4 Utility ETFs for the New Smart Grid

September 27th at 11:00am by Tom Lydon

America’s infrastructure is aging if not outdated, but Capitol Hill has allocated some stimulus money into updating our country’s infrastructure, including the new and improved “smart grid.” The cash injection should help revitalize the energy infrastructure sector, along with related infrastructure exchange traded funds (ETFs).

According to GTM Research analyst David Leeds, the smart-grid market will expand 70% to $9.6 billion by 2015 from its current $5.6 billion, covering 48% of the country, writes Fahmida Y. Rashid for eWeek. [Building the Case for Infrastructure ETFs.]

Both utility companies and technology companies are offering solutions in the smart-grid project. Outside experts will likely deploy, manage and maintain the smart grid.

The media and analysts have bombarded listeners with the new and next best thing to come along, but David Fessler for InvestmentU has helped dispel some myths about where to invest in the Smart Grid.

  • President Obama has called for the installation of 40 million smart meters. This new meter may allow power companies to watch over what appliances the electricity is powering. Fessler advises investors to stay away from smart meter companies since they may not make too much in the long term.
  • As energy usage increases, America will need a bigger power transmission system to cover the increasing capacity. This should be a good opportunity for companies that deal with high-voltage lines, but regulatory bureaucracy at the local level may keep projects on hold for a long time.
  • “Smart” appliance companies are popping up, advertising their energy-saving products, but the problem is that it may be too early to invest in these business ventures. [Utility ETFs: Growth and Income, All in One.]
  • New sources of energy, such as renewable, are making a greater appearance and power companies will have to come up with a new way to manage the extra power. Power companies are putting billions over the next decade into power distribution networks. Cisco Systems (NASDAQ: CSCO) is one company that could benefit from implementing the networks.

For more information on the smart grid, visit our utilities category.

There are dozens of ways to get exposure to America’s energy future by using ETFs. Visit the ETF Analyzer and search “utilities” to bring up some of the options. Also look for ETFs that are heavy in names contributing to this growing market.

  • Rydex S&P Equal Weight Utilities (NYSEArca: RYU), up 9.1%in the last three months
  • Utilities Select Sector SPDR (NYSEArca: XLU), up 8.7% in the last three months
  • SPDR FTSE/Macquarie Global Infrastrucutre (NYSEArca: GII), up 8.6% in the last three months; United States is 40%; Utilities are 86.6%
  • iShares Goldman Sachs Technology (NYSEArca: IGM), up 6.7% in the last three months; CSCO is 6.1%

Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.