GRID Flying Under The Radar

by on October 16, 2012 | ETFs Mentioned:

“Clean energy” is perhaps one of the most frustrating segments of the market, as the industry continues to provide unique growth opportunities but has been having trouble attracting a significant amount of attention from investors. While solar and wind power are generally the more well-known corners of the alternative energy sector, there are some other rather intriguing companies that focus on other aspects of the space. Enter the unique, one-of-a-kind NASDAQ Clean Edge Smart GridInfrastructure Index Fund (GRID), an ETF that is designed to provide exposure to companies that are involved in “Smart Grid” technology [see Free Report: How To Pick The Right ETF Every Time]. 

The electric grid has been around for over a century, and for most people it is difficult to view this massive infrastructure as being categorized as “clean” or alternative. But with the help of information and communications technological developments and major policy changes, the U.S. Department of Energy believes that a revamp of our current electrical grid, often referred to as the “Smart Grid,” has the potential to make the storage and distribution of any kind of energy more efficient, cost-effective and less harmful to the environment. And for those investors who are understandably leery of jumping fully onboard with “clean energy”, GRID’s targeted focus on this particular segment of the energy space may be an intriguing option for those looking to get their feet wet.

Under The Hood: GRID

This one-of-a-kind ETF is designed to track the performance of common stock in the grid and electric energy infrastructure sector. Companies that are included in GRID’s underlying index are primarily engaged and involved in electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by smart grid infrastructure sector. Considering the fund’s narrow focus, it is not surprising to see that GRID’s portfolio consists of only about 35 individual holdings, a rather shallow offering in comparison to other utilities ETFs [see also Energy Bull ETFdb Portfolio].

GRID’s holdings are split up into three main sectors: half of the fund’s total assets are allocated to industrials, while nearly a third goes to technology and the remainder to utilities. Most of the stocks are mid-cap companies, with the remainder of the portfolio consisting of giant and small caps, as well as minor allocations to micro and large cap firms, making GRID’s exposure nicely spread out across different sized companies. In regards to geographical diversification, the fund is dominated by U.S. stocks, which account for more than half of GRID’s total assets. Other top country allocations include France, Switzerland, Spain and Italy.

GRID Generating High Voltage

13 Week Return 9.65%
26 Week Return 9.33%
YTD Return 16.57%
1 Year Return 11.17%
*As of 10/12/12

First Trust’s GRID made its debut in November of 2009, and since then has only been able to accumulate $13 million in total assets under management, making it one of the smallest and lesser known funds in the Utilities Equities ETFdb Category. Its relatively low average daily trading volume at a mere 1,476 shares also shows how investors haven’t exactly jumped on board this rather unique ETF.

Despite having some difficulties making its place in the ETF space, GRID has been able to deliver some stellar returns to those investors who were willing to give the ETF a try. Year-to-date, GRID has gained just over 16.5%. And over the trailing 26 and 13 week periods, it has surged higher by 9.33% and 9.65%, respectively (returns as of October 12, 2012). But although this ETF invests nearly 20% of its assets in utilities companies, which are generally known for providing relatively high cash payouts, GRID’s annual dividend yield comes in at only 1.12%, much lower than other utilities-focused ETFs [see also 8% Yield ETFdb Portfolio Now Available].

For those niche investors who want to establish a tactical tilt towards this “clean” segment of the energy spectrum, GRID is the only fund available on the market that can deliver this hyper-targeted exposure. And considering the fund’s rather impressive returns, investors may want to consider taking yet another closer look at this unique offering.

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Disclosure: No positions at time of writing.