Socially-Responsible Energy Play

05/22/2015 9:00 am EST

Focus: FUNDS

Genia Turanova

Editor, Leeb Income Performance

The energy sector may be in turmoil, but that doesn’t mean you should shun every part of it. One sub-sector we like here is alternative energy, suggests Genia Turanova, in The Complete Investor.

Many alternative energy companies have strong growth prospects the market is overlooking, resulting in very moderate PEGs.

That’s why this issue we’re recommending New Alternatives Fund A (NAEFX), a socially responsible fund that invests in companies aiming to have a positive impact on the environment.

By charter, up to 25% of its holdings can be in renewable energies. But beyond that, the fund also looks for companies that prevent or clean up pollution, conserve water, make buildings more energy-efficient, and in other ways reduce use of fossil fuels. It even invests a bit in socially concerned banks.

By industry sector, the fund’s three biggest areas are utilities (59% of assets), industrials (19%), and technology (9%).

Its biggest holdings, each accounting for 5 to 5.5% of the fund’s total assets, include Hannon Armstrong Sustainable Infrastructure (HASI), NextEra Energy Partners (NEP), TerraForm Power (TERP), Abengoa Yield (ABY), NRG Yield (NYLD), and Brookfield Renewable Energy Partners (BEP).

Ten of the fund’s 29 total holdings account for about half its assets. Some 61% of its assets are invested outside the US.

In the past, the drawback was the fund’s big 4.75% front load. But the fund has introduced a new investor share class—New Alternatives Investor—that drops the front load, making the fund suitable for our portfolio.

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