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Mutual Funds

The Brightest Green Fund

If you want broad exposure to green energy stocks, purge two thoughts from your mind: that you should buy only American, and that you'll do better with an index fund. The Europeans are several years ahead of us on the renewable-energy learning curve, so many of the best green companies reside across the pond. And index funds and exchange-traded funds, which normally track indexes, may work fine for established industries, but they are too inert to keep up with the changes occurring at a breakneck pace in the alternative-energy area.

Actively managed funds are the way to go. Be aware, however, that all of the actively managed alternative-energy funds cratered last year -- they performed even worse than the general market -- so you'll have to take a leap of faith to invest in one. Our favorite, Winslow Green Solutions (symbol WGSLX), lost 50% over the past year through April 9. And given that the fund launched in 2007, there's no long-term record on which to hang our endorsement.

However, managers Jack Robinson and Matt Patsky have some better results to show in a sister fund, Winslow Green Growth (WGGFX). For the five-year stretch that ended in 2007, it returned an annualized 19%. (It bombed last year, losing 60%. That was even worse than Green Solutions, which surrendered 54% in '08.) We prefer Green Solutions because it focuses on large renewable-energy companies and doesn't buy as many of the crunchy, environmentally conscious companies, such as Chipotle Mexican Grill, that populate Green Growth.

Robinson knows full well he's in the midst of a maelstrom. "The technology is moving so fast, and the financial incentives aren't entirely clear," he says. Then there's the uncertainty about what Uncle Sam may require and "how the infrastructure may or may not be built out," says Robinson. The result, he says: "Tracking the industry is a full-time job."


Foreign flavor. What will you get in Green Solutions? Four of the top ten holdings are foreign companies, including the world's biggest maker of wind turbines, Vestas Wind Systems, of Denmark, and Telvent GIT (TLVT), a Spanish information-systems company. Telvent improves the efficiency of pipelines and highways and makes environmental monitoring systems. Robinson calls it a "fascinating company that's growing in this no-growth economy."

Another growing company Robinson likes is WaterFurnace Renewable Energy (WFI.TO), which trades on the Toronto Stock Exchange but is based in Fort Wayne, Ind. The company runs underground pipes that draw heat from the earth and pump it into heating systems, helping residential and commercial users cut utility bills. Its fourth-quarter 2008 profits rose 60% from the same period a year earlier.

In Robinson's view, one of the keys to the success of renewable energy will be the answer to the question, "Who's going to build out the grid?" A company such as Quanta Services (PWR), which makes and installs transmission lines, will likely benefit from that infrastructure extension. And, although Robinson doesn't like to take risks with unproved technologies, he has invested in American Superconductor (AMSC). The company's superconductor business -- cables that transmit electricity with super-efficiency because of low resistance -- is losing money. But Robinson says the company's other major business -- which makes everything for wind power except the turbines -- is profitable and growing.

The minimum investment for Green Solutions is $2,500, so you can ease the fund into your portfolio. Annual expenses are 1.45% -- not bad for what is not only a sector fund but also one that invests mostly overseas.