Nevertheless, Jim Stanton says alternative energy — and the wind-energy market in particular — has a big future. Wind energy is already the second largest source of new power generation in the US, and it now has the backing of the much-hyped Pickens Plan.

Jim says two clean-energy ETFs that look undervalued right now are PBW and GEX. He also recommends FAN for a more wind-specific ETF. 

This from the Smart Profits Report:

With the steady climb of oil prices over the past few years, it’s become apparent that higher prices are here to stay.

As a result, the market has spawned dozens of new alternative energy stocks – and subsequently, ETFs devoted to the sector.

However, with alternative energy technology developing rapidly and sub-sectors like wind, solar, geothermal, bio-fuels, and bio-mass all springing into the headlines, it can be tough to know which stocks or ETFs an investor should play.

Fortunately, ETFs give you broad exposure and diversity to certain markets, with less risk than owning individual stocks.

For example, the two most widely followed alternative energy ETFs are the PowerShares WilderHill Clean Energy ETF (AMEX: PBW), which is mostly made up of American companies, and the Market Vectors Global Alternative Energy ETF Trust (NYSE:GEX), which gives you international exposure to some of the largest companies dealing in wind power.

In 2007, these ETFs turned in outstanding performances, chalking up gains of 62% and 50% respectively. And GEX may have done even better, due to the fact that it did not begin trading until May 2007.

In 2008, however, the funds haven’t been able to sustain that performance. As of September 26, PBW is down about 40% for the year, while GEX has lost 25%.

“Springing” Back To PBW

Back in the spring (March 24, to be exact), I highlighted the performance of PBW in my “Sector Watch” piece. At the time, the stock was trading around $21 and had recently tested its January lows. With the chart pattern still bearish, I said it represented a good short-selling opportunity.

Before it rebounded last week, PBW had traded below $15. But as long as oil prices remain high, ETFs like PBW should come back into favor. Moreover, after the beating they’ve taken this year, they look like good value.

That said, I don’t like trying to pick bottoms, so let’s take a look at the daily chart of PBW for more clues…

As you can see, the downtrend line drawn from the highs last December currently sits at $18.95. As time goes by, this number will go lower, but a couple of closing prices above this downtrend line will signal a change in trend – and that the stock is probably worth buying.

Profits From Thin Air

Between PBW and GEX, though, I actually prefer GEX, due to its higher exposure to the wind power segment. This fast-growing area is gaining some serious momentum and greater investment, thanks to the publicity that T. Boone Pickens is bringing. Pickens is a very smart businessman, who is investing billions towards the largest “wind farm” in the U.S. And you can see why he’s on board…

Wind power is the second largest source of new power generation in the U.S., surpassed only by natural gas.

• In 2007, wind provided enough power to satisfy the residential electricity needs of 150 million people.
• Capacity increased by a record-breaking 20,000 megawatts, which puts the world total at 94,100 megawatts.
• According to the U.S. Department of Energy, since 1980, the cost of producing wind power has declined by as much as 90%.
• Electricity from new wind power projects will be cheaper than electricity from new conventional power plants by 2010.

If you’re a fan of wind power, there is a relatively new ETF that deals strictly with the field. It’s called First Trust ISE Global Wind Energy (NYSE: FAN) and it began trading in June 2008.

Having hit a high of $31.50 in June, FAN has sold off, along with the other alternative energy ETFs. Earlier this month, it traded as low as $20, so let’s take a look at the chart to see what the next move might be…

With only a few months of data to go on, projecting the stock’s next move is a little trickier, but we have enough information to draw a regression channel from the June highs. The upper band of the channel is currently around $24.15 and a couple of closes above that level should lead to higher prices for the stock. We’ll keep an eye on this one, as wind power continues to gain traction.

PS. Yesterday, Oxford Club’s David Fessler described how the quiet passing of an $18 billion clean energy bill could mean ‘big moves’ for FAN and two other clean energy ETFs.

Source: Forget Washington’s Hot Air… Here’s How to Really Profit from Wind

But an even bigger problem has been the coming expiration of energy tax credits for the manufacturing, production and use of alternative energy systems and devices at the end of 2008. This situation has now changed with the $18 billion Renewable Energy and Job Creation Act of 2008.

David Fessler at Investment U says three alternative-energy ETFs should see “big moves” in the remainder of 2008 and in 2009 on the back of the bill.

Although the House of Representatives still has to approve this version of the bill, once they do the President has indicated he would quickly sign it into law.

Here are some of the bill’s highlights:

• Tax credits for wind generation facilities would be extended through 2010.
  
• Tax credits for solar, geothermal, marine (tidal) and biomass, municipal solid waste, trash combustion and hydro power plants would last through 2011.
  
• Residential energy efficient property tax credits would run through 2014, and the bill allows for up to $4,000 of solar energy tax credits for homeowners who install such systems.

Here’s one bound to get automakers excited: A new tax credit for the production – and purchase – of plug-in electric vehicles.

It’s been estimated that existing hybrid vehicles can be converted to true plug-in hybrids for an additional $3,000 to $5,000, and this credit might just be the catalyst that gets big automakers moving.

Felix Kramer, co-founder of CalCars.org – an organization which promotes plug-in hybrid electric vehicles – thinks it will happen: “This will have an enormous impact, and could conceivably entirely remove the cost increment that carmakers say is the cause of their reluctance to build plug-in vehicles.”

And car buyers come out big, too. If you purchase a plug-in car or truck, your credit could be as much as $7,500.

Other provisions of the bill provide tax credits for installing non-hydrogen alternative fuel refueling stations. Biofuels, anyone?

One provision even allows you to deduct your bicycle commuting expenses from your gross income. Being a cyclist, I’m particularly fond of that one.

The previous legislation was primarily focused on residential and manufacturing credits for solar. While they’re still included, the new bill goes a lot further, allowing utilities to take advantages of the credits, too, and in the case of solar, extends them for up to eight years.

Three Ways to Profit

This will likely jumpstart a wave of green power plant construction projects and the bill includes $800 million in bonds to help fund them. However, existing green-power producers win as well, as the bill extends production tax credits for another year for wind and for two years for solar, biomass and hydropower.

Thinking about installing solar panels on your home’s roof? Now might just be a good time to get started, as the bill extends solar investment tax credits for homeowners to eight years, and removes the existing $2,000 cap on the credits.

And if you live in the Midwest where the wind is nearly constant, you might want to consider your own wind-driven power plant. The bill includes a $4,000 credit for homeowners who install small wind generators for power generation.

Of course, there’s always the issue of how tax credits will be paid for. It was initially envisioned as a tax on oil and gas producers, but that might have killed the bill. Instead the IRS is delaying certain tax deductions for these producers, which has a net effect of having them pay for it anyway.

Clearly wind and solar companies will be big beneficiaries of this bill. Last week, we talked about the Market Vectors Global Alternative Energy ETF (NYSE:GEX) as a way to play the entire alternative energy space.

However, if you want to focus specifically on wind power, there’s the First Trust ISE Global Wind Energy Index Fund (NYSE:FAN). For the solar buffs, there’s an ETF made up entirely of solar companies, the Claymore/MAC Global Solar Index (NYSE:TAN).

All three of these ETFs should be big movers in the remainder of 2008 and 2009 as alternative energy companies begin to gear up production as a result of this exciting legislation.

Source: Alternative Energy Gets a BIG Green Light… 

According to a recent survey, three-quarters of the American public think that we’re currently in a recession. The Dow is trading around the same price it was seven years ago and only seems to be heading lower.

Fuel and food prices are at all time highs and the employment picture is gradually getting worse.

And all of this on top of a housing crisis that has yet to fully take hold.

Depressed enough yet?

Basically, we’re standing on the tracks and the train is coming — I don’t need a PhD in economics to figure that much out — the only question is, do we stand here and let it hit us or do we get out of the way?

I’m voting for getting out of the way, who’s with me!?

But it’s not enough to just “get out of the way.” We’re investors; we should do whatever we can to profit from the current economic and market climate too.

On TickerHound, we’ve been seeing questions on this exact topic for the last couple of months, you can check out what some of the other members have had to say here:

What are the Top Three Investments for a Down Market?

I decided not to weigh in at the time; it was too tough to tell where things were headed. But I think the picture has become much clearer now and today I wanted to share where my trades will be focused for the second half of this year.

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Discount Retailers

Given the fact that the American consumer thinks we’re in a recession, it stands to reason that consumer spending will continue to slow this year. That means luxury goods or purchases that require large lump sum payments are going to get pushed to the back burner for the time being.

So what will consumers be buying?

The usual, of course: Groceries, medicine and maybe even some clothing.

Consumers will certainly continue to buy these items, but they’ll be very picky as to where they buy them. Meaning, I doubt you’ll see long lines at Gap Stores anytime soon, or baby boomers opting to buy brand name drugs as opposed to the generics. People will be extremely cost conscious as we head into the second half of the year.

That’s why it’s important we focus on retailers that cater to the cost conscious consumer.

For me, that means looking at stocks like Wal-Mart (WMT: NYSE) and Dollar Tree (DLTR: NASDAQ), both of which have done very well over the last six months.

So I’ll be looking to go long Discount Retailers.

Alternative Energy

Forget the green movement and all the damage we’re doing to our environment with current forms of energy production, let’s just look at what’s going on at the pumps every day. The price of fuel is rising and it doesn’t look like it’s coming down anytime soon.

What’s a gallon of gas going to cost by the end of the summer: $5.00? $5.50?

The bottom line is, our dependence on crude is killing our economy and many of our industries; everything from transportation to shipping.

It doesn’t take a rocket scientist to know that we’ll need to look for alternative sources of energy in the not-too-distant future.

But it would take a rocket scientist to know which companies will pan out in this emerging sector. So while I won’t be buying any individual companies just yet, I will, however, be looking to go long on some of the ETFs that cover the alternative energy market.

I’ve had my eye on several for a while now — PBW, QLCN and GEX, just to name a few.

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Automakers

This one is a no-brainer for me for the following reasons:

• Decreasing consumer spending
• Increasing cost of fuel
• Increasing cost of steel

A new car will certainly be out of the question for many American consumers for quite some time. I think food, water and medicine will be higher up on the priority list for most folks in this country.

So as this market continues to head south, so too will the Auto stocks.

Luckily for us it won’t be too hard to pick which automakers to short; they’re all performing equally poorly these days. So I’ll probably go ahead and short the Big Three for the near term. I can’t see any of them turning the corner anytime soon.

One of the most important lessons I ever learned in my years in the market is that as investors we can make money regardless of how the economy is doing. As long as we don’t get emotional, lose our cool or make decisions that go against the facts, we can come out of this downturn just fine.

So make sure you play this bear market, don’t let it play you. For more on this, read what my readers have written…

Source: Weighing in on Today’s Bear

The first comes from Karl N. and he says…

Charles, First you have to buy into the assumption that fuel prices are realistic and will continue to increase! In reality, there is no reason for them to be where they are.

Second, Ethanol requires no more energy to produce than gasoline. Producers must pump, refine, and transport gasoline. Global hunger increased before ethanol because the American farmers cannot cost effectively operate. Fertilizer, fuel, seed, transport costs, living expenses, land and machinery have all increased substantially since the 1960’s without a significant increase in grain prices. The market will have more grain with the increased production of Ethanol than without it.

Please do not buy into propaganda that Ethanol is not efficient to produce, will contribute to world hunger or will drive food prices up (a loaf of bread uses 4-5 cents of wheat in it).
The truth is that unless grain prices increase more farmers will be forced to quit and food supplies will decrease.

I have to say Karl, that fuel prices are realistic even at today’s price. Granted, a lot of speculation has helped take prices higher. But the truth is that according to the Energy Information Administration, the world’s oil production peaked in 2005.

Sure, more oil is being found. But it’s not being found in easy-to-reach places. It’s all offshore, sands, and shale. Production from these areas should come online in time to replace lost production from older wells. The net result? Flat to slightly higher production in the next five to ten years.

Even with US consumption falling, consumption in China, Brazil and India is skyrocketing. The truth is, if these countries keep buying more and more, then oil isn’t too expensive.

Second, you have to admit that corn-based ethanol isn’t the most efficient way to make energy, right? The US Department of Energy says that corn-based ethanol produces a whopping (note the sarcasm) 26 percent more energy than required for production.

That’s god-awful.

Cellulosic ethanol, on the other hand, could produce up to 80 percent more energy than is required to produce it. That’s much better. But mass-scale production is also far off. (There are a few companies setting up pilot plants. But that’s all)

Now, I agree that global hunger isn’t all ethanol’s fault. I’d place the blame on the emerging economies like Brazil, Russia, India and China. But you have to admit, using farmland for fuel means there’s less farmland available for food. And if there’s less food being made, prices move higher.

In addition, corn-based ethanol was a big reason why corn jumped well over 100% after President Bush first announced the ethanol initiative. The effect is obvious – the ethanol hype is helping prices move higher. And this has been a boon to farmers.

Better yet, farmers are poised to make even more money in the years to come, mainly because of growing global demand for food.

I also received an e-mail from Sam L. that said…

As a seasoned investor I wouldn’t put one penny in green stocks, not now or for the near future. It is all hype and no action.

All hype and no action, Sam? How about geothermal producers that are taking off? Or solar producers which are making profits? Wind producers are doing well, and many high-tech battery manufacturers are on the cusp of inking huge, multi-million dollar revenue generating deals.

If you think investing in clean energy is a bad idea, just take a look at the Market Vectors Global Alternative Energy Fund (GEX) and you’ll see that the sector’s been clearly moving higher. And the PowerShares Global Clean Energy Portfolio (PBD) has been doing the same.

It seems to me that investing in green stocks is a great thing to do. What you want to do is avoid the companies that have no profits… the ones that are using very experimental technologies that haven’t been proven yet. These companies may do well in the future, but you take a huge risk by putting your money on them now.