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Hedge Funds Abandon SunEdison: 3 ETFs Feeling the Pain

Sweta Killa

SunEdison (SUNE), once the darling of hedge fund managers, has lost all its shine after being on a downward trend for some time. According to the recent 13-F filing with the SEC, several hedge fund managers have reduced their stake in SunEdison (read: How ETFs Are Overtaking Hedge Funds).


Fund manager David Einhorn's Greenlight Capital slashed its position in the stock by 25% while Dan Loeb's Third Point and Stephen Mandel’s Lone Pine Capital liquidated their entire stake in the stock. As a result, SunEdison tumbled as much as 38.4% in Tuesday’s trading session following a 7.5% decline on Monday.


This has raised a panic alarm in the ETF world, especially among funds having the largest allocation to this solar firm. These products are, namely Market Vectors Solar Energy ETF (KWT), Guggenheim Solar ETF (TAN) and Market Vectors Global Alternative Energy ETF (GEX). While KWT and TAN target the solar space of the alternative energy world, GEX provides global exposure to the companies that are primarily engaged in the business of alternative energy.


The trio currently has about 4.6%, 2.6%, and 1.5% allocation in SunEdison, respectively. American firms occupy half of TAN and GEX, while KWT allocates 30.5% of assets in the US (see: all the Alternative Energy ETFs here).  


SunEdison has been witnessing a steep downfall since its earnings announcement on November 9 after the closing bell. The stock has plummeted over 59% to date since it incurred wider loss than expected in the third quarter. Its estimates are moving south with earnings expected to be down 18.5% in the current year and 2.5% in the next. Further, the company is expected to post negative earnings growth of 240.4% compared with an industry average growth of 9.3%.


Moreover, SunEdison has a Zacks Rank #3 (Hold) with a poor Growth and Value style score of ‘F’ each and Momentum style score of ‘D’. All these suggest big trouble for the company in the future and thus the three ETFs mentioned above might see pain ahead. Over the past five days, KWT and GEX shed over 3% each while TAN lost much higher by about 7.4% (read: Solar ETFs to Watch Following Q3 Results).


The alternative energy space was beaten down badly due to the plunge in oil price that is taking a toll on the space with solar being the worst hit. This is because of investors’ misconception that oil price and solar market fundamentals are directly related. Otherwise, the industry fundamentals are still encouraging with growing demand for renewable sources, efficient alternative energy application, and Obama’s ‘Climate Change Action Plan’.


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SUNEDISON INC (SUNE): Free Stock Analysis Report
 
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MKT VEC SOLAR (KWT): ETF Research Reports
 
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