ETF Trends » VPU

An ETF to Invest in the ‘Smart Grid’ Plans

Tom Lydon — Sat, 21 Nov 2009 21:00:21 +0000

As billions go into updating and fixing the nation’s aging infrastructure, investors now have the opportunity to capitalize on the ambitious “smart grid” revolution with the use of a new sector-specific exchange traded fund (ETF).

A new “smart grid” industry is coming about and First Trust/Clean Edge Smart Grid ETF (NasdaqGM: GRID) aims to be the first to target the emerging sector, according to Maureen Brody for Ignites. GRID seeks to reflect the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index, which includes companies engaged in all components of the smart grid. (More plays for Obama’s energy plan).

The fund will have a higher weighting, around 80%, for companies that are smart grid “pure plays” and a lower weighting, about 20%, for big companies that only have a smaller vested interest in the smart grid enterprise.

The ETF is made up of 29 companies. Companies are required to have a minimum float-adjusted market capitalization of $100 million and a three-month average daily trading volume of $500K.

The top 10 holdings include: SMA Solar Technology AG, 11.6%; Schneider Electric S.A., 9.0%; NGK Insulators, 7.4%; ITC Holdings Corp. (NYSE: ITC), 7.3%; Quanta Services Inc. (NYSE: PWR), 7.2%; Itron Inc. (NasdaqGS: ITRI), 4.3%; Echelon Corporation (NasdaqGM: ELON), 3.9%; EnerNOC, Inc. (NasdaqGM: ENOC), 3.8%; American Superconductor Corporation (NasdaqGS: AMSC), 3.6%; Power-One Inc. (NasdaqGM: PWER), 3.6%. (“Smart Grid” plans power up tech sector).

For more information on utilities, visit our utilities category. The evolution of the smart grid can also be played with other utility ETFs, including:

iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 4.2% year-to-date

Vanguard Utilities ETF (NYSEArca: VPU): up 3.4% year-to-date

iShares S&P Global Utilities (JXI): up 2.0% year-to-date

Max Chen contributed to this article.

6 ETFs to Play Utility Sector’s Push for Clean Energy Laws

Tom Lydon — Thu, 05 Nov 2009 19:00:53 +0000

A group of utility companies have banded together to push for clean energy policies in the United States in response to the U.S. Chamber of Commerce’s stance on climate laws. They stand to gain from any new policies, which puts some exchange traded funds (ETFs) in a position to perform if ideas one day become reality.
A group of utility companies have come together to create American Businesses for Clean Energy. Most of the companies joining the group stand to gain from new energy policies in the United States. Keith Johnson for The Wall Street Journal reports that this action comes in response to the U.S. Chamber of Commerce’s opposition to current legislation.

Among the utilities banding together include New Jersey’s Public Service Enterprise Group (NYSE: PEG), FPL (NYSE: FPL) and PNM Resources (NYSE: PNM). On top of that, some retailers have joined in, including The Gap (NYSE: GPS); Apple (Nasdaq: AAPL) and PG&E (NYSE: PCG) left the Chamber and Nike (NYSE: NKE) has quit the board.

Cassandra Sweet for The Wall Street Journal reports that the new group is formed by utility companies across the United States. The goal is for Congress to enact a strong climate-change legislation, and as one CEO puts it, it’s not about just a few associations saying “stop this.” (10 ways to play Obama’s energy plan).

Today, 10 of the 12 Democrats on the Senate Environment and Public Works Committee supported the measure to reduce U.S. greenhouse emissions through a cap-and-trade bill. Simon Lomax for Bloomberg reports that Senate Democrats won approval over Republicans, who feel the plan is being rushed.

For more stories about utilities, visit our utility category.

iShares Dow Jones U.S. Utilities (NYSEArca: IDU): up 2% year-to-date; PEG 3.6%; FPL 4.5%; PCG 3.6%

Vanguard Utilities ETF (NYSEArca: VPU): up 0.9% year-to-date; FPL 5.2%; PCG 3.5%

iShares S&P Global Utilities (JXI): down 1% year-to-date; FPL 2.3% FPL; PCG 1.7%

PowerShares Dynamic Utilities (NYSEArca: PUI): down 4.9% year-to-date; FPL 4.6%

iShares S&P Global Nuclear Energy Index (NYSEArca: NUCL): up 30.6% year-to-date; FPL 5%

PowerShares Dynamic Retail (NYSEArca: PMR): up 20.8% year-to-date; GPS 5.7%

10 ETFs to Play Obama’s New Energy Plan

Tom Lydon — Tue, 27 Oct 2009 19:00:26 +0000

President Barack Obama unveiled an initiative to help fund the largest energy grid modernization in United States history. The investment could have a wide-ranging impact on exchange traded funds (ETFs).

The Obama Administration has announced that it’s investing $3.4 billion in order to fund this project. Through the plan, 100 private companies, utilities, cities and manufacturers will receive grants ranging from $400,000 to $200 million in order to build a smart energy grid, reports Lynn Sweet for The Chicago Sun-Times. So far, these awards are the largest Recovery Act awards ever made on one day. (Nine things that could affect alternative energy).

Analysis shows that by getting smart grid technology off the ground, it could reduce electricity use by at least 4% by 2030. This would result in savings of $20.4 billion for both businesses and consumers. (Does this mean alternative energy is not so alternative anymore?)

The Senate environment committee also released details of its climate change legislation, which includes the share of “emissions allowances,” which is revenue that comes from regulation of a cap-and-trade system – once it’s in place. The Senate has nearly tripled the share of allowances set aside by the House for transit, inter-city rail, and other efforts to trim transport-based emissions. Elana Schor for Streetsblog reports that the Senate measure would set aside more than 3% of allowances in the first two years of the cap-and-trade system for limiting pollution from the transportation sector.

For more stories about clean energy, visit our alternative energy category.

First Trust NASDAQ Clean Edge Green Energy (Nasdaq: QCLN)
iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
iShares S&P Global Infrastructure (NYSEArca: IGF)
iShares S&P Global Clean Energy (NYSEArca: ICLN)
PowerShares WilderHill Clean Energy (NYSEArca: PBW)
PowerShares Global Clean Energy (NYSEArca: PBD)
PowerShares Cleantech (NYSEArca: PZD)
PowerShares Dynamic Utilities (NYSEArca: PUI)
Utilities Select Sector (NYSEArca: XLU)
Vanguard Utilities (NYSEArca: VPU)
SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca: GII)

What Rules Changes Could Mean for Utility ETFs

Tom Lydon — Mon, 21 Sep 2009 08:00:40 +0000

The smog controls put in place by the Bush Administration may not be satisfactory enough for the Obama Administration, as many state groups and environmental groups are criticizing existing standards. Any changes could impact utility exchange traded funds (ETFs).

The Environmental Protection Agency (EPA) and state groups are criticizing the standards on smog control put in place by the Bush Administration. On the flip side, however, big business claims they are already too tough.

Environmental Leader reports under the 2008 rule, the acceptable ozone limit in the air was 75 parts per billion, down from the previous limit of 84 ppb. According to the EPA, limits of no more than 70 ppb are recommended. Scientist say that going even lower is better.

Smog regulations and limits may extend beyond the utility companies and affect big corporations, as well.

Could the cost of these changes weigh on the utility sector in the long run, or will they find a way to prevail?

Vanguard Utilities (NYSEArca: VPU): up 5.3% year-to-date

Utilities Select Sector SPDR (NYSEArca: XLU): up 5.1% year-to-date

iShares Dow Jones US Utilities Sector (NYSEArca: IDU): up 6.3% year-to-date

For more stories about utilities, visit our utilities category.

Why Utility ETFs Could Benefit the Stability-Seeking Investor

Kevin Grewal — Tue, 03 Feb 2009 23:00:44 +0000

With massive layoffs being announced, businesses closing at alarming rates, all-mighty banks failing, consumer spending at lows and an overall ambiguous outlook on the economy, investors are seeking exchange traded funds (ETFs) that track those older and more stable sectors - such as utilities.
There was a time when many investors were trying to hit it big by finding what they thought was the next Google (GOOG). Unfortunately, this high risk method left many more losers then winners. Today this is not the case, most investors are searching for stability and many are turning to utilities. So far in 2009, the Dow Jones Industrial Average (DIA) and the S&P 500 (SPY) are both in negative territory, whereas the utilities industry has actually posted gains.

Moody’s has stated that the fundamentals of the sector are “solid,” based on good credit metrics and a supportive regulatory environment. The ratings agency cautioned that a couple of cautions for the sector are that the U.S. infrastructure is creaky and getting worse, and that environmental legislation could be a challenge. The cost of implementing the laws is a question mark. President Barack Obama wants to spend $11 billion upgrading our electrical grid.

Tom Lydon appeared on Fox Business last week to discuss utility ETFs.

Ron Delegge of ETF Guide states that utilities are attractive because of the tax rules on the income generated by dividends paid by utilities ETFs. In a nut shell, this income is deemed qualified dividend income which is taxed at the beneficial rate of 15% and not ordinary income rates.

So if you want to play the utilities game, there is a vast array of ETFs to choose from. Here are three of them:

Utilities Select SPDR (XLU), the largest utility ETF that tracks utility stocks in the S&P 500. It is up 4.9% over the last month and has crossed its 50-day moving average.

Vanguard Utilities ETF (VPU), which follows the MSCI U.S. Investable Market Utilities Index and is up 4.3% over the last month and has crossed its 50-day moving average.

Rydex S&P Equal Weight Utilities ETF (RYU), which tracks utility stocks in the S&P 500, but weighs them all equally, not based on market capitalization; it is up 7.3% over the last month and has crossed its 50-day moving average.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Hurricane Ike Disrupts Utilities ETFs

Tom Lydon — Tue, 16 Sep 2008 14:00:42 +0000

Hurricane Ike didn’t just ravage southern Texas – utilities exchange traded funds (ETFs) are feeling the pain this morning, too.

The storm this weekend caused a wide disruption in power and tore through homes, streets and public infrastructures, reports the Associated Press.

Electrical utilities, and the companies which provide them, has a good week last week, but are related ETFs due for a short circuit?

A slowdown within electrical utilities is evidenced by falling momentum and volume indicators, and the rally has been signaled to an end by transitioning into bear market territory, as technical analysis is showing, reports Michael Kahn for Barrons.

Related ETFs:

Energy Select Sector SPDR (XLU), down 16.1% year-to-date
iShares S&P Global Utilities Sector Index (JXI), down 20.5% year-to-date
iShares Dow Jones US Utilities Sector Index (IDU), down 16.4% year-to-date
Vanguard Utilities (VPU), down 15.7% year-to-date

Utility Sector ETFs Are Plentiful, But They’re In Need of a Jolt

Timothy Hubbard — Mon, 25 Aug 2008 08:00:48 +0000

Utility sector exchange traded funds (ETFs) are often looked to for an element of predictability, but JP Morgan has misjudged this sector with regard to US electric utilities.

In recent article, Jonathan Bernstein of ETFZone put together a list of the most efficient, best-diversified and lowest-risk utilities ETFs on the market. He explained that investors typically look to this sector to deliver regular cash dividends and lower portfolio beta.

Similar to most sector funds, the number of utilities sector ETFs has exploded in recent years. This sector now offers investors opportunities that include globally diversified ETFs, strategic allocation ETFs, and ETFs providing short exposure or leverage characteristics.

Some of the top utilities ETFs include:

iShares Dow Jones US Utilities Sector Index Fund (IDU), down 9.7% year-to-date
Vanguard Utilities ETF (VPU), down 9.5% year-to-date
First Trust Utilities AlphaDEX Fund (FXU), down 11.1% year-to-date
Rydex S&P Equal Weight Utilities ETF (RYU), down 10% year-to-date
SPDR S&P International Utilities Sector ETF (IPU), fund inception on July 16

However, according to a recent Reuters article, JP Morgan has switched to a “neutral” stance on the U.S. electric sector. The article cites concerns such as falling natural gas prices over the past few weeks contributing to the shift.

Another concern leading to the change was the recent campaign of oil billionaire T. Boone Pickens’ calling for $1 trillion worth of investing in wind power to displace natural gas consumption for power in favor of natural gas consumption as transportation fuel.

JP Morgan analyst, Andrew Smith, explained that they expected uncertainty in the US economy coupled with strong fundamentals and earnings momentum of the sector to support certain stocks throughout the year. However, he admits that they were wrong to recommend a positive stance.

Regardless, the utilites sector has lacked its predictability and utilities ETFs have shown this in their negative returns.

As Power Industry Gets Facelift, Perhaps Utility ETFs Might As Well

Tom Lydon — Thu, 10 Jul 2008 22:00:53 +0000

The United States has an aging power grid, and efforts to bring it into modern times could benefit utility exchange traded funds (ETFs).

The target is for electric power providers to spend $17 billion on upgrades by 2010, reports Steve Gelsi for MarketWatch. The alternative, if the industry doesn’t start making improvements, is increased blackouts and power-quality problems.

Utility providers are stuck, though, between the effects of an economic slowdown and uncertainty about climate legislation. Even so, while the power industry has often been criticized for its pokiness, it has stepped up efforts to go high-tech. But some still fault the industry for only stepping up their efforts after a crisis.

For example, the summer 2003 power outage that affected much of the Northeast. First Energy’s (FE) territory in Ohio was found to be the cause.

Dominion (D) has been offering “smart meters” to homes in Virginia that allows users to tell them how much energy they’re consuming and what it costs. But many of these improvements aren’t coming for free. Florida’s provider, FPL (FPL), got the go-ahead to raise monthly bills by 8% from August through December to offset rising fuel costs.

But even with all the problems of high cost and a creaky system, energy demand continues to rise. Kevin Law, CEO of the Long Island Power Authority, says that on Long Island alone, yearly demand is going up 2% in Nassau and Suffolk counties, and 7% on the eastern end of the island.

Will high-tech translate into high returns for utility ETFs?

Utilities Select Sector SPDR (XLU): down 2.7% year-to-date; Dominion is 5.7%; FPL is 6.2%; First Energy is 5.3%
iShares Dow Jones US Utilities (IDU): down 3.3% year-to-date; Dominion is 4.3%; FPL is 4.1%; First Energy is 3.9%
Vanguard Utilities (VPU): down 3.5% year-to-date; Dominion is 4.3%; FPL is 4.4%; First Energy is 3.8%
Utilities HOLDRs (UTH): down 1.6% year-to-date; Dominion is 7.5%; FPL is 7.9%; First Energy is 5.8%