The performance has been stellar in many of the key solar stocks out there over the last two months. A rising stock market and higher oil tends to help. Many companies are raising guidance or are calming fears that margin compression is escalating and that orders are dropping.
We have taken a look at some of the solar ETF products on the market to which offer the best alternatives on investing, although there are also some broader ETF products via alternative energy and clean energy ETFs that of course include heavy weightings in solar stocks. Guggenheim Solar ETF (NYSE: TAN) and the Market Vectors Solar Energy ETF (NYSE: KWT) are key solar ETFs in the mix. We have also loosely covered solar via broader alternative energy ETFs of PowerShares WilderHill Clean Energy (NYSE: PBW), Market Vectors Global Alternative Energy ETF (NYSE: GEX), and the iShares S&P Global Clean Energy Index (NASDAQ: ICLN). As First Solar, Inc. (NASDAQ: FSLR) is the largest solar stock out there, we have tried to show how it relates into each because the weighting and balancing of each fund differs.
Guggenheim Solar ETF, which recently changed names from Claymore/MAC Global Solar Energy under the same “TAN” ticker, is the go-to ETF for the solar sector. The company keeps its weightings to where one holding does not dominate the ETF as First Solar is worth more than $11 billion in market cap but does not quite have a 10% weighting in the ETF. The other issue to consider here is that this ETF has foreign holdings that are not based in the US and that do not really trade in the US. It has many Chinese solar players, but the weightings also include holdings such as Meyer Burger, Renewable Energy, SMA Solar Tech, and Solarworld.
At $8.75, the Guggenheim solar ETF’s 52-week trading range is $6.02 to $11.47. The bear market and the collapse of the oil bubble both contributed to poor share performance. When this launched in 2008, the ETF’s shares were at $25.00.
The second solar ETF, which is far less liquid and far smaller, for solar investing is the Market Vectors Solar Energy ETF (NYSE: KWT). This fund from Van Eck tracks the Ardour Solar Energy Index. The market weightings here are more market-cap oriented as First Solar had more than 12% weighting at last look and it combined with the next three top holdings equal nearly 40% of the entire ETF weighting. The international solar players that are weighted in this index are actually a lower amount among the top holdings when compared to the Guggenheim fund.
At $13.30, its 52-week trading range is $9.04 to $17.31. It has seen the same punishment from the peak as shares were trading above $40 when it launched back in 2008.
Another play on the future of solar energy is actually a partial solar play, because it is diversified in all forms of green and alternative energy sources. That is the PowerShares WilderHill Clean Energy ETF with a market cap of more than $500 million at last look. This alternative energy ETF tracks the WilderHill Clean Energy Index and solar is not the sole weighting here. Even with First Solar’s $11.5 billion market cap, the weighting for that component was under 3% at last look. Some companies even have a larger weighting than other larger companies by market cap because the index tries to give a higher weight to “other” forms of alternative energy like wind, monitoring, smart-grid, and other technologies. The fund even notes that the modified equal-weighted index is rebalanced and reconstituted each quarter.
Many sources show that the 52-week trading range of the PowerShares’ is $4.00 to $11.95, although if you eliminate the Flash Crash then the real range has a low close to $8.00.
Market Vectors Global Alternatve Energy ETF is a second broader alternative energy ETF and it is more broadly weighted on alternative energy as a sector rather than solar. A dominant wind company called Vestas Wind Systems from Denmark is actually more than 10% of the weighting versus nearly 8% weighting of First Solar on last look. At $21.05, its 52-week range is $17.81 to $26.99 and its market cap is closer to $150 million on last look. This ETF was actually one of the first movers and launched at $40.00 in 2007. It then rose north of $50.00 but slid along with its peers and its components that make up the weighting.
A less liquid ETF for broader alternative energy strategies is the iShares S&P Global Clean Energy Index. This is much smaller and much less liquid with thin volume when you compare it to the PowerShares ETF. As it tracks the S&P Global Clean Energy Index, it also has foreign issues that do not trade actively in the U.S. At $17.77, its 52-week trading range is $14.02 to $24.34. When the fund launched in 2008, shares were above $50.00 at the peak.
As you can see, there are many ways to skin a cat when it comes to solar investing and then broader alternative energy investing. These are just some of the broader options out there when you consider the open-end mutual funds and the focused private investment pools that have been started in the last decade.
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