February 5th, 2020 by Michael Barnard
As with many in the CleanTechnica community of readers and authors, I’ve been long on TSLA for years. My purchase price cap was $275 USD, which led to me buying in three times in 2016 and 2018.
And now it’s 2020, and TSLA peaked at $961.96 on Tuesday, Feb 4 at 3:30 PM, after closing at $650.57 on Friday Jan 31. A lot of profit taking has ensued, and I have to admit I was part of it. I’ve taken far more than my initial investment out of TSLA, yet still have far more than my initial investment left in the stock. I’m letting that ride, but have been looking to diversify. (As a note, I’m in a portfolio rebalancing phase regardless, and have also divested my upside on AAPL and a ditched a few other holdings entirely).
That’s led me to look for my more preferred investments, index funds and the like. I’ve been saying for a few years that I’d love to have a good EV and autonomy index fund that had global reach, and that covered car brands, OEMs, and batteries. I’ve been looking for similar good funds in the larger cleantech and clean energy space as well, but this article is just about my findings on the EV+autonomy front.
Obvious note: I’m not an investment advisor and this doesn’t constitute investment advice.
So what have I found?
Well, I’ve found a lot of new exchange traded funds (ETF), a category of investment I chose to stay away from in the past when it was emerging, but one that’s stabilized into something I like and can understand fully. I’m not a deeply sophisticated investor. My strategy is buying and holding (something which Kahneman’s Thinking, Fast and Slow makes clear is a much wiser choice for non-institutional investors than the alternative). I don’t do leverage. I don’t buy short (a pox on all their houses) or futures. ETFs were a little weird when they first came out, and appeared to me to feature a lot of junk assets, including a lot of junk debt. I wasn’t paying attention to them during the 2007-2010 period, but it wouldn’t surprise me to find out that a lot of them collapsed badly.
Modern ETFs have mixes of things, but the ones I’m pulling into this article are just stock funds bundled as ETFs as opposed to mutual funds. No futures or synthetic oddities that I’m aware of, and often tracking third-party stock indices. They have different targets, and the variances are interesting, and often illuminating. Unsurprisingly, all of the mobility-oriented ETFs feature TSLA, often as their biggest holding. As such, they appear suitable for less sophisticated investors, but your kWh per 100 km may vary, of course.
The first two are very similar, with Tesla and tech giants dominating the list.
2019 inception, medium capital ($31M), low expense ratio (0.47%).
The German Solactive index tracking appears in a couple of funds, and it’s mixed, weighting German manufacturers a bit more favorably than they deserve, in my opinion.
2018 inception, medium capital ($17M), high expense ratio (0.68%)
FUND OBJECTIVE: The Global X Autonomous & Electric Vehicles ETF (DRIV) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Autonomous & Electric Vehicles Index.
2019 start, capitalization unclear, high expense ratio (0.69%)
This one is more global, with Baidu out of China (good) and BMW (not so good) in the top 10 holdings, and is based on the Solactive index, hence BMW’s presence in the top 10, one assumes.
Investment Strategy: KARS seeks to measure the performance of the Solactive Electric Vehicles and Future Mobility Index.
2018 inception, high capitalization ($77M), low expense ratio (0.50%).
This one is not specific to EVs and autonomy, but wraps them up in a 100-stock disruptive technology higher-risk fund. Lots more Asia, but also Adobe, which seems odd to me.
Fund Summary: The investment seeks investment results that correspond (before fees and expenses) generally to the performance of the Indxx Disruptive Technologies Index (the “underlying index”). The fund will invest at least 80% of its net assets in securities that comprise the underlying index. The underlying index is designed to identify the companies using disruptive technologies in each of ten thematic areas: Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments. The fund is non-diversified.
2018 inception, low capitalization ($1.7M), high expense ratio (0.65%).
Natural language processing assisted managed EV and autonomy fund. Good global coverage, and the top 10 stocks didn’t have any surprises for me, but were reasonable choices in my opinion.
EKAR Factset Analytics Insight: EKAR identifies companies involved with “next generation” vehicles—generally, electric or autonomous vehicles—using a natural language processing (NLP) algorithm to scan large volumes of textual data, media platforms, and databases. Stocks are sorted into one of four categories: battery producers (mining, chemicals/components, or manufacture), original equipment manufacturers (design, manufacture, or distribution of next-gen vehicles), suppliers (parts and components), and semiconductor and software companies (sensors, mapping, or driving policy). The fund uses a proprietary ranking methodology to select up to twenty-five stocks within each category. Holdings are market-cap weighted, with a 7% cap on individual positions and a 40% cap on each category. The index is rebalanced quarterly and reconstituted semi-annually. EKAR’s expense ratio is in line with its competition in the segment.
Second oldest fund at 2011 inception, medium capitalization ($19.5M), very high expense ratio (0.70%)
Legacy auto manufacturer weight fund, but global. 20% Tesla, but after that it’s just the usual companies that aren’t doing enough. No BYD or Baidu.
Investment Objective/Strategy – The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before the Fund’s fees and expenses, of an equity index called the NASDAQ OMX Global Auto Index.
2018 inception, low assets ($7M), low expense ratio (0.46%).
This ETF tracks the Asian-sounding but US-based small Kensho index which is strong on carshare and autonomy. Still has Ballard (scratching head), strong on NIO, also Uber and Lyft. Also Avis (scratching head again).
Fund Summary: The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Kensho Smart Transportation Index. Under normal market conditions, the fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index is comprised of U.S.-listed equity securities (including depositary receipts) of companies domiciled across developed and emerging markets worldwide which are included in the Smart Transportation sector as determined by a classification standard produced by the index provider.
These last two are similar, in that they include EVs in a clean energy portfolio. They are future economy funds based mostly on what works today, not wild swings for the bleachers with unknown tech choices. Reasonably well hedged against the transformation, in other words.
2018 inception, high capitalization ($146M), high expense ratio (0.65%)
US- and Canada-only clean energy sector including EVs, 20% Canadian, which is odd. Has Brookfield, which I like. Decent MSCI ESG Fund Rating (7/10).
ACES Factset Analytics Insight: ACES tracks a market-cap-weighted index of North American companies involved in the clean energy industry. The index provider targets companies that enable the evolution of a more sustainable energy sector, and includes activities such as renewable energy sources (solar, wind, hydropower, biofuels), clean technologies (electric vehicles, battery technology, fuel cells, smart grids), and any other emerging clean energy technology.
Oldest fund with a 2007 inception, high capitalization ($180M), medium expense ratio (0.60%)
US-only clean energy sector.
QCLN Factset Analytics Insight: QCLN holds a broad portfolio of US-listed firms in the clean energy industry. Eligible companies must be manufacturers, developers, distributors, or installers of one of the following four sub-sectors: advanced materials (that enable clean-energy or reduce the need for petroleum products), energy intelligence (smart grid), energy storage and conversion (hybrid batteries), or renewable electricity generation (solar, wind, geothermal, etc).
So what am I choosing to invest in?
Well, if you look at my criteria, what I chose to highlight, and my comments (as well as what I’ve been writing about for the past while), you can probably guess which ones I favor and which ones I don’t. But I’m interested in what the CleanTechnica braintrust has to say. There are undoubtedly more sophisticated investors in the crowd who can weigh in with insights. At least one investment advisor I’ve noted has recommended against too narrowly thematic funds.
I’m also interested in what investment vehicles I’ve missed. Chime in.
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