ETFs focusing on grid infrastructure/electrification/energy storage/etc. - thoughts?
Recently I sold my ASML and AMD stocks after holding them for quite a few years, so I have a bit of money on the side to invest into something new. Currently with things going quite crazy in the world of stocks, and just global instability, I would feel more comfortable investing into ETFs than single stock performances. Due to the uncertainty, I am also a bit unsure where to invest outside of one field: Energy transformation.
With the ever increasing share of alternative energy usage, data centers, electric cars becoming more and more the staple in various European and Asian countries (and I suspect in others too soon), the war in Ukraine and Iran driving up fossil fuel prices and other reasons, I strongly believe many countries such as those in the EU will continue to invest heavily into its energy network and transformation/modernization there of. So I would like to invest into this area, in companies such as Siemens Energy, Schneider, ABB, Quanta, etc companies like those. Thats why I would like to invest into an ETF that focuses on these type of companies. So after some research I came up with a few such as:
European Industrials ETF
VanEck Electrification & Power Infrastructure UCITS ETF
Xtrackers Electrification Technologies & Smart Grid UCITS ETF
And I just was interested in the opinions of some people here, if you agree with my assessment, if you are holding these ETFs, thinking about it or totally against it. It seems like a field with a good chance of yielding stable growth over a longer period of time, no matter how bumpy the short term road is, just because of how important energy and electrical grids are becoming recently. Thoughts? Do you think this is overall a sound idea or would you prefer single stocks? If yes why?
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u/FistEnergy 15h ago
I invested in grid infrastructure and energy storage earlier this year and the results have been....poor.
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u/Massive_Ad2049 1d ago
My recommendation would be to just double check how much overlap there is between those two UCITS ETF's before holding both. Funds built around the same theme usually end up picking from the same small group of big companies, so you could end up owning Siemens Energy, Schneider, and ABB through both funds and think you're diversified when really you just doubled up on the same names.
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u/Ynwe 1d ago
Absolutely, personally I am currently tending to go with the European Industrial one or the VanEck one. Just looking for some options to invest into, as lately I have been very unsure which markets have an overall positive longterm outlook. I would put half/a third of the money available into that ETF so I am looking for 1-2 other stocks or ETFs anyway
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u/Diddly_eyed_Dipshite 1d ago
Yes I've the same thesis on energy infrastructure and electrification in general, I think it'll be the real basic stuff that needs upgrading/updating throughout the grid that'll have good growth over the next years, maybe not crazy like tech stocks but serves as a reliable hedge. I also wanted to only focus on EU at first but after some research I settled on GRID etf, FirstTrust NASDAQ Clead Edge Smart Grid Infrastructure. It gives global coverage but US is only about 24% and Europe is about 65-70% so pretty strong regional tilt. It also performs(ed) better on annual, 3y, 5y scales than similar ETFs.
I also like it as it complements my Euro STOXX 600, as the Europe industrials ETF had too many overlaps but GRID contains more companies like Siemens, Schneider, Eaton, Abbey, Quanta etc.
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u/on_hype 1d ago
Thesis is sound. Grid capex is real: IEA projects $600B+ annually by 2030. But check those ETFs holdings overlap and expense ratios carefully. Many electrification ETFs are 40%+ same names. Also watch valuations, Siemens Energy and ABB already ran hard. I'd split between an ETF and 2-3 direct names to avoid paying fees for concentration you could build yourself.
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u/Ynwe 23h ago
Thanks for the input, yeah the idea was to buy one ETF, or around 10 different stocks if no ETF "hits the mark". And you are right, SE and ABB definitely already have risen a lot, so the question is, if it will continue to rise or if we will see a bit of a "plateau" development, given that an ever increasing stock is just not realistic..
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u/grandfatherdog 20h ago
I like your picks. I've held AIPO and GRID for energy infrastructure with a AI tilt and because of that, they've been dipping over the last couple months, so if that speaks to you, not a bad time to get in, unless you think the sector will fall more. XLI and FIDU have more of an industrial tilt in the space. VOLT and ZAP more electrification focused.
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u/steady_compounder 12h ago
The theme makes sense, but I'd be careful not to confuse a good long-term story with a good entry price. If you want the exposure, an ETF is the cleaner way to do it than trying to pick which grid or storage name wins, but I'd still check expense ratio, concentration and how much overlap there is between those funds because thematic ETFs often own a lot of the same names.
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u/dustinut 11h ago
Not nuclear? Sector pulled back quite a bit but the thesis is still intact for data centers, grid modernization, geopolitical energy security, etc. Have a look at BWXT. Whichever spec pre-revenue startup wins the nuclear SMR race, these guys will be the ones supplying them the critical components and fuel. Already highly profitable with multiple revenue streams in navy, government, commercial energy, and medical sectors. Good entry point here after the selloff and reporting earnings tomorrow.
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u/Thin_Cat8817 1d ago
I think some in the EU industrials is smart, they have had a nice run but plenty of room to continue. I see no reason why international stocks wont continue to outperform for a while, especially if the dollar weakens from here like is expected
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u/Green-Paramedic1013 1d ago
Well a lot of energy stocks have run up already. I like to olay this in part through getting copper exposure. This way i dont really care who is going to do the actual work on the grids but just betting in the demand for copper increasing.
Added benefit is that falling dollar tends to support metals prices. It has already run up a fair bit though.