The Green Bay Packers and the Pittsburgh Steelers will tussle in Cowboy Stadium this Sunday. Both teams are rich in tradition and championships but only one will emerge victorious. In honor of this clash between Packer Green and Steeler Gold, I present my favorite Green and Gold ETFs as honorary captains for Super Bowl 45.
As a born and raised Green Bay Packer fan, I must begin with the Green captains. Like Green Bay quarterback Aaron Rodgers, the green investment theme burst onto the scene a few years back and is gaining a significant following. See below for investopedia’s definition of Green investing.
There are a variety of Green ETFs in the marketplace but the two that standout to me focus on the necessities of life: water and energy. First, the Powershares Global Clean Energy ETF (PBD) owns a baskets of stocks from around the globe that focus on “greener and generally renewable sources of energy and technologies facilitating cleaner energy.” While clean energy has underperformed as a category over the last few years, the pricing and efficiency of many of the technologies behind clean energy companies continue to gain ground. PBD is an attractive option for a one stop global allocation to many of the leading companies in the clean energy space.
Second, the only commodity on Earth that is irreplaceable is water. That’s why proper treatment, efficient use and reuse of water is so important to our planet. The Guggenheim S&P Global Water ETF (CGW) provides a globally diversified way to access companies involved in water purification, treatment, equipment and related businesses. Unlike clean energy, investing in water has been a good place to be over the last few years as these companies have generally outperformed the S&P. Here’s a two year performance chart courtesy of Yahoo Finance comparing CGW to the S&P 500 ETF, SPY.
We’ve met the two Green captains, now let’s take a look at the Gold ETF captains in honor of the Pittsburgh Steelers. Gold, like Steeler quarterback Ben Roethlisberger, has had its share of controversy lately. Many wonder if Gold is the next bubble to burst or if it should even be a part of a portfolio allocation. Looking at the stats however, it’s hard to ignore the low correlation benefit Gold provides versus other investments. Check out the chart below, courtesy of iShares, which displays the 10 year correlations of a variety of investments relative to Gold.
Clearly, Gold can help diversify a portfolio and the best ETF to do it with is the iShares Gold Trust (IAU). IAU actually backs its shares with physical gold bars held in a vault. Although there are several of ETF that hold physical Gold, IAU’s low expense ratio of 25bps makes it a standout bargain.
One way to go beyond owning physical Gold and take more risk — similar to the deep pass plays that both Rodgers and Roethlisberger are known for — would be to buy an ETF that focuses on companies that mine for Gold. These companies often act as a leveraged play on Gold. For an aggressive allocation to gold miners, I like Van Eck’s Junior Gold Miner’s ETF (GDXJ) which invests in the smaller cap gold miners. Here’s a chart comparing GDXJ, IAU and SPY since GDXJ’s inception in November of 2009. Notice the upside and downside of GDXJ’s leveraged relationship to Gold.
So there you have it — the Green and Gold honorary ETF captains for Super Bowl 45. Let the battle for supremacy begin in the markets and also on the football field February 6th, 2011. Good luck to all and go Pack go!