As the world faces the inevitable elimination of sources of non-renewable energy, increasing numbers of investors are looking for opportunities in such sectors as solar, wind and water.
Each of these investment categories presents special challenges and the purpose of this blog is to introduce you to a few of the complexities and opportunities these kinds of investments present.
The solar industry is experiencing growing pains. While the long-term appeal of the category is unmatched – Apple and Google are investing big time in solar energy – it’s perhaps unwise to buy individual stocks. The best way to play solar is to build a position using exchange traded funds (ETFs). The Motley Fool1 offers a solid introduction to this investment category.
Writing recently in ETF.com, one of the world’s leading authorities on exchange-traded funds, Cinthia Murphy2 offered an upbeat interpretation of the category:
‘Solar energy ETFs are staging an impressive rally following a slew of renewable energy installation deals that suggest demand for solar panels and alternative energy is picking up pace, at least in Silicon Valley.
Much of the upward momentum is recent, following news that Apple is investing big in solar energy. The company said last month an $850 million deal with photovoltaic panel maker First Solar would equip all of the company’s California facilities with solar power.’
According to a recent report, again published in The Motley Fool (Travis Hoium3, January 4, 2018): ‘Wind energy is booming in the U.S. and around the world, accounting for more than one-third of all electricity capacity installed globally in the last five years…
…Investing in wind energy, however, is easier said than done. Manufacturing is largely done within large conglomerates, and asset ownership often falls to utilities or corporations that have much bigger exposure to other business lines.’
That the world is facing an acute water shortage is, increasingly, a truism. Large regions of major countries – such as the United States – are in drought or have questionable long-term access to a water supply.
While this may not appear to be a significant issue for us in Canada – Ontario alone contains 10% of the world’s supply of fresh water, for example – water as an investment subject is an obvious winner.
Writing in a recent issue of Barron’s (January 21, 2017) writer Sarah Max4 offered some thoughts about water ETFs and where to find them: ‘But while the value of water is crystal clear, strategies for investing in it can get murky. Water offers few options for direct investment. The next best thing: utilities, industrials, and, to a lesser degree, health-care companies focused on purifying, transporting, and testing water.’
Ms. Max included some helpful investment suggestions, including:
PowerShares Water Resource ETF
The oldest and largest is PowerShares Water Resource, an ETF that focuses on U.S. companies with meaningful ties to water.
First Trust Water ETF
Another candidate is First Trust Water ETF, which also offers a heavy exposure to
utilities and industrials, though it’s largest holding, Agilent Technologies is a health-care company focusing on life sciences, diagnostics, and chemical analysis.
Guggenheim S&P Global Water ETF
The $449 million Guggenheim S&P Global Water, launched in May 2007, tracks 50 companies with water-related businesses.
This, of necessity, is a very brief introductory overview of three investment categories with enormous upside potential. For more information about solar, wind and water investing, please contact me personally. There’s plenty to talk about.
Dave Ritcey, The Ritcey Team, Scotia Wealth Management