Source : TheStockAdvisors.com
"Alternative energy has been among the hottest investment themes of the past few years," says Paul Tracy, editor of the industry leading StreetAuthority Market Advisor.
Here, the advisor reviews a recent recommendation for the Market Vectors Global Alternative Energy ETF (NYSE: GEX), an exchange-traded fund that offers broad exposure to several key sub-sectors of the alternative energy industry.
"There are several key drivers of the alternative energy trend. Consider that as recently as 2002, crude oil was trading below $20 per barrel and natural gas cost less than $2 per million British Thermal Units (BTUs). Now, oil is trading at over $100, while natural gas is trading at more than five times its lows.
"Naturally, rising prices for key energy commodities spells rising costs for consumers. For the first time in history, drivers have been consistently paying more than $3 for a gallon of gasoline.
"And electricity produced from natural gas is becoming increasingly expensive. Alternative energies offer a way to cut dependence on fossil fuels and reduce this extreme variability in energy costs.
"Another pillar of growth is increasing government regulation. The U.S. already controls the emission of pollutants from power plants. Pollutants are regulated using a cap-and-trade system. This system allows power plants polluting above their regulated maximum emissions to buy credits from cleaner plants.
"Thus, dirtier plants have the choice of buying potentially expensive credits or taking steps to reduce emissions of key pollutants. This system serves as an economic incentive -- cleaner plants are able to recoup some of their pollution mitigation costs by selling their excess environmental credits.
"And this system will become increasingly important as attention turns to carbon dioxide and "greenhouse" gases. On April 2, 2007 the U.S. Supreme Court made a pivotal decision regarding environmental regulation.
"The nation's highest court ruled that the U.S. Environmental Protection Agency (EPA) acted improperly by refusing to regulate greenhouse gas emissions under the Clean Air Act. It's likely some sort of carbon regulation will eventually become part of U.S. law.
"The Market Vectors Global Alternative Energy ETF offers broad exposure to alternative energy. The fund's top holdings include solar plays such as First Solar, SolarWorld and Suntech.
"First Solar is the leader in the so-called thin-film solar market -- thin film solar cells use cadmium telluride, a lower-cost raw material than the polysilicon used by most solar firms.
"Polysilicon supplies are extremely tight right now due to strong demand, and this has sent prices soaring over the past two years. This gives FSLR a key cost advantage over the competition.
"GEX also includes significant exposure to the global wind market with holdings such as Denmark's Vestas Wind Systems and Spain's Gamesa. Vestas is the world's leading manufacturer of wind turbines, with more than a one-third share of the global wind market.
"In addition to solar and wind, GEX includes smaller positions covering ethanol and biofuels, energy efficiency and geothermal power. By providing investors with diversified exposure to the alternative energy business, GEX is a smart way to invest in this booming market. My staff and I think GEX looks like a solid 'Buy' below $55."
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