A FANTastic Idea For Wind Power Exposure | ETF Trends

Alternative energy assets continue grinding higher in 2020 and the First Trust Global Wind Energy ETF (NYSEArca: FAN) is participating in that trend with a year-to-date gain of nearly 5%.

FAN turns 12 years old in June, making it one of the oldest renewable energy ETFs. The fund follows the ISE Clean Edge Global Wind Energy Index.

“Companies in the index universe that are identified as providing goods and services exclusively to the wind energy industry are given an aggregate weight of 66.67% of the index. Those companies determined to be significant participants in the wind energy industry despite not being exclusive to such industry are given an aggregate weight of 33.33% of the index. This weighting is done to ensure that companies that are exclusive to the wind energy industry, which generally have smaller market capitalizations relative to their multi-industry counterparts, are adequately represented in the index,” according to First Trust.

Environmental, social and governance (ESG) is becoming an integral part of the investment space and as more investors clamor for funds that hone in on these initiatives, ETF providers are scrambling to give the people what they want. One of these areas is alternative energy, which will allow ETFs that center on wind and solar power to come into focus.

A Fabulous FAN

One of the stocks boosting FAN this year is its largest holding: Danish turbine manufacturer Vestas Wind Systems. The stock represents 9.41% of FAN’s weight.

“Vestas posted an order intake — a measure of turbines placed on its order books — of more than 17 gigawatts (GW) last year, with revenue hitting 12.1 billion euros ($13.34 billion), up from 10.1 billion euros in 2018,” reports CNBC.

FAN’s index provides a benchmark for investors interested in tracking public companies throughout the world that are active in the wind energy industry. In order to be eligible for inclusion in the index, a security must be issued by a company that is actively engaged in some aspect of the wind energy industry. Fortunately for investors, Vestas meets FAN’s criteria and that stock could continue fanning gains for the wind ETF.

“Wind energy manifested its position as a leading global energy source in 2019, driving Vestas’ order intake to a record 17.9 GW, 20 percent growth in revenue and expected high activity levels in the coming years,” Henrik Andersen, Vestas’ group president and CEO, in a press release.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.