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Clean energy ETFs are hit, but money continues to flow

Investors have lost their betting bundles on manufacturers of solar panels and wind turbines this year. Their reaction: Double down.

one year ago, Green stocks and funding to track them In the aftermath of the market recovery from the pandemic plunge, there was a tremendous rebound. Solar panel and wind turbine companies were one of the companies that benefited from the investor-led and consumer-led surge. Renewable energy demandDespite being a small unprofitable venture, many.

This year, returns are chasing the wider stock market. This is in part due to the stocks implemented so far, the uncertainty about the Federal Reserve interest rate course, and how that action ultimately affects growth stocks.

Exchange-traded funds that track the renewable energy index have recorded double-digit declines so far this year.

Black lockof

iShares Global Clean Energy ETF

It has fallen 18% since December.

Invesco Co., Ltd.

Popularity

Solar ETF

Recorded a 17% decrease.

Still, the money continues to flow. Professional money managers and individual traders have invested $ 6.2 billion in green energy ETFs so far this year, according to RefinitivLipper data. Inflows are heading above last year’s record $ 7.2 billion.

Index makers and asset managers have said so far that the sharp drop in stock prices does not reflect investors’ desire to bet on green companies.

Ali Rajendra, Senior Director of the S & P Dow Jones Index’s Strategy and Volatility Index, said:

At BlackRock, the world’s largest asset management company, Clean Energy Funds have reported $ 2.7 billion inflows so far this year and $ 1 billion to European Clean Energy Funds, according to FactSet. The interest was so high that S & P needed to expand the benchmark for clean energy used by BlackRock funds to solve the problem of being overfunded, mostly in small, difficult-to-trad companies. ..

Such changes rarely occur, according to S & P’s Rajendra, but strong demand from investors required the index to be refreshed from just 30 to 82 shares. The company has also lowered the criteria for including stocks in particular.

Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management, believes that renewable energy inventories, from solar panel makers to alternative battery makers, will ultimately change transportation and other aspects of everyday life.

Maine solar farm. Because clean energy stocks are expensive, they and the funds that track them can be more vulnerable to market and political changes.


Photo:

Robert F. Bucati / Associated Press

Gerber has invested more of his clients’ cash in Invesco’s Clean Energy Fund, contributing a total of $ 446 million to ETFs so far this year. He avoids the best-performing oil stocks on the stock market this year.

“The more speculative stocks we have, the higher our reputation, but in this market people are more interested in fantasy than in reality,” Gerber said. “In other words, if you use solar, there is a little illusion there.”

Invesco’s solar ETFs surged 233% in 2020, while BlackRock’s Global Clean Energy Fund surged 140%. This was the best year in history for both, as the valuation of green stocks rose to a dizzying height.

Both funds have declined year-to-date, but their valuations have risen. According to FactSet, Invesco’s Solar ETFs are trading at 36 futures price-earnings ratios against 21 on the S & P 500.

Clean energy companies, on the other hand, trade at a 70% premium to traditional energy companies based on interest, taxes, depreciation and the ratio of corporate value to profit before depreciation, standard metrics and strategists. I am.

Bank of America

Said. They said the rating fell from its highs earlier this year, but is still well above the five-year average.

Stocks are expensive, so they and the funds that track them can be more vulnerable to market and political changes. For example, if the Fed begins to raise interest rates faster than expected and loses some of its growth stock, their appeal may diminish.

Or, if you have hiccups, volatility can increase $ 1 trillion infrastructure plan President Biden and some US senators agreed. Green stocks rebounded last year as investors were convinced that the new administration would accelerate the transition to U.S. wind and solar energy and fossil fuels after Mr. Biden won the presidential election in November. ..

Investors are already experiencing some of that volatility. Clean energy stocks have recovered alongside growth stocks in recent weeks. Invesco’s solar funds have increased by nearly 11% in the past month, while BlackRock’s ETFs have increased by 2.2%.

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Investors’ willingness to continue to pour money into this part of the market shows that they are positioning themselves for a potential long-term readjustment of the energy sector and the economy.

Rene Reyna, Head of Thematic and Specialty Products Strategy at Invesco, said the technology will ultimately significantly reduce the cost of batteries, solar panels and other green initiatives, resulting in widespread adoption and significant benefits. He said he was premised on beliefs. In that sense, he said clean energy is a “hopeful trade.”

Built at a wind farm in New Mexico last year. Clean energy companies trade at a 70% premium over traditional energy companies.


Photo:

Cate Dingley / Bloomberg News

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

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Clean energy ETFs are hit, but money continues to flow

Source link Clean energy ETFs are hit, but money continues to flow

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