Global Timber & Forestry ETF Launched by iShares

The iShares S&P Global Timber and Forestry ETF launched this week, with very light volume of 7,000 shares traded on its opening day. The fund (WOOD) seeks to replicate the performance of the S&P Global Timber and Forestry Index, which Standard and Poors created back in August of 2007. The index is comprised of roughly 25 of the largest public companies dealing with the management, ownership, or upstream supply chain of forests and timberlands. Many of the companies are REITs, paper product companies, and paper packaging companies. The top three holdings in the index are Plum Creek Timber (PCL), Rayonier (RYN), and Weyerhaeuser (WY), which are all U.S. companies. Out of the ten countries represented in the index, the U.S. makes up roughly 41%, followed by Canada’s roughly 19%. The top ten of the 25 holdings as of December 31, 2007 are as follows:

Plum Creek Timber – 8.45%
Rayonier Inc – 8.29%
Weyerhaeuser Corp. – 8.11%
Sino-Forest Corp. – 8.00%
West Fraser Timber – 4.17%
Oji Paper Co. – 4.14%
SCA – Svenska Cellulosa – 4.08%
Smurfit-Stone Container – 3.92%
Potlatch Corp. – 3.90%
Aracruz-PNB – 3.88%

The top five holdings make up roughly 57% of the index, which is comprised of companies ranging from $15 billion in market cap, to $300 million. Along with the U.S. and Canada, other countries with sizeable portions of the fund are Brazil, Finland, Sweden, and Australia.

Investing is a Breeze with the Global Wind ETF

The much anticipated First Trust ISE Global Wind Energy ETF (FAN) launched this week with healthy trading volume and a tight spread. Renewable energy has been a hot topic as of late, especially wind energy because of its low cost, and high efficiency. With the launch of this new fund, investors now have a chance to profit from companies in the wind energy business, as well as companies that will be entering the space.

The First Trust ISE Global Wind Energy ETF (FAN) will aim to track the ISE Global Wind Energy Index. The index is comprised of companies that provide goods and services to the wind energy industry, and companies “determined to be significant participants in the wind energy industry despite not being exclusive to such industry”. In order to be considered for the index, the company must be engaged in some aspect of the wind energy industry such as manufacturing or design of machinery, distribution of materials, management of a wind farm, or distribution of wind generated electricity. The current top ten of the 52 holdings in the fund are as follows:

REpowersystems AG - 10.51%
Vestas Wind Systems - 10.28%
Gamesa - 8.81%
Hansen Transmissions - 6.80%
Japan Wind Dev. Co. - 5.13%
Babcock & Brown Wind Partners - 4.40%
Nordex AG - 4.34%
Theolia SA - 4.28%
Clipper Windpower - 2.94%
Gurit Holding AG - 2.81%

On a fundamental basis, the trailing P/E ratio for the fund is 25, and price to sales is around 2.2. The total net assets for the fund are around $9.1 million, but this is likely to balloon as more investors move into the fund. The expense ratio for the fund is 0.60%, and trades on the NYSE Arca exchange.

Solar ETFs Face off: TAN vs. KWT

With global energy demand on the rise, nations, businesses and individuals are looking more than ever for new, and more importantly, renewable sources of energy. This new surge of interest in the renewable space has many looking to the mother of all renewable resources, the sun. Now that the world is starting to take solar power seriously, investors are taking a second look at now profitable solar companies, and the ETFs that track them.

Currently there are two ETFs that dominate the solar sector, Claymore’s Global Solar Energy Index (TAN) and Van Eck’s Market Vectors Solar Energy ETF (KWT). At first glance these two funds look to be quite similar, and in many aspects they are. However, a closer look reveals many of their differences in structure, size, and value.

The first solar energy ETF to hit the market was Claymore’s TAN, which tracks the MAC Global Solar Energy Index. This index is comprised of 25 securities covering small (42%), mid (30%), and large cap (28%) companies. Shortly after the launch of TAN, Van Eck’s KWT hit the market, which tracks the Ardour Solar Energy Index. This index is comprised of 27 securities covering small (35%), mid (38%), and large cap (27%) companies. When looking at the top five holdings of the two funds as a percentage of the total fund, TAN’s top five make up 34%, whereas KWT’s top five make up a much larger 47% of the fund. Also worth noting is MEMC Electronic Materials (WFR) is absent from KWT, but makes up roughly 5% of TAN and is listed as the sixth largest holding.

On a value comparison, TAN’s average trailing P/E ratio is around 45, while KWT is sporting a 55 trailing P/E. When looking at the top three in country allocation, TAN is 30% China, 29% Germany, and 26% United States compared to KWT’s 26% China, 36% Germany, and 24% United States.

Both of these ETFs are good investments for direct exposure to the solar energy sector, however Claymore’s TAN seems to be the better diversified of the two and would be our choice if we decided to put solar energy to work for us.

Can You Handle the new Frontier Market?

There's new blood in the ETF universe, and its not commoditites or leveraged funds, its the blood of the new frontier of investing, known as the frontier markets. On Thursday June 12th Claymore launched its Frontier Markets ETF (Ticker: FRN) which will attempt to track the Bank of New York Mellon New Frontier DR Index (Ticker: BKNFR). Here is a brief snippet from Claymore on what the index is comprised of:

The Frontier Index tracks the performance of depositary receipts in American depositary receipts ("ADR") or global depositary receipts ("GDR") form that trade on the London Stock Exchange ("LSE"), New York Stock Exchange ("NYSE"), American Stock Exchange ("AMEX") and Nasdaq Stock Market ("NASDAQ") of companies from countries that are part of the Frontier Market, as defined by the Index Provider.

The Index Provider currently defines the Frontier Market countries as: Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, United Arab Emirates, Egypt, Ghana, Kenya, Malawi, Mauritius, Morocco, Nigeria, Tunisia, Zimbabwe, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Ukraine, Bangladesh, Pakistan, Papua New Guinea, Sri Lanka, Vietnam, Peru, Chile, Colombia, Ecuador, Jamaica, Panama and Trinidad & Tobago.

As of May 23, 2008, the Index's constituent countries were represented (in approximate market capitalization) in the Index as follows: Poland 25.0%, Chile 21.0%, Egypt 17.1%, Kazakhstan 7.8%, Peru 5.3%, Czech Republic 5.2%, Nigeria 3.4%, Lebanon 3.2%, Pakistan 3.0%, Oman 2.4%, Columbia 2.3%, Croatia 1.8%, Bahrain 1.4%, Georgia 0.7% and United Arab Emirates 0.5%.

Currently FRN's total market cap is just shy of $4,000,000 and has an expense cap of 0.65%.
The top 10 Holdings are names you probably have never heard of, and are as follows:

BANK PEKAO SA 7.94 %
TELEKOMUNIKACJA POLSKA 6.52 %
ORASCOM TELECOM HOLDING S 6.11 %
KAZMUNAIGAS 5.23 %
MINAS BUENAVENTURA ADR REP 2 SER'B'PEN1 5.20 %
ORASCOM CONSTRUCTION INDU 5.03 %
POLSKI KONCERN NAFTOWY OR 5.03 %
KGHM POLSKA MIEDZ SA 5.03 %
EMPRESA NAC ELEC-CHIL ADR 4.88 %
ENERSIS-ADR 4.21 %

Just recently PowerShares announced that it will be launching its own frontier market ETF with the planned ticker of PMNA. The fund will be based on the NASDAQ OMX Middle East North Africa Index, which is comprised of the largest and most liquid securities in Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and the UAE.

PowerShares to Launch Frontier Market ETF

Invesco PowerShares today announced its plans to launch a new frontier markets ETF, which will focus on the Middle East and Africa. The anticipated ticker symbol for the new fund is PMNA, and the fund will be called the PowerShares MENA Frontier Countries Portfolio. The fund will be based on the NASDAQ OMX Middle East North Africa Index, which is comprised of the largest and most liquid securities in Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and the UAE.

This will be an exciting new ETF option, as many investors are looking for a way to cash in on the newly popular frontier markets. The most popular option to date is the T.Rowe Price Africa and Middle East mutual fund (TRAMX) which has been given an endorsement by Fast Money's Tim Seymour, and is up 9.1% for the year as of May 31st.

DCR "Oil Down" ETF Going to Zero?

It's been a wild ride for Oil based ETFs over the last few months, especially for the MacroShares Oil Down ETF (DCR), which rises in price when the price of oil drops. Needless to say, DCR has been severely punished as oil prices have now cleared 130. On April 17th MacroShares issued a press release as follows: "The NYMEX light sweet crude oil futures contract for June closed at $114.36 on Wednesday, April 16th at 2:30. This marked the third consecutive business day that the reference price for MacroShares Oil Up and Down (UCR and DCR respectively) closed at or above $111. This triggered an early termination event for the securities. On July 3rd, a final distribution payment will be made to the UCR and DCR shareholders of record as of June 30th based on the underlying value of the Up and Down MacroShares Trusts. The underlying value of the trusts will be determined based on the June 25th closing price of the NYMEX light sweet crude oil futures contract for August."

So what does this mean for investors of DCR? Basically Oil needs to drop below $120 for DCR to have any value for the distribution. The value for the shares will be based on the following forumla: ($120 - Crude) / 3 = NAV

So if you're looking for a more conservative short play on crude oil, and with a longer timeframe than a few weeks, pass on DCR and look to shorting or buying puts on the USO instead.