BofA Names Its Top Clean Energy ETF Pick

Clean energy stocks have been top performers in 2020, and traders are optimistic that a potential blue wave in the November election could open the door for a more favorable environment for clean energy in the U.S.

On Monday, BofA Securities initiated coverage of four clean energy ETFs and chose its top pick among the four.

The Analyst: BofA analyst Elias Lanik initiated coverage of the following ETFs:

• iShares Global Clean Energy ETF ICLN, Buy rating.
• First Trust NASDAQ Clean Edge Green Energy Idx Fd ETF QCLN, Hold rating.
• VanEck Vectors Low Carbon Energy ETF SMOG, Hold rating.
• Invesco WilderHill Clean Energy ETF PBW, Hold rating.

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The Thesis: Lanik said he is bullish on clean energy stocks as a whole given the global secular transition from fossil fuels to renewable energy.

Yet that bullish outlook doesn’t mean investors should snatch up each and every clean energy stock and ETF, the analyst said. 

“Significant performance dispersion across the group shows the wide range of approaches towards building a portfolio of clean energy stocks is an important consideration for investors,” he said. 

Lanik names the ICLN ETF as his top clean energy ETF and said the fund has an attractive collection of BofA Buy-rated stocks, has diversified exposure to climate change themes and has the deepest liquidity profile of the four funds mentioned.

The ICLN fund has 30 total holdings, and 37% of its stocks have Bank of America Buy ratings. Top stock holdings include First Solar, Inc. FSLR, Contact Energy Limited COENF and VERBUND AG OEZVY.

Benzinga’s Take: These clean energy ETFs could certainly experience some volatility associated with the U.S. election given that Democrats have made green energy a centerpiece of their party platform.

Given the wide range of stock performance within the space, a diversified, liquid ETF such as the ICLN fund is certainly a great way to invest in green energy while mitigating risk and volatility.