4 Mutual Funds to Rally on Cleantech Boom
Climate change concerns have forced global economies to adopt clean energy rapidly. The recent wave of decarbonization is forcing economies to move away from carbon-based fossil fuels and adopt cleaner alternatives like solar, wind, and other renewable energy.
Per a Deloitte report, the New Climate Economy findings state that low-carbon growth can deliver $26 trillion in economic benefits globally by 2030. This is allowing the spectra of the clean technology bust. Clean technology or cleantech talks about renewable energy, energy efficiency and other technologies to reduce carbon emissions.
In the late 2000s and early 2010s, several startups popped up globally, grabbing the attention of venture capitalists. Gradually with the government transforming the face of energy consumption and taking up decarbonization as a plan, funds started flowing, helping companies grow. Governments are also investing millions of dollars into the research and development of sustainable technologies and cleantech. Clean power generation, smart agriculture and building retrofits have been areas of focus for the Biden administration.
Several corporates and millionaires are now funding small-scale changemakers. Bill Gates has committed billions of dollars in funding for battery companies and electric-vehicle firms. Tech bigwigs like Google have set goals to become carbon-neutral by 2030, while Amazon has set up a $2-billion fund to invest in climate initiatives.
Investors can also look into renewable energy sources like wind, solar, and hydroelectric, that supply about a quarter of the electricity generated by the power sector at present. The industry has been growing roughly 8% annual rate over the past decade to increase its electricity generating capacity.
Though Biden’s infrastructure bill is on hold, it plays a huge role in supporting his plan to make the United States run 100% carbon-free by 2035. Hence, the electric vehicle, smart-home sectors are poised to grow, boosting the cleantech space.
4 Cleantech Fund Picks
Given the current scenario and the boom in clean technology, we have shortlisted four funds poised to grow. These funds flaunt a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and portfolio diversification without several commission charges associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Utilities Portfolio FSUTX aims for capital appreciation. This non-diversified fund invests most assets in common stocks of companies, primarily engaged in the utilities industry and generating most of their revenues from utility operations.
This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 7.6% and 10.1% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSUTX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, below the category average of 0.94%. This fund has significant investment in alternative energy companies like Clearway Energy, Vistra Corp, Nextera Energy and Sunnova Energy.
New Alternatives Fund Class A NALFX aims for long-term capital appreciation, with income being the secondary objective. The fund invests in common stocks of YieldCos, American Depository Receipts, real estate investment trusts and publicly-traded master limited partnerships.
This Zacks Sector – Other product has a history of positive total returns for more than 10 years. NALFX has three and five-year return of 26.3% and 17.5%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
NALFX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.96% versus the category average of 1.29%. Additionally, the fund has significant investment in alternative energy companies like Nextera Energy, Vestas Wind Systems and Innergex Renewable Energy.
Calvert Global Energy Solutions Fund Class A CGAEX aims to track the performance of the Calvert Global Energy Research Index. The fund invests a majority of assets in companies whose main business is sustainable energy solutions. The portfolio consists of companies engaged in facilitating the transition to a more sustainable economy by reducing greenhouse gas emissions and the expanded use of renewable energy sources.
This Zacks Sector – Other product has a history of positive total returns for more than 10 years. CGAEX has three and five-year return of 23.8% and 16.8%, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CGAEX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.24%, below the category average of 1.26%. Additionally, CGAEX has significant investment in alternative energy companies like Nextera Energy Partners, First Solar and Terraform Power.
Fidelity Select Automotive Portfolio FSAVX fund aims for capital appreciation. This non-diversified fund invests a majority of assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, FSAVX has returned 29.3% and 21.2% over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSAVX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.88%. Additionally, the fund has significant investment in companies that deal in EVs or related products and services like Tesla, Ford and Nio.
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