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Wind Energy Fund Alternative
Energy sources has become one of the fastest growing sectors of the last five
years, as global warming has become a stable in the popular culture, and as
the governments race to comply with the Kyoto Protocol.
It is obvious that the future of Wind Energy
depends greatly on the solution to the European Financial Crisis of 2011.
However the end of the crisis is expected to bring back the necessary
financing schemes which will bring back even larger Wind Energy installations
and growth to the sector, as European governments try to reach their carbon
emission reduction targets pertaining to the Kyoto Protocol. As a result, The
Wind Energy Fund expects to provide investors with very high returns as the
valuation of Wind Energy companies return from 4X-5X EBITDA to their normal values of 9X - 12X EBITDA. The Wind Energy
Fund will be one of the more passively managed funds. The fund will try to
accumulate shares at good entrance levels but once the shares are accumulated
there won’t be too much churn. The aim will be to take advantage of a
long-term upwards trend rather than exploiting short term moves with the
exception of extreme moves in specific stocks. The Fund will
also accumulate a position in US Crude Oil as the persistently high price of
oil is a necessary component to the viability of alternative energy sector.
This position will also serve as a hedge to reduce volatility and risk in the
Fund and is expected to be around 30% - 35% of Fund assets. |
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Since Inception Relative Performance
Graph vs DJIA and 7 -10 Year Bond Index Latest Trades
Comments June 15th’
12 10:52 I am not sure if I’ll be able to start
actively trading this Fund even in the medium-term. The green energy market
has shaped up in such a way that the wind sector has some serious
disadvantages. The Eurozone problems definitely hurt the sector but it
specifically hurts Vestas because it is a Danish
company. Also solar energy seems to have taken the lead from wind energy as
the more largely used green energy source. Given these fundamentals it might
be wise to short some wind energy stocks like Vestas,
but that is a very risky trade too. The reason is that these stocks are very undervalued compared to the size of the companies and
any Eurozone positive developments might bring about a short squeeze. Jan 11th, 12
15:54 Seems I could have made some money buying Vestas on the dip but the move in the stock was entirely
due to rising European markets. I don’t want to make those kinds of short
term trades for this Fund. As soon as the market turns, the stock will
probably turn down also. Jan 6th, 12
13:32 The guidance cut by Vestas
has caused a huge correction in the price of the stock which is good news for
the Fund. However the correction actually came after a similarly large rise
in the stock. Also, this is a stock that is in a very strong downtrend, not
much liked by the analysts and currently very sensitive to the general market
direction rather than its own fundamentals. Therefore I will hold out on
buying shares until the market finds its bottom, and the stock gets to move
on its own fundamentals. Dec 8th, 11
14:12 As
with the other passive Funds, I have initiated long bond fund positions for
the Wind Energy Fund to take advantage of an expected decrease in bond
yields. The positions should remain until European problems are solved, or at
least Vestas decreases to levels too good to pass
up. Dec 3rd, 11
11:34 Since this will be a more relatively
passive Fund, the level at which the positions are initially accumulated is
very important. I do have a general negative bias towards the market until
European problems are sorted out, and some form of QE is initiated by ECB. So
until then I will hold out on making any substantial trades. Dec 3rd, 11
11:26 Let’s
note the general strategy that is planned for this Fund. The Wind Energy Fund
will be less fragmented due to few firms dominating the sector. The main
emphasis will be on the Danish firm Vestas since it
trades at very depressed multiples even though it commands a large share of
the market. Also in consideration will be Siemens which supplies a great deal
of equipment to the sector. Spanish utilities Gamesa
and Iberdrola which also trades at very reasonable
multiples will constitute another large chunk as Spain represents the largest
wind energy market. The Fund will also dedicate about at least 20% of the
Fund to USO as high oil prices are a necessary condition for the feasibility
of wind power. |
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Since
Inception Performance Chart vs Equity and Bond
Benchmarks
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