The Rise Of Green Fuel ETF’s (PBW, PZD, QCLN, UNG, XOP)

clean-energyDaniel Harrison From Hard Assets Investors put out a piece on “The Rise Of Green Fuel” – It’s already axiomatic among investors: When oil runs out, alternative energies, like solar or wind power, will help pick up the slack. But those looking to diversify their green portfolios should also keep a close eye on the next stage of clean tech investment: alternative fuels. In recent years, a band of small- and medium-cap alternative fuel producers have emerged, prompting investors to rush into these high-risk, high-reward offerings. But alternative energy and alternative fuels are completely different investments, fundamentally driven by two separate commodities: namely, oil and gas. And it’s that distinction that holds the key to the clean fuel revolution.

Clean Energy Vs. Clean Fuel

Despite the flurry of alt-energy ETFs launched lately, most options for alternative fuel investing are still the individual companies, which tend to be high-risk, small- to medium-cap firms.

In some ways, this isn’t so bad. Take the PowerShares WilderHill Clean Energy ETF (PBW), the PowerShares CleanTech Portfolio (PZD) and the First Trust NASDAQ Clean Edge Green ETF (QCLN). These three ETFs – which straddle the range of small- to large-cap funds – have performed reasonably well this year (they’re up between 20-25%), but they still lag the stock market as a whole. In part, they’ve been dragged down by under-performing sectors like solar: First Solar, a $10 billion solar power leader, has dropped 9% year-to-date, while Evergreen Solar, a smaller provider, has plunged 41%.

But the story could not be more different for synthetic fuel makers. Synthesis Energy Systems (SYMX), which uses gasification technology to convert coal and coal waste into clean transportation fuels, has surged 79% year-to-date. Rentech (RTK) has skyrocketed 240%, after recently receiving a contract to supply 1.5 million gallons a year of synthetic diesel fuel for eight U.S. carriers, including Delta Airlines and American Airlines, starting in 2012. And Syntroleum Corp (SYNM), a biodiesel manufacturer, is up a whopping 430%. (For more on alt-fuel deals, check out our recent story, “Exxon: A Biofuel Bet?”.)

The reason for the disparity between clean energy and clean fuel, says Art Hogan, chief market analyst at Jefferies & Co., is that clean energy companies require high natural gas prices to flourish, while fuel makers need high oil prices – a distinction many investors fail to make.

“There is a misconception that clean tech is, in general, tied to the price of oil, and that there is a $75 hurdle rate [to profitability],” Hogan told Hard Assets Investor. “But you can’t look at $75 oil and say that we’re back in the clean tech business. Until we see natural gas prices move, clean energy companies will continue to move in the wrong direction.”

Hogan expects solar and wind power companies to continue to under-perform over the next 12 months, until the price of gas begins to rise again.

When that will happen is still up for debate, as it depends heavily on the recovery of U.S. consumption. As the recession has hit, so has the price of natural gas fallen: On Friday, it reached a low of under $3 per thousand cubic feet vs. $13 per thousand cubic feet a year ago. (Still, for investors with positions in ETFs such as the United States Natural Gas Fund (UNG) or the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), investing in beaten-down solar power companies or green energy ETFs right now could make for an interesting addition to a portfolio, whenever prices begin to rebound.)

Full Story: HERE

Here is a look at the top companies listed within these ETF’s and what they have done in the past year below:

The investment (PBW) seeks results that correspond generally to the price and yield (before the Fund’s fees and expenses) of an equity index called the WilderHill Clean Energy index. The fund normally invests at least 80% of total assets in common stocks of companies engaged in the business of the advancement of cleaner energy and conservation. It may invest at least 90% of total assets in common stocks that comprise the Clean Energy Index. It is nondiversified.

TOP 10 HOLDINGS (PBW) ( 36.90% OF TOTAL ASSETS)

 
 
Company Symbol % Assets
American Superconductor Corpora (AMSC) 3.34
CALPINE CORP (CPN) 3.05
COSAN LIMITED CL A (CZZ) 3.64
Fuel Systems Solutions, Inc. (FSYS) 4.37
OM GROUP INC (OMG) 3.05
ORMAT TECHNOLOGIES (ORA) 3.29
SOCIEDAD DE CHILE SC (SQM) 3.13
SUNTECH POWER HLDGS (STP) 3.36
TRINA SOLAR LTD ADR (TSL) 4.72
YINGLI GRN ENGY ADR (YGE) 4.95

 Chart for PowerShares WilderHill Clean Energy (PBW)

 

The investment (PZD) seeks results that correspond to the price and yield performance, before fees and expenses, of the Cleantech Index. The fund normally invests at least 80% of total assets in common stocks of cleantech companies. It normally invests at least 90% of total assets in common stocks that comprise the Cleantech Index. The fund is nondiversified.

 

TOP 10 HOLDINGS (PZD) ( 30.17% OF TOTAL ASSETS)

 
 
Company Symbol % Assets
ABB LTD (ABB) 2.95
Autodesk, Inc. (ADSK) 2.82
CORNING INC (GLW) 2.67
First Solar, Inc. (FSLR) 2.97
GAMESA (GAM.MC) 3.53
IBERDROLA RENOVABLES (IBR) 2.74
Kurita Water Industries Ltd N/A 2.87
SCHNEIDER ELECTRIC (SU.PA) 2.54
SIEMENS AG-REG (SIE) 3.14
Vestas Wind Systems (VWS) 3.94

Chart for PowerShares Cleantech (PZD)

 

The investment (QCLN) seeks investment results that correspond generally to the price and yield (before the Fund’s fees and expenses) of an equity index called the NASDAQ(R) Clean Edge(R) Green Energy Index. The fund normally invests at least 90% of assets in common stocks that comprise the index. The index is designed to track the performance of clean energy companies that are publicly traded in the United States and includes companies engaged in manufacturing, development, distribution, and installation of clean-energy technologies including, but not limited to, solar photovoltaic, biofuels and advanced batteries. The fund is nondiversified.

TOP 10 HOLDINGS (QCLN) ( 51.86% OF TOTAL ASSETS)

 
 
Company Symbol % Assets
Cree, Inc. (CREE) 6.43
First Solar, Inc. (FSLR) 8.37
GRAFTECH INTL LTD (GTI) 3.14
Itron, Inc. (ITRI) 5.12
Linear Technology Corporation (LLTC) 5.18
MEMC ELECTRONIC MTRL (WFR) 6.74
ON Semiconductor Corporation (ONNN) 4.73
ORMAT TECHNOLOGIES (ORA) 4.09
SUNPOWER CORPORATION (SPWRA) 3.59
SUNTECH POWER HLDGS (STP) 4.47

Chart for First Trust NASDAQ Clean Edge Green Engy (QCLN)

 

The investment (XOP) seeks to replicate as closely as possible, before expenses, the performance of an index derived from the oil and gas exploration and production segment of a U.S. total market composite index. The fund uses a passive management strategy to track the total return performance of the S&P Oil & Gas Exploration & Production Select Industry index. The index is derived from the oil and gas exploration and production portion of the S&P Total Market index. As of September 30, 2007, the Oil & Gas Exploration index was comprised of 37 stocks. It is an equal weighted market cap index. The fund is nondiversified.

TOP 10 HOLDINGS (XOP) ( 37.96% OF TOTAL ASSETS)

 
 
Company Symbol % Assets
CABOT OIL GAS CP (COG) 3.45
CIMAREX ENERGY CO (XEC) 4.26
ENCORE ACQUISITION (EAC) 3.79
FOREST OIL CP (NEW) (FST) 3.42
NEWFIELD EXP COM (NFX) 3.86
PIONEER NATURAL RES (PXD) 4.17
PLAINS EXPL&PROD (PXP) 3.89
SOUTHWESTERN ENERGY (SWN) 3.48
WHITING PETE CORP (WLL) 4.25
WORLD FUEL SVCS CP (INT) 3.39

Chart for SPDR S&P Oil & Gas Exploration & Prod (XOP)

 

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