The Alerian Energy Infrastructure ETF (ENFR) doesn’t scream “renewable energy fund”, nor is it advertised as such, but the exchange traded fund offers surprising access to the renewable energy boom.
ENFR tracks the Alerian Midstream Energy Select Index (CME: AMEI). ENFR acts as a type of hybrid energy infrastructure ETF, which could help investors capture some of the high yields from MLPs while limiting the tax hit from solely owning MLPs.
Believe it or not, traditional energy companies are in the early innings of moving toward lower carbon emissions and embracing green energy.
“Major oil companies are in the early stages of one of the biggest transformations in any industry in decades. Nearly all of them are starting to make investments in low-carbon businesses, investing in wind, solar, and hydrogen power,” reports Avi Salzman for Barron’s.
The ENFR ETF: (Sort of) Going Green
Renewable energy, which includes solar, wind, geothermal, hydroelectric, and other low carbon sources, is commanding an increasing share of the energy landscape, meaning it’s not only prescient for midstream operators to move into space, but potentially profitable ones, too. Renewables represent a new growth frontier for fossil fuels providers.
“Oil companies aren’t expected to grow much in the years ahead, because even the most bullish analysts doubt that oil demand will rise more than a total of 10% in the next decade from 2019 levels,” according to Barron’s.
Companies must adapt to shifting market conditions or risk being left behind or worse. This particularly true in the energy sector where renewables continue pilfering market share and investors from fossil fuel producers.
However, some traditional energy companies see the writing on the wall and are changing with the times. That includes midstream names, including some residing in.
ENFR acts as a type of hybrid energy infrastructure ETF, which could help investors capture some of the high yields from MLPs but limits the tax hit from solely owning MLPs. Moreover, many traditional MLP funds don’t provide adequate renewables exposure, but ENFR is changing that conversation.
Other MLP funds include the Global X MLP ETF (NYSEArca: MLPA) and the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.
