In the world of energy investing, most turn to traditional futures contracts or “Big Oil” companies for exposure to this volatile yet attractive corner of the commodities market. Though there are other viable ways to gain access to the energy space, one segment is often overlooked, and considering its performance in recent years, understandably so. Alternative energy equities were once touted as the “next big thing” in the commodities world, with many believing that the world will sooner rather than later make the switch to clean energy [see What Can You Buy With America's Daily Oil Consumption?].
Despite widespread efforts, alternative energy still remains a small fraction of our energy production, and companies involved in the industry have struggled to gain ground. For the last several years, alternative energy ETFs have suffered steep losses, and no corner of the market has been spared, as solar, wind and nuclear power stocks have all faltered.
In 2013, however, these funds have been able to log in modest gains, piquing investor interest once again.
The chart below highlights five alternative energy ETFs, comparing their performances across various time frames, including year-to-date returns [see Energy Bull ETFdb Portfolio]:
- WilderHill Clean Energy Portfolio (PBW, A-)
- Market Vectors Nuclear Energy ETF (NLR, B)
- Cleantech Portfolio (PZD, A-)
- Solar ETF (TAN, B+)
- Global Clean Energy Portfolio (PBD, A)
With the exception of the Nuclear ETF (NLR) and the Cleantech Porfolio (PZD), the majority of alternative equity ETFs have been seeing red for the past three years. Year-to-date, however, four out of the five funds on this list have managed to post modest returns so far in 2013, with the Global Clean Energy Portfolio (PBD) logging in the highest YTD return of 7.56%.
While these figures are encouraging signs for the industry, it will be important for those looking to get back into the alternative energy space to also consider other obvious factors besides performance, including expenses, liquidity and portfolio composition.
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Disclosure: No positions at time of writing.