2020 was a very successful year for renewable energy providers, allowing their stocks to reach all-time highs.
Consumers are trying to switch from fossil fuels to clean energy, which is good for operators of solar and hydroelectric plants, wind turbines, tidal power plants, geothermal complexes and biofuels. According to the scientific publication Our World in Data, in 2019, about 11% of all primary electricity was generated from renewable sources.
According to the Center for Climate and Energy Solutions, a US non-profit, nonpartisan organization, in 2018, 17% of US electricity was generated by green energy companies (hydroelectric 7.0%, wind 6.6%).
FAO experts add:
“According to forecasts, by 2050, the share of solar energy (including distributed) will grow from 11% (as of 2017) to 48%, which will make this the fastest growing trend in the electric power industry.”
The sun is a generous source of free and clean energy. The technology for collecting and storing solar energy has evolved over time and has become much cheaper. At the same time, this energy can be collected with the help of separate panels (for household needs) and in solar power plants.
A recent study by the Organization for Economic Co-operation and Development (OECD) asserts that “solar PV is the driver of all green energy.” Currently, China provides “more than 70% of the world’s production of photovoltaic modules.”
If Joe Biden (who has every chance of being elected to the presidency of the United States) lives up to his campaign promises for green energy, the new administration will pursue far more “green” policies. Most analysts believe that the alternative energy industry in the United States will thrive in the new decade.
In today’s article, we will look at two exchange-traded funds that will allow long-term investors to jump in this direction.
1. First Trust NASDAQ Clean Edge Green Energy Index Fund
- price: $56.60;
- Annual trading range: 16.14 – $59.75;
- profit return: 0.31%
- investment costs: 0.60%.
First Trust NASDAQ Clean Edge Green Energy Fund (NASDAQ 🙂 It allows you to invest in companies in emerging areas of clean energy, including manufacturers of photovoltaic panels, biofuels or advanced batteries. The fund was launched in 2007.
The QCLN portfolio consists of index components and includes 44 stocks. The top ten investments account for more than 45% of the capital, approximately $1.1 billion.
Topping the list is NIO (NYSE:), which many refer to as “Chinese Tesla (NASDAQ :)”, home energy solutions provider Enphase Energy (NASDAQ:), smart energy technology provider Solaredge Technologies (NASDAQ :), and the world’s largest lithium battery maker Albemarle. For electric vehicles (NYSE:).
By sector, the funds are distributed as follows: renewable energy production equipment (24.85%), automobiles (19.50%), alternative electricity (15.37%) and semiconductors (11.38%).
Since the start of the year, QCLN stock is up more than 125% and hit an all-time high of $59.75 on November 9. The $1,000 invested in the fund in early January has now turned over $2,250. Given the significant rally (particularly the rally in recent weeks), we can expect short-term profit-taking for a number of the fund’s components. A possible pullback to $50 may increase the margin of safety for the position.
2. SPDR S&P Kensho Clean Power ETF
- price: $85.89;
- Annual trading range: $30.60 – $90.27;
- profit return: 0.97%;
- investment costs: 0.45%.
SPDR S&P Kensho Clean Power ETF (NYSE:) Provides access to innovative companies driving the growing renewable energy sector. The ETF was launched in 2018 and currently manages a portfolio of 39 securities worth over $100 million.
CNRG is based on the S&P Kensho Clean Energy Index. More than 50% of the capital is invested in ten companies.
The largest investments include Sunrun (NASDAQ:), which produces residential solar panels and batteries; Hydrogen Powered Fuel Cell System Developer (NASDAQ :), Chinese manufacturer of high purity polycrystalline silicon Daqo New Energy (NYSE:), Chinese solar panel supplier JinkoSolar (NYSE:), SunPower (NASDAQ:): Provides solar energy solutions.
The ETF reached an all-time high of $90.27 on November 9 and is currently trading more than 85% above its levels at the start of the year. A dip to $80 would make the fund more attractive to investors in the long run.
Green energy stocks and related ETFs constantly make headlines in financial publications screaming about their upward potential. However, it must be remembered that any investment involves risks; Only a comprehensive analysis of the asset allows you to multiply the profits.
In the long term, we like the sector and both thoughtful funds, which offer “geographic” diversification of capital. However, after the recent price hike, it would be wise to wait for a correction, and only then open long positions.
NB: The assets discussed in this article may not be available to investors in some regions. In this case, consult a certified broker or a financial advisor who will help you choose a similar tool. The article is for informational purposes only. Before making an investment decision, be sure to conduct additional analysis.