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The
Problem With Investing in Wind Power |
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It
seems like every day that oil prices hit a new record high (like they did
on Friday), alternative energy stocks become much more compelling opportunities.
Accordingly, we've been following the alternative energy industries since
this site's inception, except for one area - wind power. The reason
is sad, though practical. Back to that in a second.
 In
the meantime, investors who want to cash in on wind power's investment
potential finally have some overdue opportunities.
A few days ago,
First Trust unveiled an exchange traded fund (or ETF) that specifically
reflects wind power stocks. The ETF is designed to mirror the ISE's
Global Wind Energy index, and will trade under the ticker 'FAN'.
(Clever, huh?) A couple of days after that, PowerShares countered with
their Nasdaq
OMX Clean Edge Global Wind Energy Index ETF (NASDAQ: PWND).
Like all ETFs,
caution is advised with these two equities. Liquidity has been relatively
light so far, as it would be with any new fund.
Still, we welcome
the unique additions to the ETF world, which has been struggling to find
new venues and niches. (You know ideas are sparse when one of the big
players in the ETF world launches an actively-managed ETF.) A few thousand
shares of each fund have been trading each day. As time moves on though,
we look for liquidity to grow.
 Now,
about the reason we've not been able to cover much in the way of wind power
stocks...take a look at the nearby table of the top holdings of First Trust's
wind ETF, and then the table of PWND's top holdings.
See anything
interesting?
All those 'SA',
'AG', 'NV' and 'AS' additions at the end of the company name mean they're
foreign companies....which is most of them. You'll also find many
of them trade in the United States on the Pink Sheet network as ADRs. (We
listed the ADR tickers for PWND's holdings, though PowerShares is likely
to hold foreign stocks directly, rather than Pink Sheet equities.)
There's not
one thing wrong with a Pink Sheet stock - as long as you can find information
about the company, and there's at least some liquidity. The problem is,
most of the U.S. versions of these stocks are illiquid.
 The
two fund companies in question can get around that problem because they
have directs access to foreign markets. Most U.S. investors don't yet have
that luxury. Of course, most U.S. investors may not have the time and
inclination to play in foreign markets either.
That being said,
we'll acknowledge it was a reader who presented the one of the few U.S.-traded
wind power companies we could find...Mass
Megawatts Power (OTCBB: MMGW). Broadwind
Energy (OTCBB: BWEN) was the other one that popped up.
As bulletin
board stocks, they don't get attention from the mainstream media. Our job
is largely to do what the mainstream media won't, however. So, consider
this a formal introduction; we're putting MMGW and BWEN on our watchlist.
Here's the bigger
picture point though - the two wind power ETFs are not only great options
for U.S. investors, but they're almost the only options. If you're
reading this newsletter, we'll assume you're at least willing to consider
small and micro cap (and non-exchange listed) names. Many investors are
not,
however.
Too bad, too.
There really does seem to be a true opportunity here. Check out
this data (which we shamelessly ripped off of the Invesco PowerShares website):
"In
2007 alone, global wind power installations equaled the capacity of 20
large-size conventional power plants...Energy demand is growing worldwide.
It is expected to rise by 53% between 2006 and 2030 with 30% of this demand
coming from developing nations like China and India...In 2007 wind power
crossed a milestone, becoming the first $30 billion clean energy industry.
This number is expected to grow to over $80 billion over the next 10 years."
Though both Broadwind
and Mass Megawatts offer great potential, a choice of only two names still
doesn't feel overly-reassuring. Perhaps someday a handful of other wind
power stocks from the United States will jump into the mix, rather than
letting foreign companies enjoy most of the wind power market's growth.
In the meantime, the ETFs will have to do.
Earlier in the
week, in the blog, we listed several bulletin board stocks that were rising
despite the market's overall demise. As stated then, the ONLY reason we
mentioned any of the tickers was just because the stocks were rising -
the underlying company could have stunk.
The flipside
is, even a great company with a falling stock is a lousy investment, so
why not start a search for bullish characteristics?
In the meantime,
a few of those stocks have fallen by the wayside, by breaking their winning
streak. Here are a few that have continued to rally.
Again, we've looked
at nothing more than the charts; any decision you make from here would
require due diligence. But hey - the stocks are rising...that's gotta'
count for something. On that note, we're still eyeing the whole original
list. |
Updated: 8:15 pm PDT (03:15 GMT), November 2, 2010
