Scalper1 News
Summary The fund focuses on ‘corporate social responsibility’. The fund is smartly weighted with top market performers. Generally, it’s a very well-diversified, moderate risk, capital appreciation fund. There seems to be a majority consensus among scientists that the Earth’s climate is changing, however there does seem to be some disagreement whether that change is being caused by industrial emissions or simply part of a natural, ancient geological cycle. Some of this divisiveness is clearly along economic lines. For one example, many emerging market or emerged market nations rely on inexpensive coal resources to generate electric power. Further, there’s a huge global industry built up around coal: heavy equipment manufacturing, rail and marine transportation, power companies and even the miners whose livelihoods are threatened. On the other hand there’s a mindset that believes, ‘ better safe than sorry ‘. To be sure, most companies do have a corporate conscience and have implemented a responsible eco-policy. However, some companies take it a step further and practice a broader social responsibility policy . The Huntington Ecological Strategy ETF (NYSEARCA: HECO ) accomplishes exactly that. This fund offers a ‘single package’ opportunity for those wishing to invest with companies having strong sustainability and fair trade policies as well as eco-friendly policy. In Huntington’s own words (from their 2014 year-end commentary), ” … we look for companies that are practicing and promoting environmental stewardship while being able to generate sustainable level of profits that will represent logical investment over a long term…” (click to enlarge) There are similar funds to choose from. Two of the four funds filtered out by the Seeking Alpha ETF Hub , the First Trust NASDAQ Clean Edge Energy ETF (NASDAQ: QCLN ) and the PowerShares WilderHill Clean Energy Portfolio (NYSEARCA: PBW ) focus, as one might expect from their names, mainly on clean energy related companies. The PowerShares WilderHill Progressive Energy Portfolio (NYSEARCA: PUW ) has a somewhat broader objective being, “… focused on the following areas: alternative energy, better efficiency, emission reduction, new energy activity, greener utilities, innovative materials and energy storage …” There’s a difference in the Huntington Eco-Logical Strategy ETF in that it goes beyond energy concerns and, “… invests at least 80% of its net assets… …in the securities of ecologically-focused companies… …that have positioned their business to respond to increased environmental legislation, cultural shifts towards environmentally conscious consumption, and capital investments in environmentally oriented projects. These companies include all companies that are components of recognized environmentally-focused indices …” The strategy is smart. It isn’t restricting itself to a particular sector or manufacturing practice. Instead it seeks well performing, well established and well managed companies with an active and strong sense of corporate social responsibility in its operations, however that may be. (Data from Huntington) The fund is weighted towards cyclically sensitive sectors starting with IT, comprising 25%, Industrials at 10% and Consumer discretionary at 13% for a total of 48% of the fund. Defensive sectors are HealthCare at 17%, Utilities at 6% and Consumer Staples at 12% totaling 35% of the fund and lastly, sensitive sectors such as Financials at 12%, Energy at 2% and Materials at 2% accounting for 16% of the fund. (There is also a small cash position). Checking with three different sources, MarketWatch , Yahoo and the Wall Street Journal , the fund seems to have a surprisingly low beta of about 1; i.e., it moves with the market. (Data from Huntington) When putting aside the corporate social responsibility focus, it otherwise seems to be a reasonably well diversified fund with a moderate bias towards risk as demonstrated by its sector allocations. So the last question is just how socially responsible are the included companies? For instance, Google’s (NASDAQ: GOOGL ) participation is spelled out at Google Green: the Big Picture , where social-responsible investors will get a detailed accounting as only Google can present. Similarly, Nike (NYSE: NKE ) promotes ” A Better World ” and also details its efforts for manufacturing sustainability. The table below lists just a few corporate policy links. Some are really well presented, while others are rather straight forward, as if part of a shareholder’s report but are there nonetheless. In the left column are the larger holdings of the fund and on the right some of the smaller holdings. In general, the corporate responsibility presentations cover the complete range from “WOW!” to “legal-formal”. Only a few are sampled below, however, in general, it always seems to be a good idea to read a company’s corporate responsibility policy before investing. All investors should keep in mind the losses which have occurred, both in share price and earnings, in the past when absent policies led to ‘oversights’; bad labor practices, illegally purchased resources or damaging environmental accidents. A socially responsible company mitigates risks. The fund is relatively new to the market having been incepted in June of 2012 and is actively managed. Huntington notes total assets of $7,228,416.00 with 200,000 shares outstanding; it trades on NYSE-Arca. Currently it trades at a -0.33% discount to NAV. Huntington notes it largest premium to NAV as 0.01%, largest discount to NAV at -2.24% as well as its average Premium/Discount of -0.67. The fund distributes annually, with a yield of 0.22%. The prospectus is a bit more detailed noting a weighted average market cap of $87.569 million, a weighted P/E of 26.8 and a price to book multiple of 5.7. Also, the prospectus identifies the underlying index as the MSCI KLD 400 Social Index . The investor should note that the First Trust Fund tracks the NASDAQ Clean Edge Green Energy Index ; the PowerShares funds, PBW and PUW track the WilderHill Clean Energy Index and the WilderHill Progressive Energy Index , respectively. The expense ratio is quite high at 0.95% with a gross expense ratio of 2.08%. However Huntington does note that, ” contractual fee waivers are in effect until August 31, 2015. ” Also, the average annual turnover is around 55%. To sum up, the fund is indeed, as advertised, Eco-Logical. All said and done, it seems to be a really good fund in general, and perfect for those concerned that their capital is being invested in social minded, sustainably conscience and earth-friendly companies. One word of caution: This fund is very lightly traded, but there’s absolutely no reason it should be that way! Aside from the ‘green motif’, this is a really well constructed, diversified fund with moderate risk. It merely needs to be discovered. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: CFDs, spread betting and FX can result in losses exceeding your initial deposit. They are not suitable for everyone, so please ensure you understand the risks. Seek independent financial advice if necessary. Nothing in this article should be considered a personal recommendation. It does not account for your personal circumstances or appetite for risk. Scalper1 News
Scalper1 News