The Best ETF for 2007: PowerShares WilderHill Clean Energy

I panned the PowerShares WilderHill Clean Energy (AMEX: PBW  ) exchange-traded fund long before David Gardner selected it for the Motley Fool Rule Breakers portfolio.

So far, I haven't been proved wrong; the ETF is down roughly 10% since earning its rebel stripes in the April issue. But I fear that won't last. Too many very smart investors think I'm loony. Have a look at how highly regarded this fund is by the community of Fools participating in Motley Fool CAPS:

Metric

PBW

Total ratings

108

Bullish ratings

94

Bull ratio

87%

Bearish ratings

14

Bear ratio

13%

Bullish pitches

33

Bearish pitches

3

Data current as of Nov. 14, 2006

What don't I know? Not surprisingly, David Gardner explained it in his CAPS pitch, a portion of which I've excerpted here:

... buying PBW keeps you from having to "know" (or guess!) the winners in this field. We're still at an oil-reliant, too-early stage to know the winners in alternative energy. I definitely have some companies here that I like, but what I appreciate about PBW is that I don't feel like I have to be right to make money. I can own the basket.

Diversity on the cheap
And you can own it on the cheap. According to Morningstar, owning this ETF, which acts like a mutual fund but trades like a stock, costs only 0.70% annually. That's a pittance compared with an energy-sector fund such as Guinness Atkinson Alternative Energy, which charges 1.91% annually.

What's more, the WilderHill index contains both reasonable speculations and well-heeled ballast. Stalwarts such as Kyocera (NYSE: KYO  ) and Scottish Power (NYSE: SPI  ) help to offset riskier bets such as Medis Technologies (Nasdaq: MDTL  ) , Color Kinetics (Nasdaq: CLRK  ) , and American Superconductor (Nasdaq: AMSC  ) .

Buy the best
But again, the primary reason to consider the WilderHill ETF is alternative energy as a whole. Researcher Clean Edge says that alternative-energy companies will create another $110 billion in market value over the next eight years. If you think that's crazy, consider that energy costs now account for 6.2% of household spending, a 15-year high.

Purchasing the WilderHill index allows you to bet that consumers won't endlessly tolerate exorbitant energy prices while leveraging the risk-moderating features that come with one of the finest investment vehicles ever designed. So good, in fact, is this fund that it was named the "Most Innovative New ETF Product in 2005" in the annual Closed-End Fund and ETF awards, sponsored by investor-relations firm Capital Link.

Break the rules, not your portfolio
Aggressive growth investors often fearlessly tread where others won't. That's how David Gardner invests, for example. Me, too. But even rebels like us can appreciate the diversity a good exchange-traded fund brings as we seek to capitalize on the tectonic shifts that undergird the global economy. That's why the PowerShares WilderHill index is in the Rule Breakers portfolio, and it's why you may want it for your own.

Agree? Disagree? Sign up for CAPS now, and tell us what you think. It's entirely free. Your Fool cap is waiting.

Go herefor the complete list of ETF contenders in our CAPS tournament. And for more information on exchange-traded funds, visit the Fool's ETF Center.

Fool contributor Tim Beyers has 32 picks in his CAPS portfolio. Get in the game, add your own rating, and challenge Tim today.Tim didn't own shares of any of the companies mentioned in this story at the time of publication. Get the skinny on all of Tim's stock holdings by checking his Fool profile. The Motley Fool's disclosure policy is a rebel on Wall Street.


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