Solar ETFs Can Keep Shining

ETF Trends

Despite a strong start to August by U.S. stocks on Thursday, exchange traded funds that hold high-flying solar stocks did not participate. SunPower (SPWR), a stock that heading into Thursday’s session had risen more than fourfold this year, was the solar sector villain.

The maker of integrated solar product plunged 13.6% on volume that was more than double its daily average after declining to provide 2014 guidance until later this quarter, reports Donna Howell for Investor’s Business Daily.

SunPower’s decline weighed on the Guggenheim Solar ETF (TAN) , sending the fund down 2.4%. The Market Vectors Solar Energy ETF (KWT) fell nearly 1% Thursday. TAN allocates 6% of its weight to SunPower while KWT features a 5.8% weight to the stock. [Solar ETFs Dazzle in Second Quarter]

To this point in 2013, TAN and KWT are the best and third-best non-leveraged ETFs in terms of performance and those gains have been accrued following dismal 2012 runs that saw the ETFs enter this year beset by dismal outlooks. TAN and KWT shook off the concerns and have been driven by positive fundamentals. For example, the International Energy Agency said in June that wind, solar, bioenergy and geothermal power could expand 40% over the next five years, or double the 20% growth in 2011. [June ETF Performance Report]

Positive headlines helped make TAN and KWT two of the best-performing ETFs in June and for all of the second quarter. Those superlatives extend to July where TAN gained over 20%, making it the top-performing non-leveraged ETF for the month. Two other alternative energy ETFs, including KWT, were found among July’s 10 best ETFs as well. [July ETF Performance Report]

KWT and TAN were boosted last month, in part, by news that China, the world’s second largest economy, said it plans to quintuple its solar panel grid. Given the jaw-dropping returns offered by TAN and KWT this year, investors may be concerned the funds are overdue for a pullback, but there are some interesting anecdotes to consider.

First, TAN is still more than 20% below its 2012 split-adjusted high. Second, the slack start to August for the ETF should not be concerning because over the past six months, TAN incurred minor losses in the first trading day or couple of days only to finish with monthly gains in four of those six months.

Guggenheim Solar ETF

View photo

.

TAN

 

ETF Trends editorial team contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

View Comments (0)