With 2021 in full swing, investors can anticipate clean energy to be one of the top performers with an incoming Joe Biden presidency. If you’re looking to translate into gains via the convenience of an ETF wrapper, then the Invesco WilderHill Clean Energy ETF (PBW) is your fund.

PBW seeks to track the investment results of the WilderHill Clean Energy Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index.

The underlying index is composed of stocks of publicly-traded companies in the United States that are engaged in the business of the advancement of cleaner energy and conservation. Stocks are included in the underlying index based on the index provider’s evaluation that such companies will substantially benefit from a societal transition toward the use of cleaner energy and conservation.

Per an Investor’s Business Daily article, “Joe Biden’s 2020 U.S. Presidential election win put a firm footing under clean energy ETF stocks. Biden has vowed to accelerate the nation’s movement to cleaner forms of energy. Meanwhile, China, one of the largest remaining burners of coal, claims it will speed up its shift to cleaner energy.”

“Such trends lit up some massive gains in alternative energy ETF stocks,” the article added. “The $1.7 billion-in-assets Invesco WilderHill Clean Energy ETF (PBW) returned an impressive 208% this year so far. That makes the S&P 500’s 15.5% rise in 2020 look ho-hum. Even the high-octane Nasdaq 100’s 47% gain is far behind this year.”

PBW Chart

PBW data by YCharts

PBW’s Holding Gains 300%

The strength of a fund can be tied to a holding that is providing massive gains. For PBW, it uses a minimal allocation towards one holding with 2.78% being the highest, but one holding, in particular, has been a stellar performer.

“What’s Invesco WilderHill Clean Energy’s secret? Big bets on the companies most exposed to the push for clean energy,” the Investor’s Business Daily article said further. “One of the ETF’s top holding, at 5.9%, is FuelCell Energy (FCEL). The Danbury, Conn.-based company makes, installs, and sells fuel cell power plants. The stock was a penny stock as recently as late 2019. And yet, just this year shares soared more than 300% to 11.74 apiece. Investors seem willing to overlook the fact FuelCell is projected to lose money through at least 2023.”

PBW’s allocation skews towards small cap companies that have been gaining strength as of late.

“This year, micro-cap indices have been outperforming mid and large cap indices, a trend that 71% of the 117 professional investors surveyed believe will continue over the next six months,” the article added. “In fact, their low correlation with large caps performance is one of the key aspects driving the increase in appetite for micro caps, with 73% of investors citing this as an increasingly attractive feature.”

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