PUW: The Virtue Of A ‘Greenish’ Energy ETF

January 14, 2013

What happens when the best alternative energy ETF isn’t really alternative at all?

The PowerShares WilderHill Progressive Energy Portfolio (NYSEArca: PUW) has been quietly beating the entire universe of global energy and renewable energy ETFs over the past year.

It’s somewhat of a hybrid ETF, focusing neither on renewable nor traditional energy companies.

Instead, PUW holds companies that try to improve on the use of typical energy sources like oil, natural gas and coal, by either increasing their efficiency or reducing their pollution.

In other words, it may be the ideal way to capture green sentiments without the difficulties facing the truly green renewable energy sources like solar or wind energy.

Solar ETFs, like the Guggenheim Solar ETF (NYSEArca: TAN) or Market Vectors Solar Energy ETF (NYSEArca: KWT) have tanked over the past year, losing over 30 percent each.

Wind energy ETFs, like the First Trust ISE Global Wind Energy ETF (NYSEArca: FAN) or the PowerShares Global Wind Energy ETF (NYSEArca: PWND), didn’t do quite as badly, but still lost money: 3.5 and 7.3 percent, respectively.


PUW vs Renewables 1 year


The figures look even worse for the solar and wind ETFs when you expand the time series to three years. TAN and KWT lost about 80 percent, FAN lost about 50 percent and PWND 60 percent.


PUW vs Renewables - 3 year



Solar and wind energy have both recovered a bit lately, driven partly by Berkshire Hathaway’s announcement that it was paying $2.5 billion for solar projects from SunPower and partly by the temporary resolution of the U.S. “fiscal cliff.” KWT in particular has returned about 35% in recent weeks.

Still, the longer-term losses are simply staggering, and there’s nothing to imply that demand will suddenly swing up without (or even with) more government subsidies.

For those who believe that society is about to embrace—and be willing to pay for—putting solar panels on every roof and figure out how to store enough energy to stay warm in the winter, TAN and KWT could be great investments.

Similarly, if you think wind energy is capable of powering cars and have space in your backyard for a few windmills and, moreover, aren’t worried about all the birds that apparently get killed by windmills every year, you can go for FAN, as PWND is getting shut down in February.

I’m being a little facetious, since renewable energy could potentially be a great supplementary source of energy, but I don’t think that time is now.



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