After 10 years of business, Tesla is finally starting to gain traction in the U.S. market and will be posting profits for the first time since going public. There have been strong words on both sides about Tesla’s second production vehicle, but after the Model S won Motor Trend Car of the Year earlier this spring Tesla stock has experienced a meteoric rise in price. Elon Musk’s car company has pushed back against allegations that their Model S is just another electric pipe dream to prove that you don’t need gas to make a car people want to drive, and yet many auto-focused ETFs are missing out on these strong returns [see also How To Take Profits And Cut Losses When Trading ETFs].
Even as Tesla continues to rake in the cash, it remains absent from the portfolios of auto ETFs and broader consumer discretionary funds. One of the most popular and focused funds, the First Trust NASDAQ Global Auto Index Fund (CARZ, C+), continues to focus on firms such as Ford, Honda and Toyota, which have proven to be powerful and lasting car companies. As a relatively new and volatile firm, it may not fit the bill that CARZ looks for when investing, but not investing has cost some huge returns [for more ETF analysis, make sure to sign up for our free ETF newsletter].
A Clean Energy Fund’s Hero
In comparison the alternative energy fund (QCLN, A) is by no means the most popular or largest ETF, but its heavy bet in Tesla has proven very lucrative for the fund. By following a modified market cap weighted index, QCLN tracks the performance of American clean energy companies engaged in a variety of activities, including manufacturing development, distribution, and installation of emerging clean-energy technologies. Since Tesla not only uses its lithium-ion battery packs but also sells them to other automakers like Daimler and Toyota, they are a key component in this fund, making up about 8% of the holdings [also check out the Socially Responsible ETFdb Portfolio].
As seen above, even while CARZ has enjoyed strong market returns recently and brought in almost 40% since December 2012, QCLN has returned more than 66% in the last six months. Like QCLN, the following three ETFs not only have a stake in the auto manufacturer, they have all seen great returns after Tesla’s take off this year [check out 3 Economic Charts Bears Love To Ignore].
- Market Vectors Gloabl Alternative Energy ETF (GEX, B): This global ETF provides exposure to companies that are principally engaged in the alternative energy industry. Besides holding Tesla, this ETF focuses on Cree Inc, Eaton Corporation and Cosan Ltd to provide a massive 60% return since this time last year.
- WilderHill Clean Energy Portfolio (PBW, B-): Since ranking as one of the worst returning ETFs in 2012, PBW has enjoyed a much stronger year, with this green ETF returning 32% since the start of 2013.
- Global Clean Energy Portfolio (PBD, B+): This mostly international fund also contains Tesla in its top 10 holdings as it looks to deliever capital appreciation through companies that focus on greener and generally renewable sources of energy and technologies.
[For more ETF analysis, make sure to sign up for our free ETF newsletter]
Follow me on Twitter @lynpaintzall