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Is it Time to Buy the Dip in Clean Energy ETFs?

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On Mar 6, the Senate approved President Joe Biden's $1.9-trillion stimulus package, sending the amended bill back for a vote in the House. The Democratic-controlled Senate voted 50-to-49 to pass the "American Rescue Plan" through reconciliation (read: ETFs to Win/Lose as Senate Okays Biden's $1.9T Relief Bill).

As the members in the Senate modified some provisions, the legislation needs to go back to the House that passed the previous version of the proposal last week. Both House and Senate have been working on the bill in top speed as unemployment insurance benefits expire on Mar 14 (read: Top ETF Stories of February Worth Watching in March).

The very passage of the bill in the Senate indicates that most of Biden’s agendas are going to see the light of the day in the coming days. Amongst the many policies that Biden and his democratic party support, clean energy is at the forefront.

Biden has already canceled Keystone XL Pipeline and rejoined the Paris Climate Agreement. Notably, Paris Climate Agreement is the international treaty designed to counter disastrous global warming. Biden ordered federal agencies to start reviewing and reestablishing more than 100 environmental regulations that were weakened or canceled by Donald Trump. No wonder, clean energy ETFs will start soaring from such intentions and moves.

Clean Energy in Red This Year: Time to Buy the Dip?

Notably, after riding high in the past year thanks to low rates and Biden’s election win in November, clean energy ETFs have succumbed to a slowdown this year. Invesco Global Clean Energy ETF (PBD - Free Report) is the maximum loser with about 12.2% losses while Invesco WilderHill Clean Energy ETF (PBW - Free Report) is the best performer with 9.1% losses this year.

The funds have been in the red inthe past month too with PBW losing the most(down 24.6%) and VanEck Vectors UraniumNuclear Energy ETF (NLR - Free Report) shedding the least (down 3.1%). However, such funds have offered great returns in the one-year timeframe. PBD, First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) , CNRG and PBW each are up more than 100% in a year’s time.

Hence, the correction in the clean energy space coupled with the latest passage of the bill could open up a buying opportunity in the space. The fundamentals are strong for the space. The cost of renewable energy generation has been falling in recent years with continued technological innovation. Increasing global acceptance has also been favoring the space.

Biden has expansionary plans for clean energy. He is forming a plan — a Clean Energy Revolution — to address the issue of climate emergency. He sees America as becoming a 100% clean energy economy by 2035 and having net zero emission by 2050 (read: 4 Best Sector ETFs of Q4).

In fact, he has a $2-trillion-plan toward combating climate change that will eliminate carbon emissions from the power grid by 2035 and accelerate the uptake of electric vehicles (read: 4 Best Investing Areas of Q4 & Their Top ETFs).

Against this backdrop, below we highlight a few clean energy ETFs that have a comparatively low P/E ratio in the space than the other funds. These funds can be watched for upside in the coming days on support from the Biden administration.

SPDR S&P Kensho Clean Power ETF (CNRG - Free Report) – 31.53X

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) – 31.77X

ALPS Clean Energy ETF (ACES - Free Report) – 31.84X

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