QCLN: Momentum Issues And High Volatility Suggest A Hold

seekingalpha11-21 15:56

The First Trust NASDAQ Clean Edge Green Energy Index Fund targets diverse clean energy sectors, focusing on decarbonization through biofuels, solar, wind, advanced batteries, and hydrogen.QCLN's top ...

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You can become one too!","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","QCLN":"First Trust NASDAQ Clean Edge Green Energy Index Fund","BK4585":"ETF&股票定投概念"},"translate_title":"QCLN：动量问题和高波动性建议持有","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"QCLN":0.9},"content_text":"The First Trust NASDAQ Clean Edge Green Energy Index Fund targets diverse clean energy sectors, focusing on decarbonization through biofuels, solar, wind, advanced batteries, and hydrogen.QCLN's top holdings, Tesla, ON Semiconductor, and First Solar, diversify risk across electric vehicles, semiconductor efficiency, and solar power, despite high overall risk.Renewable energy investment surged 22% in 2023, with significant growth in solar energy and battery storage, while electric vehicle sales hit record highs.QCLN is fairly valued with a P/E ratio of 29.23, slightly above market average, but momentum issues and high volatility suggest holding for the next few quarters.Editor's note: Seeking Alpha is proud to welcome Blake Winiecki as a new contributing analyst. You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more »    Frederick Doerschem Pursuit of clean and safe energy has been an active topic for years now. The recent U.S. election will intensify that debate, which adds an element to analyzing this stock market area. With a variety of energy sources seeking to lead the charge in the industry, investors are looking to find the companies with a sustainable edge versus direct competitors and the fossil fuel industry. First Trust NASDAQ Clean Edge Green Energy Index Fund (NASDAQ:QCLN) targets a cross-section of clean energy. This ETF attempts to track the performance of clean energy companies, primarily in the United States. The fund touches on nearly all aspects of green energy, with particular emphasis on decarbonization. It includes companies focused on eliminating fossil fuels, through biofuels, solar, wind, advanced batteries, and hydrogen. After large gains through 2020, the clean energy industry hit the radar screens of more investors. Valuations have improved but with lackluster recent performance, high volatility, and the rising realization that eradicating fossil fuels is incredibly challenging, I rate QCLN a hold for at least the next few quarters. Here’s why. Holdings Seeking Alpha Seeking Alpha QCLN holds 55 stocks across 7 sectors. The unique piece to this fund is that it acts as an energy ETF, but many of the largest stocks that classify are actually technology companies. To me, that’s a positive. As the top holding, Tesla (TSLA) has garnered a lot of attention recently based on a large beat on earnings in September. Rounding out the top three holdings and 25% of the portfolio are ON Semiconductor (ON) and First Solar (FSLR). Later on, I will discuss how the overall risk for QCLN is high, but on another positive note, the ETF’s biggest holdings are diversified, hitting on three different sources of clean energy with electric vehicles, semiconductor efficiency, and solar power. Industry Breakdown First Trust Above is the breakdown by industry for the companies in QCLN. As you can see, it is very spread out, and there are many components that are trending to help with the fight toward decarbonization. Grand View Research shows that North America dominates the revenue share in the decarbonization market, which is great for QCLN as it consists almost 90% from the United States. Decarbonization Grand View Research Renewable energy usage has ramped up significantly and is forecasted to only gain speed going forward. World Resources Institute shows the projected sources of power generation out to 2050. There has already been a rapid decline in coal and oil use. Gas will present the most difficulty to move on from or decrease, but QCLN leaders like Tesla and Rivian (RIVN) Automotive are well on their way to helping the cause. Many parts of the world have set a 2050 target of net-zero greenhouse gas emissions. Although lofty, it’s still a positive for QCLN as it only creates more awareness and government incentives for consumers. Renewable Energy Trends World Resources Institute Investment in renewable energy is up 22% from last year, with over $300 billion invested in the United States in 2023. According to World Resources Institute, solar energy has had the largest increase in demand recently. 31 gigawatts of solar energy capacity were implemented into the U.S. last year, up 55% from 2022. Battery storage is newer on the renewable scene but is also seeing rapid growth, predicted to double this year. Lastly, wind growth was noticeably lower than previous years, but still held 11% of electricity generation. The chart below shows the trends in energy capacity recently, and the sources it is coming from. Roughly 25% of electricity created in the United States came from renewable sources. World Resources Institute Of course, if we are discussing clean energy, we must include the rise in electric vehicles (EV), especially since two of the top five holdings in QCLN are Tesla and Rivian. World Resources Institute reported 1.2 million electric vehicles were sold in 2023, which made up 7.6% of total vehicle sales, its highest fraction to date. Tax credits and government help toward charging infrastructure are leading buyers toward companies like Tesla and Rivian. The uptick in EV’s purchased over the last couple of years is quite dramatic and doesn’t show many signals of slowing down. World Resources Institute Valuation QCLN is close to being fairly valued. The current P/E ratio is 29.23, slightly above the market average, but much less than the current renewable energy average of 47.7 according to Simply Wall St. First Trust points out other current valuations as shown below. But, on the forecasted side, Ycharts has each of these ratios dropping, with projections of 2.01 price/book, 12.21 price/cash flow, and 2.54 price to sales. This indicates overvaluation at the moment, but still relatively solid metrics in an industry that tends to be overvalued.   First Trust Dividends, Expense Ratio, and Momentum QCLN has a dividend yield hovering right around 1%. The long-term dividend advancements have been fine, but 2021 saw no growth. The fund is right at the median of all ETFs with an expense ratio at .59%. Momentum has been an issue recently. QCLN is down 19% year to date and is less than half of its all-time in 2021. I do believe all the positive news surrounding clean energy and the wealth of knowledge growing, will bring this industry forward, but it could be years away until it gains traction again. Seeking Alpha Highly Volatile One of the biggest concerns for QCLN, are the various metrics that measure risk. A beta of 1.5 is quite high, but that is just the beginning. QCLN has a standard deviation and an annualized volatility, each hovering around three times higher than the median among all ETFs. It’s not necessarily veering me completely away from the fund because this is in part due to the heavy allocation in the tech side of the clean energy space. I think a portfolio percentage of QCLN should be fairly low, especially with the election season here. An already volatile ETF could have even greater swings depending on politics and new policies shaping the stock market, but I don’t think QCLN needs to be avoided if you are already holding it. Seeking Alpha Conclusion  QCLN and clean energy will power forward; it just might not be in the near term. I see the tech side of this ETF as a great way to hold stocks in the energy sector. Ultimately, the risk here is just too high at the moment and is the leading reason why QCLN is a hold. Once we see the volatility slow down for an extended period of time, and valuations remain stable, then it will be time to decipher again what direction QCLN will head.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485551164"}