With 2021 in full swing, investors can expect clean energy to be among the top performers with Joe Biden’s upcoming presidency. If you want to make a profit with the convenience of an ETF wrapper then this is it Invesco WilderHill Clean Energy ETF (PBW) is your fund.
PBW aims to replicate the investment results of the WilderHill Clean Energy Index. The Fund will generally invest at least 90% of its total assets in the securities that make up the underlying index.
The underlying index consists of stocks of publicly traded companies in the United States that are in the clean energy and environmental protection businesses. Stocks will be included in the underlying index based on the index provider’s assessment that such companies will benefit significantly from a societal transition to cleaner energy and environmental protection.
According to an article in Investor’s Business Daily, “Joe Biden’s win in the 2020 US presidential election gave ETF clean energy stocks a solid foundation. Biden has vowed to accelerate the country’s move towards cleaner forms of energy. Meanwhile, China, one of the largest remaining coal burners, claims to want to accelerate its transition to cleaner energy. “
“Such trends have sparked some massive gains in alternative energy ETF stocks,” the article added. “The Invesco WilderHill Clean Energy ETF (PBW), valued at $ 1.7 billion, is up an impressive 208% so far this year. That makes the S&P 500’s 15.5% rise in 2020 look ho-hum. Even the 47% increase in the high octane Nasdaq 100 is way back this year. “
PBW data from YCharts
PBW stake wins 300%
The strength of a fund can be tied to a position that brings massive profits. PBW uses a minimal allocation to one position, with 2.78% being the highest, but one position in particular has performed well.
“What is the secret of Invesco WilderHill Clean Energy? Big bets on the companies most exposed to the pursuit of clean energy, ”the Investor’s Business Daily article continued. “One of the top positions of the ETF is FuelCell Energy (FCEL) with 5.9%. Based in Danbury, Connecticut, the company manufactures, installs and sells fuel cell power plants. The stock was still a penny stock at the end of 2019. And yet shares rose more than 300% to 11.74 apiece that year alone. Investors seem willing to overlook the fact that FuelCell will lose money until at least 2023. “
PBW’s allocation tends to be towards small capitalization companies that have been gaining strength recently.
“This year micro-cap indices have outperformed mid- and large-cap indices, a trend that 71% of 117 professional investors surveyed believe will continue for the next six months,” added the article added. “In fact, their low correlation with large-cap performance is one of the main things driving the appetite for micro-caps, with 73% of investors finding this an increasingly attractive trait.”
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