Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some ecologically focused stocks to your portfolio, but don't have the time or expertise to hand-pick a few, the Huntington EcoLogical Strategy ETF (NYSE: HECO) 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 them simultaneously.
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Huntington ETF's expense ratio -- its annual fee -- is 0.95%, which is considerably higher than many ETFs, and close to the fee for many managed stock mutual funds. It invests at least 80% of its money in securities of ecologically focused companies -- ones "that have positioned their business to respond to increased environmental legislation, cultural shifts toward environmentally conscious consumption, and capital investments in environmentally oriented projects."
This ETF is too new to have any meaningful track record to assess. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver. The fund is very 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.
Why ecologically focused companies?
Recent history has shown us that companies can actually save money and profit while being better to the environment. Socially responsible investing (SRI) can be quite competitive.
More than a handful of ecologically focused companies had strong performances over the past year. Ecolab (ECL 0.66%) surged 50%, with bulls liking its expertise in sanitation and water-use management, and especially its prospects using those talents in rapidly growing developing regions. Its innovation is a plus, too. It has shed its vehicle-care business, and used an acquisition to beef up its position in oilfield chemicals.
Darling International (DAR 2.84%), a food-waste recycler and the nation's biggest publicly traded renderer, saw its shares jump last month on news that it acquired a rendering and biodiesel business. Bulls are excited that its biodiesel joint venture with Valero Energy is now up and running, and some see it as a good time to buy into the company. The stock is up 20% over the past year.
Natural gas specialist Spectra Energy (SE +0.00%) surged 20%. It has been inking some promising partnerships, and recently yielded 3.7%. It recently significantly boosted the scale and length of contracts on its Express crude oil pipeline. Along with NextEra Energy (NEE +1.15%), Spectra was recently awarded a contract to build a $3 billion natural-gas pipeline into Florida. It's also angling to boost dividend payouts via some reorganization. The company's second quarter featured revenue up about 10%, but below expectations. Bulls have high hopes for profits from the Utica shale region.
NextEra is another recent component of the Huntington ETF, and has advanced about 19% over the past year. It has posted some ugly numbers recently, but its dividend has been growing, and it has surpassed analyst expectations for its second-quarter earnings. Bulls think its many investments could eventually pay off.
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.
