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Wednesday, July 28, 2010

THE CLEAN ENERGY FUND? YES, STILL PERFECTLY HEDGED


Today, we take another look at one of most perfectly hedged investment funds on the market: The big "clean energy" fund, PBW.

DailyWealth readers know we believe long-term investors should focus on boring, dividend-producing businesses like Altria and Johnson & Johnson. The investor is best served by stable, dividend-paying businesses that produce "never go out of style" products like cigarettes and Band-Aids.

Yet many investors are enamored with the idea of investing in clean energy companies… most of which sport such terrible business models that we like to call them "perfectly hedged." They lose money in both good economic times and bad economic times. Their share prices are able to sink in both bull markets and bear markets.

For a picture of this hedged condition, we present the past two years of trading in the PBW. As an easy, "one click" way to go long solar, wind, and various other clean-energy companies, this fund has drawn in hundreds of millions of investor dollars over the past few years.

As you can see from today's chart, this fund managed to get smashed during the 2008 asset selloff. It also managed to not rise during the great 2009 rally… And it continues to tread water. Our advice remains: Ditch the money-losing fad stocks and get into businesses that churn out profits even when the sun is down or the wind isn't blowing.

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