Wednesday, August 14, 2013

Remembering the Blackout

10 years ago today, Wall Streeters ended their day frantically walking down staircases and jamming into uptown buses, if we weren't buying discount meat and perishables. Without computers and TVs, we didn't know a great blackout had darkened the entire US northeast after some trees downed a power line in Ohio.  We want to mark the anniversary with another look at the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID).

We highlighted GRID on July 9th in frustration over Con Edison’s rolling brownouts during the summer heat wave.  Tracking a smart beta index that rebalances quarterly and reconstitutes semi-annually, it had just paid its largest dividend which sent its yield score to 100 and rocketed the fund out of the triple digits and into the top 10.  That yield still scores 100 and is confirmed by an also exceptional 96.3 price cash flow score as the government showers money on its constituent smart grid infrastructure providers.  You don’t need earnings or book value to get the government’s love and both of those categories score around 50 but the four combine for a decent 74.1 Fundamental Score today.  The fund is up nicely since that July 9th post but its Behavioral Score has come down from 65.5 to 60.9 thanks to its sentiment score dropping with its implied volatility.  Good Global Theme and middling Quality Scores all combine for a 67.4 Total Score which is good enough for 22nd place today.

Some of those weaker Quality metrics contribute to GRID’s higher than average 5.38 Red Diamond Risk Rating which is similar to those China and emerging markets funds in the top ranks.  Its 7.28 Green Diamond Reward Rating would probably be higher if GXC was not still skewing the curve.  Now that the heat wave has broken, our power supply has been uninterrupted but the autumn storms loom and the last two years have seen additional blackouts after Irene and Sandy.  Another season like that could remind more investors that our electrical grid still needs to be smarter.  GRID's 22nd place rank today is down from 3rd place on July 9th but up from 73rd place 2 days ago.  When we post our monthly performance reports in coming days, you will see that 22nd place signals it will continue to outperform in coming months.  Thanks for reading and as always, please send any questions to

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