A gusher of production amid weak global demand mean oil and natural gas prices haven’t gone anywhere in a year, and that’s leaving traditional energy players playing catch up.
The S&P 500 has generated a total return of more than 21% year-to-date, beating the energy sector’s return by 3 percentage points. And some of the biggest names in the sector are faring even worse: Exxon Mobil (XOM) is barely above break-even for the year, and Chevron (CVX) is trailing the broader market by 10 percentage points.
But where the old guard is wheezing, alternative energy stocks have blasted off.
The worst of the solar panel glut is behind the industry, demand is shining bright, and costs are coming down. Perhaps most important, in a big boost for the green-energy industry, the EPA is set to lower carbon emission from coal-based power plants and enforce stricter policies on green-house gas emissions.
With that as the backdrop, here are four alternative energy funds — both actively managed mutual funds and passive exchange-traded funds — that are absolutely crushing the market this year.
Firsthand Alternative Energy
Minimum Investment: $2,000
No. 1 in its fund category (mid-growth tech), according to Morningstar, ALTEX is up 84% for the year-to-date, beating its benchmark by 64 percentage points. True, the expense ratio is high, but when a fund puts up this kind of return, why quibble over fees of 2%?
Guinness Atkinson Alternative Energy
Minimum Investment: $5,000
A focus on sun and wind power has propelled GAAEX to No. 1 in its category (small-blend equity energy) this year, with a 71% gain year-to-date that bests its benchmark. Again, expenses are high, but management is more than earning its fees with this kind of outperformance.
Guggenheim Solar ETF
Total Assets: $315.1 million
Average Volume: 195,000
If you’re put off by the high fees for active management, alternative energy ETFs have you covered, with come stellar returns to boot. For a concentration in solar energy with low expenses and a generous yield, look no farther than TAN. This ETF has more than doubled for the year-to-date, jumping 144% on a price basis.
Top holdings include Hanergy Solar (up more than 300% this year, but listed only on the Hong Kong Stock Exchange), Trina Solar (TSL) and GCL-Poly Energy Holdings (another stock available only in Hong Kong).
First Trust Nasdaq Clean Edge Green Energy Index Fund
Total Assets: $82.5 million
Average Volume: 35,000
QCLN tracks an index that happens to include Tesla Motors (TSLA) and Cree (CREE). The former — the market’s favorite electric-car company — has quintupled this year, while the latter has more than doubled on the promise of LED lighting technology. That has helped QCLN gain 88% on a price basis so far this year.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.