The Obama ETF Portfolio
ETF Investing Alongside the New Administration
Alternative energy, and in particular wind energy, was a major platform for the Obama campaign and the new president is keeping his promise by including incentives in the current stimulus plan. However, before jumping into wind energy investments, take a closer look at the plan details.
Wind Energy Plan ignores Equipment Manufacturers
The wind energy plan in its current form provides tax breaks to companies that build alternative energy projects but ignores companies that manufacture equipment such as wind turbines and electric-system upgrades. Since most current manufacturers are in Asia and Europe, the tax credits are likely to benefit companies and create jobs outside of the U.S.
Some in congress are urging support for a provision that would give a 30% tax credit to companies that expand or build U.S. manufacturing facilities that make renewable energy equipment. However, the final answer will not come until the spending bill emerges from the House-Senate conference.
Current Best Bet is on International Utilties and Equipment Suppliers
Given that the only large U.S. manufacturer of wind turbines is GE, investors should look outside the U.S. for companies and funds that will benefit from Obama’s alternative energy push. Two exchange traded funds specialize in wind energy. The First Trust ISE Global Wind Energy Index Fund (FAN) tracks an index of publicly traded companies throughout the world that are active in the wind energy industry.
Top holdings include EDP Renovaveis SA which increased capacity four-fold between 2005 and 2007 and is now the world’s 4th largest producer of wind energy. The company recently announced a partnership with a consortium of U.S. investors that are putting $265 million into U.S. wind farm projects. Other top holdings include other non-U.S. companies including Iberdrola Renovables which recently built 5 U.S. wind farms and Vestas Wind Systems – the world’s leader in wind turbine production.
The other ETF focused on wind energy is the PowerShares Global Wind Energy Portfolio (PWND). Top holdings include EDP Renovaveis SA, Iberdrola Renovables and Vestas Wind Systems as well as wind turbine manufacturer Gamesa Corporacion Tecnologica S.A.
Renewable energy outlook: Investing in Clean Energy with ETFs
Utilties: EDP Renovaveis SA, Iberdrola Renovables
Wind Turbine Companies: Vestas Wind Systems, Gamesa Corporacion Tecnologica S.A.