on Alternative Energy Stocks.

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.

Tom Konrad, CFA

A quick update of last month’s list of speculative puts, to reflect the new options symbols.

In January, I put together a list of nine puts and one small energy efficiency stock I expect to do well this year.  I normally only do updates on these every quarter, but because of the recent change option symbols, I thought I’d revisit my 10 Green Energy Gambles.  The links in the original article have stopped working; this new table shows the current list.

Here’s the list: with updated option symbols.

* Prices given are the midpoint between the bid and ask at the close on the given date.

After a little over a month, it’s too early to draw any conclusions about the portfolio’s performance.  I’m naturally happy that the portfolio is up, but disappointed with its performance relative to the benchmark.  On the other hand, I don’t know any theory behind benchmarking options portfolios, let alone mixed option and stock portfolios. 

Anyway, it’s nice that the portfolio is up for the month, so I shouldn’t complain that I’m not meeting my self-imposed benchmark. 

For those of you keeping score at home, my long-only Ten Clean Energy Stocks for 2010 portfolio is down 5% since December 27, 2009, compared to a drop of 14% for PBW and a drop of 4% for the Russell 3000 index.  The simplified version of the portfolio, which substitutes the ETFs PTRP and GRID for six of the stocks is down 8%.

DISCLOSURE: Short EWW,DAL,AMR,LUV,CNX,BTU,HOT,JBHT,DIA.  Long PEFF.

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 Ten Green Energy Gambles for 2010: Update I appeared first on Alternative Energy Stocks.

Charles Morand

Last week, I conducted an analysis showing the lack of evidence supporting claims that oil and alt energy returns are strongly correlated (claims that sometimes come from outfits as reputable as Bank of America Merrill Lynch).    

I don’t want to belabor this topic but I thought I would post the results of another, similar analysis I conducted following comments I received on how to improve the first one. In a nutshell, the comments suggested I do the following:

1) Look at daily correlations or even smaller periods, as “common knowledge” market movements can often dominate over the real relationship in the short and very short run

2) Look at absolute (price) correlations as well as relative (return) correlations (my first analysis looked only at relative movements)

3) Look at directionality (i.e. what % of the time do assets X and Y move in the same direction regardless of the size of the move)

4) Extent your analysis to five years or greater

New Analysis, Same Difference

The three sets of tables below show daily return correlation coefficients, daily price correlation coefficients and daily directionality statistics (% of days that the assets close Up, Down or No Movement together) for oil, nat gas, the S&P 500 and alt energy stocks.

The time periods have been extended from three to five years or since inception. The oldest alt energy ETF available is PBW that was listed on March 03, 2005 – not quite 5 years but a decent chunk of time nonetheless. The other 3 ETFs (sector specific) were all listed in the 2^nd half of 2008.

The first set of tables show that returns on oil are not particularly useful at explaining returns on alt energy stocks on a daily basis (let’s say that we enter useful territory at 0.5 and above), although the results for PBW show the relationship strengthening somewhat in the last year (which has been anything but a normal year for the markets). These results are in line with those from my previous analysis which looked at weekly returns.

As far as absolute prices go (the second set of tables), correlation coefficients for oil and alt energy are high, but they are just as high if not higher for alt energy and the S&P 500. PBW shows the relationship strengthening over time, but it strengthened even more between oil and the S&P 500, something Tom opined might be the case a few months ago.

I don’t find absolute price correlations all that useful. In the medium and long terms, returns matter far more than absolute prices. If a $1 movement in oil consistently results in a $1 movement in an alt energy ETF over the long run, the high coefficient could obscure a divergence trend between the returns on both assets as their prices rise.

Finally, the directionality tables (note that assets appear in a different order) show a fair bit of co-directionality between oil and alt energy (with the exception of PTRP [alternative transportation], something Tom and I discussed last week). But here again, the S&P 500 emerges as the stronger predictor.

Conclusion

I did not go any more granular than daily data: anything beyond that becomes relevant only to traders.

Once again, the general conclusion that emerges from this analysis is that oil – whether in terms of returns, prices or directionality – is not a particularly useful indicator to go by when investing in alt energy stocks, especially when compared to equity markets in general (i.e. the S&P 500).

The implication for investors is that they should not invest in alt energy as a hedge against or a play on rising oil prices. If anything, what little relationship does exist will probably tend to disappear overtime as alt energy and cleantech stocks respond more to core business fundamentals than to seemingly logical yet unproven narratives about external drivers.  

DISCLOSURE: None

The post Oil & Alt Energy Redux appeared first on Alternative Energy Stocks.