Obama ETFs: Might the President-Elect Revitalize Traditional Energy ETFs?

By Gary Gordon | November 12, 2008 | 2:40 PM | 0 Comments

It seems that everywhere you turn, you'll find recommendations for Obama-friendly ETFs. And if there's one consistent theme, it's the demand for "greener" alternatives to energy.

Yet with crude oil not seeing $57 per barrel since February 2007 more than 20 months ago, and with the price multiples (P/Es) on alt energy more than double than traditional energy, the rhetoric from the campaign trail won't be enough to stimulate alt energy ETFs.

A simple truth is this: When oil is skyrocketing, alt energy is a consistent war cry. When oil is fading more rapidly than stock assets, it would seem that the best way to make money from the alt energy push is from United States Oil (AMEX: USO)

That's right. If USO climbs, alternative energy initiatives will be more prominent and the demand for corporate shares of those companies will rise as well.

I'm not suggesting that environmentally conscious investors put their dollars to work in "Big Oil" or the commodity itself. But i am being realistic. For all the talk about Obama-friendly energy alternatives like the PowerShares Wilder Clean Energy (NYSE: PBW), this one has lost -70% YTD through 11/12/08. (Try to find a diversified ETF will a more troubled 2008.)

The alternatives that I like for Obama are not leaps and bounds better. Yet I'd rather diversify in unique ways; that is, I like the idea of a "clean technology ETF" that captures infrastructure, green companies and a bit of mid-cap growth.

Consider the PowerShares "CleanTech" Fund (NYSE: PZD).This exchange-traded fund is a "greener" take on infrastructure. Unlike the U.S. industrial revolution, the next wave of international growth will be cleaner... more "resource-conscious." And Obama will be emphasizing that point at every discussion of energy independence and infrastructure improvement.

“Cleantech" companies as those that derive the majority of their business from products or services that improve productivity or performance while reducing costs, resource consumption, pollution and toxicity. Expressed another way, these are knowledge-intensive corporations that add economic value (productivity, performance, etc.) while minimizing the use of the world's natural resources.

Again, the equity world is so battered, there are no winners for the moment. But when the time comes... when initiatives are announced... the investments that stand to benefit the most from "change" are investments like PZD.

And for those who are disgusted with a direct investment into the commodity via USO, you'll note that PZD is charting a not too dissimilar path. So if you want to feel good about Obama-friendly companies... investments that will prosper on greater demand for the efficient use of natural resources as well as infrastructure enhancement, "CleanTech" PZD may be the ticket.

click chart to enlarge

Of course, if you're not disgusted by traditional resources, you might want to take a look at the PowerShares Dynamic Energy Exploration and Production (NYSE: PXE).. This exchange-traded fund is geared towards small- and mid-sized companies… not “Big Oil.” PXE represents smaller companies that have attractive price-to-book and attractive price-to-earnings. Helping established explorers of energy grow from smaller companies to bigger companies works in the Obama playbook, even as “windfall profit taxes” are talked about with “Big Oil.”

click chart to enlarge

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.