Alternative Energy Is Hot

In one of our postings in July, we discussed about PBW, an Exchange
Traded Fund (ETF) that aimed to reap some benefits of being in the
Energy sector while keeping 'social responsibility' intact: PBW.

PBW is based on an index of publicly traded energy companies that focus
on environmentally friendly sources of energy and technologies and
started trading on the American Stock Exchange on March 3. The index
contains 37 companies that use greener and renewable energy
alternatives such as wind, solar and hydrogen fuel cells.

The ETF, which is managed by PowerShares Capital Management, tracks
the WilderHill Clean Energy Index, a benchmark calculated by the Amex.

Last week PBW has seen assets and trading volume pick up as investors
speculated that alternative power would become increasingly viable for
companies and consumers. The $108 million ETF added $20 million the
week before Katrina hit, and $35 million more the week after the hurricane
left damaged oil rigs and refineries in its wake. The portfolio gained 35%
in the three months through Sept. 9, according to investment research
firm Morningstar Inc., and is up 17% in the past four weeks alone.

Its Top holdings include Emcore Corp. (EMKR) , in the renewable-energy
harvesting sector, power delivery and conservation firm Itron Inc. (ITRI)
and energy conservation company Medis Technologies (MDTL) .

Investing in environmentally-friendly energy stocks seems a reasonable
strategy given political tensions in the Middle East and anticipated demand
from emerging economies like India and China. But one must also
remember that a concentrated clean-energy ETF is prone to wide
performance swings since it invests in small, speculative companies and is
considered a hedge against oil prices, which also can be volatile.