The Roen Financial Report closely covers the universe of almost 30 alternative energy Mutual Funds (MFs) and Exchange Traded Funds (ETFs). We use a proprietary ranking method to pick the best funds, looking at measures that include fees, risk, tax liability, and the financial health of individual holdings within each fund. In the latest round of rankings, all top rated funds retain their premier slots.
Subscribers can see the complete list of funds, including rankings and technical breakdowns, in both Excel and PDF format, by going to www.roenreport.com/mfsetfs/.
The three top ranked mutual funds remain at Allianz RCM Global Water A (AWTAX), Fidelity Select Environment and Alternative Energy (FSLEX), and Portfolio 21 R (PORTX). AWTAX has gained almost 18% in the past year, and Morningstar has rated it in the top 10% of returns for funds within its category. Alger Green A (SPEGX) dropped one level in its ranking this month, from a Rank 3 to a Rank 4.
It is interesting to note that all three of the Rank 1 Mutual Funds are trading near the top of their annual highs. In addition, the securities that FSLEX holds appear to be the most overvalued, so I would proceed with caution at this point.
The annual average performance of alternative energy Mutual Funds was basically flat, up only 0.3% for the year. On a positive note, gainers beat losers by a 3:2 margin.
Exchange Traded Funds
All Rank 1 ETFs remain the same for December: Market Vectors Environmental Services (EVX), First Trust ISE Global Wind Energy Index Fund (FAN) and First Trust ISE-Revere Natural Gas Index Fund (FCG). Each of these funds excels for various reasons, but they all share a low management fee structure relative to the other ETFs.
First Trust NASDAQ® Clean Edge® Smart Grid Infrastructure Index Fund (GRID) got bumped up two notches in its rank this month. GRID generates returns at relatively low risk, is tax efficient and has low management fees compared to other alternative energy ETFs. It also had the highest annual return of all tracked ETFs, up over 15% for the year.
Overall, though, the average ETF fared far worse than Mutual Funds, down an average of 15.1% for the year. Not surprisingly, Guggenheim Solar (TAN) had the worst annual returns, reflecting the struggles of the beleaguered solar market.
Remember to always consult with your investment professional before making important financial decisions.