By Philip van Doorn, MarketWatch
• The First Trust Global Wind Energy ETF /zigman2/quotes/202847480/composite FAN +1.51% is the only one targeting this space, according to FactSet. It holds 45 stocks and aims for a 60% weighting among pure-play wind companies, and there are only five of those. The remaining 40% are diversified energy companies involved with the wind industry. The top holding is Siemens Gamesa Renewable Energy SA /zigman2/quotes/205250048/delayed AT:SGRE +3.34% .
• The VanEck Vectors Low Carbon Energy ETF /zigman2/quotes/209443812/composite SMOG +1.47% has a cap-weighted portfolio of 29 holdings of companies considered to derive at least 50% of their revenue from alternative energy. The largest holding is Tesla.
• The Invesco Global Clean Energy ETF /zigman2/quotes/202774103/composite PBD +2.38% invests at least half of its assets outside the U.S. It holds 87 stocks, with positions capped at 5% of the portfolio when it is rebalanced and reconstituted quarterly. It has a bias toward small- and mid-cap pure-play clean energy companies, but will also invest in larger diversified companies. The largest holding is Vivint Solar.
• The First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index Fund /zigman2/quotes/201178568/composite GRID +0.70% holds 53 companies involved in smart grid and energy infrastructure development, on an equal-weighted basis.
• The SPDR S&P Kensho Clean Power ETF /zigman2/quotes/206089699/composite CNRG +1.68% is focused on U.S. companies that develop technology and make equipment used for alternative energy generation. The top holding (among 39 stocks) is Vivint Solar.
• The Global X YieldCo & Renewable Energy Income ETF /zigman2/quotes/208624465/composite YLCO +1.33% is a different animal entirely — it has a dividend yield of 3.26%, which isn’t too shabby at a time of such low interest rates. From FactSet: “A ‘YieldCo’ is a holding company for renewable energy projects that have been spun off by a larger energy utility. Launched in 2013, these income-focused investments generate cash flow while taking advantage of tax incentives and depreciation to minimize taxes at the corporate level.” The fund also holds shares of other types of companies that derive at least 50% of income from renewable energy. The top holding (out of 33) is EDP-Energias de Portugal SA /zigman2/quotes/209931957/delayed PT:EDP +1.55%
If you are considering investments in any of the ETFs listed here, it’s important that you do your own research to better understand methodologies and portfolio construction, to form your own opinion.
Renewable power generators
The dozen ETFs listed above hold more than 270 different stocks in various industries, with 27 in the alternative power generation industry, according to FactSet. Nine of the alt-power companies are covered by at least five analysts polled by FactSet, with at least half the analysts rating the shares a “buy” or the equivalent:
|Company||Ticker||Country||Total return - 2020||Share 'buy' ratings||Closing price - Sept. 25||Consensus price target||Implied 12-month upside potential|
|Terna Energy SA||/zigman2/quotes/200731311/delayed GR:TENERGY||Greece||49%||100%||$11.00||$12.60||15%|
|Xinyi Energy Holdings Ltd.||/zigman2/quotes/203873508/delayed HK:3868||China||80%||89%||$3.47||$3.40||-2%|
|China Longyuan Power Group Corp. Class H||/zigman2/quotes/202963579/delayed HK:916||China||-3%||88%||$4.65||$6.69||44%|
|EDP Renovaveis SA||/zigman2/quotes/207150921/delayed PT:EDPR||Spain||31%||69%||$13.62||$14.92||10%|
|Atlantica Sustainable Infrastructure PLC||/zigman2/quotes/204995713/composite AY||U.K.||8%||60%||$27.32||$32.75||20%|
|NextEra Energy Partners LP||/zigman2/quotes/203407911/composite NEP||U.S.||14%||56%||$58.38||$63.00||8%|
|Northland Power Inc.||/zigman2/quotes/209711387/delayed CA:NPI||Canada||50%||50%||$39.70||$38.30||-4%|
|Scatec Solar ASA||/zigman2/quotes/201536012/delayed NO:SSO||Norway||59%||50%||$196.50||$169.67||-14%|
Scroll the table to see all the data. You can click on the tickers for more about each company.
One of the problems with sell-side analysts’ ratings and price targets is that they usually have a 12-month outlook, which isn’t a long period for a committed investor — especially in an industry that is still in its early stages. You can see that for some of these stocks, the prices have gotten ahead of the targets. That’s another reason you need to do your own research and have conviction before jumping in.