Past performance may not be a guarantee of future results, but in a momentum-driven market, what has worked recently continues to work. Many of the most powerful trends in the stock market will affect companies not only for a single year, but for a long time to come.
One of the major trends was the push for electric vehicles and renewable energy. Many individual stocks that rode the wave had big gains in 2020. Even if you prefer the diversified exposure that sector-oriented exchange-traded funds offer, you could still make some money in 2020.
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The Invesco WilderHill ETF for Clean Energy (NEW: PBW) and the Global X Lithium & Battery Tech ETF (NEW: SMALL) was one of the top ETFs in 2020. They are also charging ahead in 2021 and riding high on the wave of interest in electric vehicles, renewable energy and other clean-tech initiatives.
A Wilder Way to Buy EV
The Invesco Wilderhill Clean Energy ETF tripled its value to its shareholders in 2020. It also started stronger in 2021 and rose another 22% in just one and a half weeks.
The Invesco fund has a broad investment objective to seek ventures in any aspect of clean energy and conservation. In practice, this includes nearly four dozen companies in specific areas, ranging from electric vehicles and charging infrastructure to solar energy and lithium mining. About three-quarters of its shares are based in the US. The best performance is the Chinese EV leader NIO (NYSE: NIO), solar supplier SolarEdge Technologies (NASDAQ: SEDG), and mining company Lithium America (NYSE: LAC).
With an expense ratio of 0.70%, the Invesco ETF is not that cheap. For those who do not want to take the risk of holding smaller numbers of individual stocks – or the hassle of buying dozens of stocks to fully fit the portfolio – the fund does a good job of offering significant exposure in the clean energy sector . .
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Get a charge from lithium and battery supplies
The Global X Lithium & Battery Tech ETF achieved slightly weaker results in 2020 than its counterpart here, but it still more than doubled for the year. This ETF focuses much more narrowly on the extraction, refinement and use of lithium for the manufacture of rechargeable batteries for a wide range of applications.
It is not surprising to see a much larger share of the Global X ETF’s portfolio in non-US companies. This is because lithium is found in strategic locations around the world. Companies emerge where lithium is mined.
Global X outperformed its leading stock, Albemarle (NYSE: ALB), which is a lithium supplier. Shares more than doubled in 2020 as lithium demand rose.
Yet the ETF, which has a cost ratio of 0.75%, has undoubtedly received a major boost from its ownership of leader in electric vehicles Tesla (NASDAQ: TSLA). With its dual role as a consumer of batteries and as a producer of high-tech batteries, Tesla’s returns have made a huge contribution in themselves, despite the fact that the stock currently owns only 5.5%. It also helps with the ETF’s performance in 2021, as the fund is already up almost 15%.
LIT data by YCharts.
Expect more from battery technology supplies in 2021
Electric vehicle manufacturers are just beginning their efforts. Many start-ups have not even started making vehicles yet. Even those who have an advantage still have a long way to go before they take their step.
This indicates that suppliers of key components will do well in the future. 2021 is likely to be even more successful for these two ETFs and the companies in their portfolios.