Monday, January 7, 2008

Clean Energy ETF (PBW)

Happy New Year Everyone!

I am writing to let you know about an ETF that I have found and like very much. It is called the Powershares Milwall Clean Energy ETF with the symbol PBW. I like the ETF because it falls under the four principles of Warren Buffet’s investing style (management, price, industry growth, and value). The ETF is managed well. The ETF has included industry leaders like First Solar in its portfolio. It also contains companies that cover the entire process from idea to product usage. The technical aspects of PBW’s chart show that it is in an upward trend. Its Price to Earnings ratio is reasonable. The profits for most of these companies will grow at an exponential rate because there is demand from both public and private sources.

The one downside I would say that it has is that a great majority (over 91%)of the ETF’s holdings reside in the US and I would like to see more exposure to clean energy companies outside the US.

As always, do the homework necessary to get your investments correct. I do my homework by using Yahoo Finance and Optionsxpress. They are both excellent resources.

As of right now I do not own any shares, optionsof PBW, or any shares or options of the securities within PBW.

Please post any comments as you see fit.

1 comment:

pfstock said...

By contrast, I don't like this ETF. That does not necessarily mean that I think it will go down in price. For the record, this ETF tracks the WilderHill Clean Energy Index. (I am not sure if a "Milwall" Clean Energy Index exists.)

Some of the things that I don't like about the index are that it is dollar weighted and rebalanced quarterly. Many indices are based on market cap rather than dollar weighted. By rebalancing quarterly, the fund is regularly selling its winners, and buying more shares in laggard companies.

Lastly, I question the construction of the index itself. Many of the stocks in the index are selected based on qualitative criteria. This makes their stock selection more subjective than one based solely on objective market data.