Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



How to Make Money in Smart Grid Stocks

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some smart grid stocks to your portfolio, but don't have the time or expertise to hand-pick a few, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure ETF (NASDAQ: GRID  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of smart grid stocks simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF's expense ratio -- its annual fee -- is 0.70%, which is a bit more than many ETFs, but still considerably lower than a typical stock mutual fund. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF is too young to have a sufficient track record to assess, but it has underperformed the world market over the past three years. It's the future that counts most, though, and, as with most investments, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why smart grid stocks?
Building a smart grid involves the process of modernizing, digitizing, and making more efficient our electricity industry's infrastructure. Many expect big things from it, with Cisco Systems CEO John Chambers suggesting, back in 2009, that it will be a bigger business than the Internet. Some smart grid stocks are pure plays, while others are bigger companies engaged in lots of other operations, too.

More than a handful of smart-grid-related companies had strong performances over the past year. Solar energy inverter maker Power-One (UNKNOWN: PWER.DL.DL  ) , and utility contractor Pike Electric (NYSE: PIKE  ) , both surged 44%. Power-One's gain is in large part due to its being acquired, at a premium, by Switzerland-based power and automation technology giant ABB. Some have worried about inverters becoming commoditized, but others have admired Power-One's profitability and solid balance sheet.

Expectations for Pike Electric have been so high that the stock slumped in May on news that its third-quarter revenue and EPS grew only by 23% and 33%, respectively. Management blamed the weather for some slowdown in construction. Analysts at Stifel downgraded the stock in March, but then upgraded it back to a buy rating in May.

General Electric (NYSE: GE  ) jumped 24%, and recently yielded 3.2%. The company makes hardware and software for the smart grid, such as its smart meters. It's pretty far away from being a pure play among smart grid stocks, though, as its portfolio includes everything from light bulbs to refrigerators, to aircraft engines, to mammography systems, to mining equipment, and much more. Its latest earnings report is coming up later this week, and in its last quarter, it posted operating earnings up 15%, and equipment orders up 10%. One factor holding the company back has been weakness in Europe. GE has been boosting its involvement in renewable energy in recent years.

Canada's largest energy company, Suncor Energy (NYSE: SU  ) gained 10%, and yields about 2.5%. The company has expertise in deep oil sands, which are not known for cleanliness, but it's also investing more heavily in renewable energies. In recent news, pipeline shutdowns due to flooding put a crimp in production. Suncor is vulnerable to possible tightened regulations on pipelines, and its diversification beyond North America.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in, and profiting from it, that much easier. It you're interested in smart grid stocks, give this ETF a closer look. Or just examine the smart grid stocks within it.

This ETF focused on smart grid stocks isn't the only one to consider. I invite you to check out our special free report, "3 ETFs Set to Soar," which will introduce you to a few ETFs that have great promise for delivering profits to shareholders. Just click here to access it now -- for free.

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2540778, ~/Articles/ArticleHandler.aspx, 5/28/2016 8:22:21 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 23 hours ago Sponsored by:
DOW 17,873.22 44.93 0.25%
S&P 500 2,099.06 8.96 0.43%
NASD 4,933.51 31.74 0.65%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/27/2016 4:00 PM
GE $30.12 Up +0.10 +0.33%
General Electric C… CAPS Rating: ****
GRID $36.55 Up +0.22 +0.61%
Smart Grid Infrast… CAPS Rating: No stars
PIKE $0.00 Down +0.00 +0.00%
Pike Electric Corp CAPS Rating: No stars
PWER.DL.DL $0.00 Down +0.00 +0.00%
Power-One, Inc. CAPS Rating: ****
SU $27.54 Down +0.00 +0.00%
Suncor Energy, Inc… CAPS Rating: ****