Yes, the alternative energy sub-industry is part of the broader energy sector and that means there is really no competition when it comes to crowning 2013’s top energy exchange traded fund.
The Guggenheim Solar ETF (NYSEArca: TAN) is not just this year’s top energy ETF, it is 2013’s best-performing non-leveraged ETF. With Monday’s 2.7% gain, TAN is up about 128% for the year. This is how strong solar stocks have been this year: Not only is TAN the best non-leveraged ETF, but it has trounced the rival Market Vectors Solar Energy ETF (NYSEArca: KWT) by about 2,600 basis points and that is NOT a criticism of KWT.
Although plenty of clean energy ETFs have surged in 2013, a scant amount will end the year with gains of around 70%, indicating that solar stocks have been a force to be reckoned with. [Clean Energy ETFs Cleaning up in 2013]
All of this after TAN, KWT and their holdings spent multiple years grappling with slumping demand, tumbling share prices and reverse splits to artificially prop up their share prices. This year, TAN has outpaced its largest holding, First Solar (NasdaqGM: FSLR), but several of the ETF’s holdings, include some in the top-10, have not just doubled. They have tripled, quadrupled or risen fivefold.
Elon Musk’s SolarCity (NasdaqGM: SCTY) is up a tidy 362.4%. TAN held SolarCity for more of 2013 than did KWT, which partially explains the performance chasm between the two ETFs. [10 ETFs With the Most Bang for Your Buck]
But the sun is about to set on 2013 and there can be no guarantees that TAN and KWT will offer up 2014 sequels to their 2013 returns. The last time TAN and KWT or their underlying indices were among a year’s top ETFs (or indices) was in 2007. In 2008, the pair lost an average of 66%. Things could be different this time around.
Solar companies are solving one of the industry’s long-standing problems: Driving costs low enough to compel end users to make the switch from traditional fuel sources.
“What’s happening now is bigger than that, it’s a full-scale commercialization of solar technology, the buildout of an entire infrastructure meant to rival the filthy, inefficient coal-burning complex at some point in the future. According to NPD, “the pipeline of large-scale solar power projects in the process of being built in the U.S. will hit 43 gigawatts his coming year,” which represents a 7% increase over such projects launched in 2013,” writes Josh Brown at The Reformed Broker.
Remember that TAN underwent a 1-for-10 reverse split in early 2012, so although the fund has more than doubled this year, it is still nowhere close to its May 2008 highs. First Solar would need to rise almost sixfold to reach its 2008 high. Canadian Solar (NasdaqGM: CSIQ) is up a staggering 761% this year, but still needs to tack another 50% to reclaim its 2008 high. Those are just two examples of how far some solar stocks need to go to reclaim lost glory.
For those that like pretty numbers, TAN has $289 in million in assets, $164.4 million of which has flowed into the fund this year, while KWT has $21.2 million in assets, indicating investors are nowhere close to being over-allocated to solar ETFs.
Guggenheim Solar ETF
