Solar ETFs Still Slipping On Falling Oil

Thursday November 20, 6:24 pm ET
Trang Ho
Investor’s Business Daily

Uncertainty in demand from Italy, slowing U.S. new-home starts, a weakening euro, declining oil prices, a sharp drop in solar panel prices and investor flight to safety have cast a dark cloud over the once white-hot solar energy ETFs.

Market Vectors Solar Energy (KWT)and Claymore/MAC Global Solar Energy (TAN) have tumbled 73% and 74% from their May highs. They are textbook examples of how the higher stocks fly, the harder they fall.

By comparison, the S&P 500 has fallen 45%, and IBD’s oil & gas integrated industry group has sunk 56%.

Both ETFs on Tuesday undercut their previous lows from October’s sell-off and gapped lower Wednesday, when benchmark crude oil fell to $49.76 a barrel. That is the lowest price for oil since May 2005.

Dim forward guidance from ETF portfolio components JA Solar (JASO) and SunPower (SPWRA) last week alerted the market to more possible disappointments from companies reporting this week: ReneSola (SOL), LDK Solar (LDK), Trina Solar (TSL), Suntech Power Holdings (STP) and Canadian Solar (CSIQ).

But despite being 71% off its high, prospects remain bright for the largest company in the sector: First Solar (FSLR). It raised its fiscal 2008 revenue outlook in late October.

JPMorgan Securities initiated coverage of First Solar on Tuesday with an overweight rating. The company has significant manufacturing scale and a strong balance sheet, and will better weather the turbulence facing the solar energy industry, analyst Christopher Blansett wrote in a client note.

Solar ETFs Warm Up As Oil Prices Recover

Thursday August 21, 6:28 pm ET
Trang Ho

Solar energy ETFs heated up this week as companies beat Wall Street earnings estimates, and oil prices climbed higher.

So far this week, Claymore/MAC Global Solar Index (TAN) rose 6.7% to 25.73. But it hangs 16% below its high.

Market Vectors Solar Energy (KWT) rose 7.3% to 39.31 and trades 13% below its high. They both cleared their 10-week averages for the first time in two months. They debuted in April with similar holdings and since have formed similar chart patterns. The former owns a slightly higher Relative Strength Rating of 60 vs. 54 for the latter.

Market Vectors-Global Alternative Energy (GEX) has the highest RS Rating among alternative energy ETFs. It rose 6.1% this week to 52.01 and cleared both its 50-day and 200-day moving averages.

First Trust Nasdaq Clean Edge U.S. (QCLN), PowerShares WilderHill Progressive Energy (PUW) and PowerShares WilderHill Clean Energy (PBW) are trading far below their long-term averages and so their charts still look bearish. They’ve trended in a sideways range since the beginning of July.

Strong Global Demand

Suntech Power (STP), a major holding in all of these except the WilderHill ETF, blasted 19% in two days to 44.70 in heavy volume. The Chinese solar cell maker increased earnings 41% from the year-ago period to 41 cents a share, 28% above estimates. Sales jumped 51% to $480 million. Earnings popped 48% to 75% the three prior quarters. Sales leaped 76% to 137% over those periods.

Solar Energy ETFs: Don’t Get Burned

Andrew Koyaanisqatsi installs solar panels for a domestic hot water system Nov. 14, 2005 in Salem, Oregon Melanie Conner/Getty Images

These volatile indexes show that sometimes there’s little safety in numbers. Analysts suggest picking individual stocks instead

by Aaron Pressman
Businessweek

With sky-high oil prices hitting new records seemingly every week, interest in solar energy burns bright. But investors have found shares of companies that provide solar-power gear to be among the most volatile in the entire stock market.

Shares of leading players like First Solar (FSLR) and SolarWorld (SRWRF.PK) routinely trade up or down by more than 10% in a day. On June 19, shares of Evergreen Solar (ESLR) surged 20% on news that the solar wafer maker had signed two long-term contract deals. But the next day, they dropped 8% when there was no significant news to drive the stock.

All that volatility had many investors welcoming the April introduction of two exchange-traded funds focusing on solar energy indexes, the Claymore MAC Global Solar Energy Index ETF (TAN) and Van Eck’s Market Vectors Solar Energy ETF (KWT). The Claymore fund is already up to $163 million in assets, while the Market Vectors offering is yet to hit $25 million.

No Safe Haven

Unfortunately for investors, the ETFs have turned out to be almost as volatile as the individual stocks. Both were down more than double the Standard & Poor’s 500-stock index’s 1.7% drop on June 20. “Just buying the whole [solar] market means you just follow its ups and downs,” says Morningstar (MORN) analyst Rick Hanna, who follows solar energy stocks. “If you do your homework, you should be able to do better than that.”

Solar Energy Outshines Rest Of ETF Universe

Wednesday May 14, 6:22 pm ET
Trang Ho

An upside earnings surprise from ReneSola (SOL) fueled a sharp rally in solar energy stocks that started Tuesday.Market Vectors Solar Energy (KWT) and Claymore/MAC Global Solar Energy Index (TAN) both gapped up 6%, giving them the best gains among U.S. ETFs.

But neither holds ReneSola, the China-based solar wafer maker.

The 27-stock Market Vectors ETF tracks the Ardour Solar Energy Index, created by Ardour Capital Investments. The 25-stock Claymore ETF tracks the MAC Global Energy Index, created by Melvin & Co., a research firm specializing in clean energy. Both ETFs launched in April with an expense ratio of 0.65%. They have overlapping holdings and use a modified cap-weighting system. So the primary difference is how much of each stock they own.

Ardour Vs. MAC Index

Top holdings in Market Vectors, Arizona-based First Solar (FSLR), Norway-based Renewable Energy, and SolarWorld and Q Cells, both from Germany, are each weighted at 10% of assets. Chinese solar firms, JA Solar (JASO), Suntech Power (STP), Yingli Green Energy (YGE), each have 5%.

In the MAC index, the largest holding, First Solar, takes up 9% of assets, followed by Renewable Energy 7.6%, Q-Cells 6.6%, Suntech 6% and SolarWorld 5.4%. JA Solar and Yingli are both weighted about 5%.

The top countries in both funds are China, Germany and the U.S., followed by Norway.

First Solar made a new high Wednesday after breaking out of a four-month cup base. It appears to have formed a high handle with a new buy point 20 308.34.

Citi Investment Research initiated coverage last week saying First Solar is one of the few companies that will weather a sharp decline in prices. Earnings vaulted 275% to a whopping 717% the past four quarters. Sales exploded 177% to 290% over those periods. It has beat analysts’ views the past six quarters.

New Solar ETFs: Here Come the Suns

Monday March 31, 2:25 am ET
Seeking Alpha

Hard Assets Investor submits: With the tremendous interest in all things “green” and “clean,” it was just a matter of time before ETF and index companies would start to carve out thinner slices of the clean tech universe. In fact, there are two ETFs in registration that target a fast-growing segment of the clean tech market: solar energy.

This month, Claymore and Van Eck registered solar energy ETFs. Claymore’s Global Solar Energy ETF will track an index developed by Chicago-based Melvin & Company. The index will be composed of approximately 25 stocks selected “based on the relative importance of solar power within the company’s business model.” The stocks in the index are involved in some aspect of the solar power business, from gathering raw materials to manufacturing equipment to selling solar energy. Components will be weighted based in part on the importance of solar energy to their business model, so that pure-play companies get more weight than conglomerates that dabble in solar energy.

Van Eck’s Market Vectors-Solar Energy ETF will track the Ardour Solar Energy Index. Expected to launch in April 2008, the ETF will contain approximately 25 stocks, selected depending on the companies’ revenues, liquidity and market cap. The list of companies isn’t available, but the roughly 25 stocks will be taken from Ardour’s Global Composite Index, an alternative energy index comprised of 118 stocks. Both ETFs will likely have familiar names, such as major solar energy companies like First Solar (FSLR), Sun Power (SPWR), Evergreen Solar (ESLR) and LDK Solar (LDK).

Van Eck and Claymore are counting on solar to generate strong investor interest in the coming years, and for good reason. There seems little doubt that the solar-power industry has a “sunny” future. In January’s Scientific American, “A Solar Grand Plan” proposes a way for the U.S. to generate 69% of its electricity and 35% of its total energy from solar power by 2050. Noted technologist and inventor Ray Kurzweil is even more bullish, forecasting that solar will meet 100% of our energy needs in 20 years. Solar currently generates far less than 1% of our energy needs.

Investor interest in solar is strong. Venture capital investment in the industry grew from $150 million in 2005 to more than $1 billion in 2007, according to Greentech Media Research. More money may also come from the government. A bill currently before the Senate could shift about $18 billion of subsidies for oil companies into wind and solar energy. The bill, approved by the House of Representatives, would extend the 30 percent investment tax credit for solar projects.

That’s the bullish case. The near-term outlook is a bit cloudier for solar companies. Industry fundamentals are increasingly difficult. At issue is the worldwide shortage of polysilicon, a vital ingredient in photovoltaic cells, which has hounded the industry by pushing spot prices of the material sky high. A turning point will come when capacity exceeds demand, as polysilicon makers have been ramping up production. In a recent report, Citigroup says that could happen as early as the second half of 2009: Citigroup analysts expect the industry to be 33 percent oversupplied in 2010. Another dark cloud for solar is slowing demand in Spain and Germany, both considered key markets because of government incentives that have sped solar development.