Solar ETFs: Is Now the Time?

June 2nd at 1:00pm by Tom Lydon

So it goes: oil and gas prices have fallen off, which means that interest in alternative energy has declined in kind. Solar exchange traded funds (ETFs) are down significantly for the year, but will it always be so?

Last week, SunPower (NASDAQ: SPWRA) gained 22% on decent first-quarter profits, which helped propel Claymore/MAC Global Solar (NYSEArca: TAN) 8% higher, reports Don Dion of the Street. SPWRA was able to do this even though it only accounts for 3.6% of TAN’s net assets.

Tomorrow, SunTech Power (NYSE: STP), which is 5.1% of TAN’s holdings, will announce earnings and may also be capable of affecting TAN’s short-term fortunes more than its share.

Over the past four quarters, STP has been able to beat analysts’ earnings estimates by an average of 100%. If history repeats itself, both STP and TAN may be in for a good run, assuming the broader market doesn’t sell-off dramatically. [Nuclear ETFs Waiting to Exhale.]

One point of caution on solar funds: eurozone companies compose 30% of TAN. Considering the economic issues in that region, it seems unlikely that the cost structure of solar energy will improve any time soon. Market Vectors Solar Energy ETF (NYSEArca: KWT) has slightly exposure to the eurozone – Germany is 20%, while Norway, United Kingdom and Spain all account for smaller portions – but it’s still there. [Which ETFs Have Euro Exposure?]

While Europe sorts out its many issues, it may be worth sitting back and watching these funds until they make the all-important 200-day moving average crossover. [How to Follow Trends.]

  • Market Vectors Solar Energy ETF (NYSEArca: KWT)

Sumin Kim 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.

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