{"id":10485,"date":"2022-08-09T19:03:40","date_gmt":"2022-08-10T00:03:40","guid":{"rendered":"http:\/\/blog.jlbn.net\/?p=10485"},"modified":"2022-08-09T19:03:41","modified_gmt":"2022-08-10T00:03:41","slug":"these-clean-energy-etfs-are-surging-after-handily-beating-the-sp-500-over-the-past-three-months","status":"publish","type":"post","link":"http:\/\/blog.jlbn.net\/?p=10485","title":{"rendered":"These clean-energy ETFs are surging after \u2018handily\u2019 beating the S&P 500 over the past three months"},"content":{"rendered":"\n

Clean-energy ETFs are outshining the S&P 500 index recently, getting another boost Thursday after an unexpected agreement in Washington on a bill that includes climate-related spending<\/a>.<\/p>\n\n\n\n

The iShares Global Clean Energy ETF Invesco Solar ETF and First Trust NASDAQ Clean Edge Green Energy Index Fund \u2014 the three largest U.S.-listed ETFs in clean energy \u2014 illustrate the recent outperformance, according to DataTrek Research co-founder Jessica Rabe. <\/p>\n\n\n\n

\u201cAll three clean-energy ETFs have handily outperformed the S&P over the last 3 months,\u201d Rabe wrote in an emailed note dated July 26. \u201cMost of the top 3 names in these large clean energy ETFs have seen upside earnings revisions for this year and next over the last 90 days.\u201d<\/p>\n\n\n\n

The rising confidence of analysts about the earning potential of renewable energy companies in 2022 and next year helps explain the ETFs\u2019 outperformance compared to the broader U.S. stock market, according to the note. Expectations for accelerating earnings growth are generally important for growth stocks, particularly in \u201ca tough market,\u201d she said.<\/p>\n\n\n\n

The S&P 500 index has tumbled 15.6% so far in 2022, with the stock benchmark much harder hit than the iShares Global Clean Energy ETF, which was down 3.8% this year through Wednesday. The fund has gained 6.9% over the past three months, while the S&P 500 dropped 3.8% over the same period spanning from April 27 to July 27, FactSet data show. <\/p>\n\n\n\n

The Invesco Solar ETF has fared even better, eking out a gain of 0.2% this year through Wednesday, after soaring slightly more than 20% over the past three months. <\/p>\n\n\n\n

\u201cThe market place has taken a look at a space that\u2019s been pretty battered broadly across the board,\u201d said Rene Reyna, head of thematic and specialty product strategy at Invesco, in a phone interview. \u201cWe\u2019ve started to see a little bit of a bounce back and recovery,\u201d he said of clean energy.  <\/p>\n\n\n\n

While the First Trust Nasdaq Clean Edge Green Energy Index Fund has sunk 15.9% this year through Wednesday, its gain of 9% over the past three months has trounced the S&P 500. <\/p>\n\n\n\n

\u201cThese ETFs rallied after Russia first invaded Ukraine towards the end of February as oil prices spiked,\u201d Rabe said. \u201cThey peaked for the year in early April, but have held in over the last several weeks even as energy commodities have been volatile.\u201d<\/p>\n\n\n\n

Clean energy tends to trade in line with \u201cgrowth, emergent-tech-type securities,\u201d according to Invesco\u2019s Reyna. For example, on Wednesday the tech-heavy Nasdaq Composite rallied \u201cpretty substantially,\u201d closing up 4.1%, while the Invesco Solar ETF ended with a \u201cpretty big\u201d gain of 6.1%, he said. Clean-energy flows<\/p>\n\n\n\n

Alternative-energy ETFs have seen almost $1 billion of net outflows this year through July 20, after attracting $5.6 billion from investors in 2021 and $5.9 billion of inflows in 2020, according to Tom Roseen, head of research services for Refinitiv Lipper. The biggest monthly outflows of 2022 were in January, with two months of net inflows this year in March and June, Lipper data show.<\/p>\n\n\n\n

\u201cI\u2019m really surprised we haven\u2019t seen more flows and more interest in clean energy,\u201d given the disruption in the oil and gas market as a result of the Russia-Ukraine war, said Aniket Ullal,\u00a0head of ETF data and analytics at CFRA Research, in a phone interview.\u00a0<\/p>\n\n\n\n

Clean energy is going to require \u201csome structural change,\u201d meaning it\u2019ll take some time before reaching a scale where it can entirely replace traditional fossil fuels, according to Ullal.<\/p>\n\n\n\n

\u201cIt\u2019s been a tough year and half for these funds, and part of it is, they\u2019re highly volatile,\u201d said Bryan Armour, director of passive strategies research for North America at Morningstar, in a phone interview. \u201cThey own a lot of growth companies where the future cash flows are particularly unpredictable.\u201d<\/p>\n\n\n\n

But over the longer term, \u201cclean energy is a really strong way to improve our energy security,\u201d said Armour.Surprise politics<\/p>\n\n\n\n

In her July 26 note, DataTrek\u2019s Rabe cautioned investors considering clean energy that they may want to hold off from putting fresh capital to work in this \u201cdisruptive tech theme\u201d until after the U.S. midterm elections in November due to potential volatility stemming from policy uncertainty. <\/p>\n\n\n\n

\u201cWhile the earnings revision data is promising,\u201d she said, the clean-energy ETFs highlighted in her note peaked in early 2021 \u201cjust after Joe Biden was elected president and Democrats took control of [the Senate in addition to the House].\u201d She said that the \u201cDemocrats\u2019 pledge to raise green-energy investment drove investor enthusiasm in the space.\u201d<\/p>\n\n\n\n

\u201cConversely, renewable-energy companies recently sold off after Sen. Joe Manchin<\/a> opposed a climate-focused spending package,\u201d said Rabe. \u201cEven though Republicans are expected to take back control of Congress, renewable energy is an increasingly important industry with economic benefits.\u201d<\/p>\n\n\n\n

But in an unexpected move, Manchin and Senate Majority Leader Chuck Schumer announced Wednesday that they\u2019d come tp an agreement addressing climate, healthcare and taxes, according to an\u00a0Associated Press report<\/a>\u00a0Wednesday evening. Manchin, a conservative Democrat from West Virginia, said the bill would invest in technologies for carbon-based and clean energy.<\/p>\n\n\n\n

The top two companies owned by the iShares Global Clean Energy ETF are Enphase Energy Inc. and SolarEdge Technologies Inc. according to the DataTrek note dated July 26. As of Wednesday, Vestas Wind Systems was the third largest holding, followed by Consolidated Edison Inc., fund data<\/a> on BlackRock\u2019s website show.<\/p>\n\n\n\n

Enphase and SolarEdge are also the top two holdings of the Invesco Solar ETF, with the third biggest being First Solar Inc. Rabe noted.<\/p>\n\n\n\n

First Trust Nasdaq Clean Edge Green Energy Index Fund\u2019s top three holdings also include Enphase, plus Tesla Inc. and ON Semiconductor Corp. she said.<\/p>\n\n\n\n

Franklin Templeton\u2019s head of ETF sales, Dan Muzzarelli, said by phone that there\u2019s some\u00a0overlap of companies held by clean-energy funds and the firm\u2019s thematic ETFs. For example, the Franklin Intelligent Machines ETF holds Tesla, Enphase, Samsung SDI Co. and SolarEdge, all stocks that tend to show up in clean-energy ETFs, he said.<\/p>\n\n\n\n

The Franklin Intelligent Machines ETF gained more than 4% on Wednesday, bringing its July advance to 13.3%, FactSet data show, though the fund is down 28.6% to date in 2022.<\/p>\n\n\n\n

\u201cYou certainly do see technology like semiconductors\u201d enabling clean energy, according to Stacey Morris, head of energy research at VettaFi.<\/p>\n\n\n\n

\u201cFrom a clean-energy standpoint, clearly that\u2019s an area that is going to gain more traction as the world focuses on decarbonization,\u201d she said. \u201cBut the reality is that we\u2019re not there yet, and, in the meantime, I think particularly natural gas is going to be very important in terms of meeting global energy demand.\u201d<\/p>\n\n\n\n

The iShares Global Clean Energy ETF and Invesco Solar ETF surged around 6% by Thursday afternoon, while the First Trust Nasdaq Clean Edge Green Energy Index Fund had jumped about 5%, FactSet data show, at last check.<\/p>\n\n\n\n

As usual, here\u2019s your weekly look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.\u00a0<\/p>\n\n\n\n

The good\u2026<\/p>\n\n\n\n

Performance<\/strong><\/td>%Performance<\/strong><\/td><\/tr>
United States Natural Gas Fund LP<\/td>10.1<\/td><\/tr>
VanEck Oil Services ETF<\/td>9.3<\/td><\/tr>
iShares MSCI Brazil ETF<\/td>7.7<\/td><\/tr>
SPDR S&P Oil & Gas Exploration & Production ETF<\/td>6.5<\/td><\/tr>
First Trust Natural Gas ETF<\/td>6.2<\/td><\/tr>
Source: FactSet data through Wednesday, July 27, excluding ETNs and leveraged products. Includes NYSE, Nasdaq and Cboe traded ETFs of $500 million or greater.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

\u2026and the bad<\/p>\n\n\n\n

Performance<\/strong><\/td>%Performance<\/strong><\/td><\/tr>
AdvisorShares Pure US Cannabis ETF<\/td>-7.0<\/td><\/tr>
WisdomTree Cloud Computing Fund<\/td>-6.8<\/td><\/tr>
ARK Next Generation Internet ETF<\/td>-6.5<\/td><\/tr>
Global X Cybersecurity ETF<\/td>-6.5<\/td><\/tr>
ARK Fintech Innovation ETF<\/td>-6.4<\/td><\/tr>
Source: FactSet<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

New ETFs<\/p>\n\n\n\n