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Even before T. Boone Pickens stepped up to the podium, investors across America were well aware that energy alternatives would be important, perhaps necessary, to meet the country’s energy needs in the future. While gas prices have backed off of recent highs, the future of U.S. energy still hangs in the balance.
ETF issuers have responded with a smattering of funds, designed to offer investors exposure to companies that might provide an alternative to oil. One such fund, PowerShares Global Wind Energy ETF (PWND), seeks to give investors exposure to the NASDAQ OMX Clean Edge Global Wind Energy Index. PWND’s index is composed of manufacturers, developers, distributors, installers and users of energy derived from wind sources. http://www.fidelityadviser.com/
“While wind energy is not a new idea,” Dion noted, “it has recently experienced a flurry of publicity in the wake of T. Boone Pickens’ proposal, ‘Pickens’ Plan.’” Part of Pickens’ Plan involves harnessing a “wind corridor” which spans from Canada to West Texas. Pickens believes that wind could supply 20% or more of the nation’s power. “These wind turbines have proven to be successful,”
PWND’s holdings are largely international, but a substantial boost to U.S. wind-produced energy could create a global effect. China, PWND’s eighth-largest country allocation through its investment in China High Speed Transmission, has been growing its wind industry at breakneck speed in recent years. “As production continues to grow in developing markets,” Dion said, “there will be a tremendous new need for energy alternatives on a global scale.” http://store.fidelityadviser.com/
So is Pickens’ Plan just good press for the concept of wind energy? In addition to creating awareness about the wind alternatives in which PWND holdings invest, an implementation of Pickens’ Plan could directly boost PWND’s value. The U.S. has the third-highest country allocation in PWND’s index, and U.S.-based wind-energy companies make up 13.67% of the portfolio.
Pickens suggests that thousands of wind turbines could fuel power plants in large population hubs. PWND’s fourth-largest holding, American Superconductor Corp., is the world’s principal supplier of HTS wire—a component that may be vital in transporting wind energy, which will be key if the proposal advocated by Pickens were to swing into motion.
PWND’s largest country allocation is Spain, home to the index’s top component, Gamesa. As one of the largest wind generator manufacturers in the world, Gamesa captured a 15% share of the wind generator market in 2007. “Gamesa’s share price has more than doubled in the last two years,” Dion noted, “and the company capped off 2007 by signing several multi-annual contracts with European clients valued at more than 700 million euros.” http://store.fidelityadviser.com/
Gamesa’s interests are spread throughout Europe, but PWND’s top ten country allocations also include Denmark, Germany, France, the U.K, Belgium and Switzerland. Holdings in China and Canada will also help provide PWND’s investors diversification in the global economy.
“PWND is a relatively new fund, launched July 1,” Dion said, “and it has not been included in our fund universe yet. Our portfolio, however, does gain exposure to alternative energy through the PowerShares Cleantech Fund (PZD). Both PZD and PWND have exposure to companies like Siemens AG and ABB Ltd.”
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PowerShares Momentum Tracker is a member of Fidelity Independent Adviser’s family of financial publications. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers. http://www.fidelityadviser.com/
“The success of PWND will hinge on global awareness and continued wind initiatives, Dion noted, “whether it is the rhetoric of T. Boone Pickens, or the frightening price of gas, investors have grown more aware of energy alternatives in recent months. News events and oil prices could create a tremendous demand for wind, and PWND, in the future.”
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PWND Top Ten Holdings*
Vestas Wind Systems A/S
Iberdrola Renovables S.A.
Gamesa Corporación Tecnológica S.A. (B01CP2)
Nordex AG
Hansen Transmissions Intl. N.V.
China High Speed Transmission&
EDF Energies Nouvelles S.A.
Theolia S.A.
Greentech Energy Systems A/S
American Superconductor Corp.
*As of 7/24/08
Source: PowerShares.com
Don Dion, publisher of Fidelity Independent Adviser, is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $750 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management. http://www.dionmm.com/
