Exchange Traded Funds (ETFs)

Tapping into This GRID

Over the past few decades, we have seen a remarkable shift in the materials that the world uses to power its machines and generate the energy that is needed to run all the devices that make living life as comfortable as possible.

While carbon-based fuel sources, such as oil and coal, have been used since the Industrial Revolution, they have increasingly fallen out of favor due to their impact on the environment. Instead, we are seeing a rise in interest in renewable energy sources, such as solar and wind power, as they have fewer of the negative drawbacks of coal and oil.

At the same time, we also are seeing a movement toward more efficient ways to store energy and use smart grids. These are electrical grids that contain many energy-saving and energy-efficient measures, including smart meters and smart appliances.

The Nov. 3 presidential election of Joe Biden, who has publicly expressed his support for green energy, might impel investors to turn toward such stocks. So, it is time to turn our attention to the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NASDAQ: GRID).

GRID tracks a market-cap weighted index of global equities that are in the smart grid and electrical energy sector. These are divided into pure play — where more than 50% of the company’s revenue comes from these two sectors — or diversified — where less than 50% of the company’s revenue comes from these two sources. After being screened for minimum liquidity and market capitalization, the stocks are then given a collective weight of 80% for pure play stocks and 20% for diversified stocks.

Exclusive ETF Talk: Tapping into the Power of Language with This Communications ETF

Some of this fund’s top holdings include Aptiv PLC (NYSE: APTV), ABB Ltd. (NYSE: ABB), Johnson Controls International plc (NYSE: JCI), Schneider Electric SE (OTCMKTS: SBGSY), Eaton Corp. plc (NYSE: ETN), Enphase Energy, Inc. (NASDAQ: ENPH), SolarEdge Technologies, Inc. (NASDAQ: SEDG) and Prysmian S.p.A. (OTCMKTS: PRYMY).

This fund’s performance has been strong, even when including the damage done by the COVID-19 pandemic. As of Jan. 12, GRID has been up 13.58% over the past month and up 27.73% for the past three months. It is currently up 7.60% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $156.56 million in assets under management and has an expense ratio of 0.70%.

In short, while GRID does provide an investor with a chance to tap into the world of electrical grids, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.