Can Investors Profit from President Obama's New Energy Policy?

Can Investors Profit from President Obama's New Energy Policy?Last week, President Obama outlined a new energy policy that aims to reduce America's dependence on imported oil by using more of the nation's abundant reserves of natural gas, encouraging more efficient vehicle fleets and expanding the use of alternative energy sources such as wind and solar.

There's no telling how much profit will actually be generated in each of these industries, but it's worth looking at a few exchange-trade funds that act as proxies for natural gas and alternative energy to see if there are ways individual investors can capitalize on these new policies.

Since the president touted a federal tax credit for the purchase of electric vehicles, as wells as a directive for federal agencies to purchase alternative fuel vehicles, companies that manufacture hybrid or electric cars such as General Motors, (GM) with its Chevy Volt and Nissan (NSANY) with its Leaf, might be expected to post more sales. But since these global companies produce millions of vehicles, it will take both time and a major change in buying trends to boost the relatively modest sales numbers of electric and hybrid models to the point that they make a big impact on manufacturers' bottom lines.

Compared to the relatively diffuse impact the announced policies could have on auto sales, natural gas, solar and wind are "pure plays" on the growing use of natural gas and a federal emphasis on encouraging alternative energy.

Charting the Alternatives


Rather than attempt to review the dozens of publicly traded natural gas, wind and solar companies for trends, let's refer to exchange-traded funds that act as proxies for each industry: the U.S. Natural Gas Fund, (UNG); the Global Clean Energy Index Fund (ICLN); the Global Solar Energy Index (TAN), and the Global Wind Energy Fund (FAN).

Here are the charts for ICLN, UNG, and the S&P 500, which we can use as a baseline for comparison.







Despite the obvious promise of natural gas and alternative energy, both ICLN and UNG have dramatically underperformed compared to the S&P 500.

ICLN tanked along with the rest of the market during the global financial crisis, recovered strongly to the $25 level in spring of 2009, and has since drifted down to a trading range below $20. A recent uptick brought it to $18.77, a far cry from its 2008 levels around $50.

The irony about natural gas is that its new-found abundance due to technological advances has caused its price to plummet. This is reflected in the chart of UNG, which has cratered from $80 in 2008 to just above $11. In terms of relative performance, the broad-based S&P 500 has outperformed both natural gas and clean energy, as it has more than doubled off its lows and reached price levels last seen in 2008.

Much Promise, Little Profit -- So Far ...


Next, let's compare the narrower ETFs for solar (TAN) and wind energy (FAN) and the natural gas fund UNG against the S&P 500 on a nine-month chart, which captures the relative price movement of each since last summer's swoon and subsequent liftoff in September.

What really pops out of this comparative chart is the solar ETF's volatility. It has outperformed the SPX and then crashed back down, all in a few months. Wind energy has underperformed the SPX, but recently closed the gap, logging a 10% gain since last summer. But it still lags the S&P 500's nearly 20% gain over the period.

Natural gas, meanwhile, has sunk 35% since last summer, a dismal return for its investors. However, long-term investors might be willing to bet that these price levels are the bottom of the range, and buy now for the future, when natural gas might not be so cheap.

Investors in wind, solar and other clean energies will have to buckle up for the ride, for heightened volatility seems to be a salient characteristic of these sectors. Their underperformance since 2009 could be seen as either discouraging or as an opportunity to buy into future earnings at reasonable prices.

Investing in sectors which may benefit handsomely in the future from the policies of today requires patience and a strong stomach for uncertainty and volatility: There are no sure things or crystal balls when it comes to investing, only probabilities, forecasts and whatever we can glean from the charts.


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graftforyou

VEGGIES IN EVERY POT AND A CHEVY VOLT IN EVERYONES GARAGE . GET RID OF THE LITTLE DICTATOR IN NOVEMBER . GOD BLESS WHAT IS LEFT OF THE CONSTITUTION

February 18 2012 at 8:57 PM Report abuse rate up rate down Reply
spr0405

This is not China, Europe, Korea, Viet Nam, or Cuba. The markets are not directed from a central committee in D.C..
It's very clear that Mr. Obama does not get the point. Government doesn't create jobs the private sector does. Only people who think they are entitled feal that the government should dictate to business how they should do business.
Another matter which gets me is this whole business about the entitlements, particularliy Social Security. Yes, it does need reforming, but keep in mind that during the Reagan administration FICA taxes went up and a Social Security Super Trust Fund was created. From its inception the Federal Government has been using these fund to balance the general budget and replacing it with I.O.U notes. So when they (Government) cries that SSA is the largest holder of the National Debt, they should blame themselves, not the program.

September 03 2011 at 1:58 PM Report abuse rate up rate down Reply
june

why does this congress let the president sign exexutive orders against laws of congress that are law ?

September 02 2011 at 4:35 PM Report abuse rate up rate down Reply
dukeofdirt

The best way to profit from this energy policy is to invest in Prozac.

August 08 2011 at 4:02 PM Report abuse rate up rate down Reply
americandoo

"TIME FOR BIG INVESTORS TO STEP UP TO THE PLATE LEAD AMERICA BY
INVESTING IN AMERICA" "WHEN YOU INVEST IN AMERICA YOU INVEST IN YOUR CHILDREN'S
FUTURE"

"INVEST IN A LARGE PROJECT THAT WILL MAKE A DIFFERENCE FOR THE FUTURE"
Similar to this idea; In past history when the USA needed a Moral Boost to our
Country we built such things as; The Largest Bridges, Dams, Statue Of Liberty,
Worlds Largest Futuristic Fair, Landed on the Moon etc.

It is overdue for us and time for us to build the Largest & Best Futuristic
CITY IN THE WORLD, using ALL OF OUR CUTTING EDGE TECHNOLOGY­.

Countries CUTTING EDGE TECHNOLOGY and BEYOND ALL OTHERS ! !

Find a location in the USA somewhere that has the space for our "FUTURE CITY
PROJECT"

Where Our Future City will Utilize all of the Newest and Cutting edge combined
technology in the world to build our City using entirely GREEN energy with ZERO
POLLUTION ! ! !

Our City Could Have A NEW VERSION OF THE STATUE OF LIBERTY, Holding
the torch in one hand and our GREEN PLANET EARTH in her other hand, her head
raised high looking Up at the sky.

This would make a GREAT FILM based
on a True Story with the help of A TEAM OF BIG MONEY INVESTORS ! ! !

Use your Imaginatio­n think how; GREAT THIS WOULD BE FOR AMERICA & OUR
ECONOMY ! ! ! !

"DREAM BIG...DO BIG"

Thank You, Respectful­ly, Michael V. Caldwell

August 05 2011 at 12:33 PM Report abuse rate up rate down Reply
Gade Rajesh

Auto auctions are a very popular way for the public to buy their next car, SUV or truck. Auto auctions are a fantastic source of bargains.

http://www.gov-auctions.org/auto_auctions.php

rajesh

wide circles

August 02 2011 at 3:47 AM Report abuse rate up rate down Reply
Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government"in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and you will not be accepted civil servants here just because you say you are here to do the right thing.

May 29 2011 at 12:19 AM Report abuse rate up rate down Reply
muenft

Anyone can profit from obamas energy "policy" buy up bankrupt companies as the price of oil puts companies out of business. He is loaning Brazilian oil company Petrobas 3 billion dollars to drillin the gulf of mexico while stopping american companies from drilling. Ofcourse the leftist president of Brazil is please with this as is his old friend George Soros that owns 20 percent of petrobras. Thats howyoumake money from his policies. Be anything but an American or American company and you can do very well at taxpayer expense.

April 04 2011 at 11:53 PM Report abuse +1 rate up rate down Reply
1 reply to muenft's comment
yoyanga8

Thats the same thing that the Donald was saying about that deal. We need someone who can make better deals for the US. I dont know that its DT but we need better and soon.

May 13 2011 at 9:24 AM Report abuse rate up rate down Reply
fecarman

HIS VISION IS A MUSLIM NATION WITH EVERYONE COLLECTING GOVERNMENT CHECKS.....WHAT A VISION. I WANT TO BE PART OF THAT. YEH

April 04 2011 at 11:11 PM Report abuse +1 rate up rate down Reply
muenft

Afganistan is one of the worlds largest locations of lithium. Do youknow who is in ther buying up and taking control of the mines?? China
Do youknow how much lithium it wwould take to manufacture enough batteries for any meaninful number of vehicles to run on stored electricity?..i don;t either but ji bet we don;t have anywhere near enough.
If you continue to follow this black judas in the white house we will all be slaves to china, india, russia and the arabs. We are well on our way now.

April 04 2011 at 10:56 PM Report abuse +1 rate up rate down Reply