In a performance that is surprising to some industry observers, the Guggenheim Solar ETF (NYSEArca: TAN), the largest ETF dedicated to solar stocks, is up nearly 48% year-to-date. TAN’s 2017 showing dispels notions that the Trump Administration would be a negative for shares of solar stocks.
A number of bullish factors have supported the rebound in solar stocks, including continued strong overall world demand for solar, especially from India, Latin America, the Middle East and Southeast Asia; greater demand for solar power due to increasingly competitive price of solar, compared to alternatives as countries seek to meet carbon-reduction targets under the Paris climate agreement; and continued low valuations, relative to pricier U.S. large-caps, according to MAC Solar Index, the index provider for the underlying benchmark of TAN.
“2017 has been a year of recovery for solar companies, after a couple of years of overproduction and weak prices in crude oil, a commodity for which solar acts as a substitute,” reports Investor’s Business Daily.
TAN’s underlying index “is designed to track companies within the following business segments of the solar power industry: solar power equipment producers; suppliers of materials services to solar equipment producers; companies that derive a significant portion of their business from solar power system installation, integration or finance; and companies that specialize in selling electricity derived from solar power,” according to Guggenheim.
The ETF holds 24 stocks and its largest position is a 13.1% weight to First Solar Inc. (NASDAQ: FSLR).
“On Dec. 5, First Solar (FSLR) — the ETF’s largest holding — provided 2018 guidance that topped the consensus estimates on earnings and met on revenue. Then on Dec. 11, a Baird analyst said the market has hit an inflection point that will continue to see long-term growth thanks to lower installation costs and advancements in technology,” reports IBD.
The clean energy sector found support under President Barack Obama as the administration pledged to fight against global warming and climate change through heavy subsidies into green technology. However, Trump, who called climate change a hoax perpetrated by China, pledged to cancel last year’s Paris climate agreement and remove Obama’s Clean Power Plan, could reverse years of supportive alternative energy policies.
TAN’s year-to-date performance is all the more impressive when considering oil prices are plunging. Previously, solar stocks have risen when oil prices do the same because expensive oil renews calls for cheaper energy alternatives. TAN has not finished higher on an annual basis since 2013.
For more information on the photovoltaic panel industry, visit our solar category.