2013 has been a good year for the alternative energy space,
pretty much across the board. This has been especially true for
solar companies which have seen their share prices edging up, while
firms that use 'green' technology like Tesla Motors have been
Lately, high oil prices have helped solar stocks to make new highs.
Moreover, strong macroeconomic factors have helped this sector rise
above others in the energy space. According to the Solar
Foundation, U.S. companies that manufacture and install solar
equipment account for 119,000 jobs (Read:
3 ETFs to Buy for Obama's Climate Change Plan
Good news also comes from the world's second largest economy,
China, which has plans to extend its solar output. This has acted
as an added stimulus to solar stocks and it could help the country
reduce its reliability on exports and will bring down the
oversupply glut of photovoltaic panels in the market.
While the outlook looks pretty bright for this sector, the ETFs in
the alternate energy space haven't missed the call either.
Investors have piled up on TAN and KWT and the space has outshined
its counterparts by double digits.
Given strong macroeconomic factors and a solid performance by the
sector so far, only investors with a strong risk appetite should
buy after the big run-up. Still for risk tolerant investors, we
have highlighted some of the key differences between the two funds
A comparative view of KWT and TAN
Launched in April 2008, TAN tracks the MAC Global Solar Energy
Index, which offers exposure to companies in some aspects of the
solar power industry.
These include companies that produce products for end-users,
manufacturers of solar panels, and those that are engaged in solar
power system sales, distribution, installation, integration or
financing. It also includes companies that are not exclusively
focused on solar power although it gives these firms a lower
weighting than their pure-play peers.
Launched in April 2008, KWT tracks the Ardour Solar Energy Index,
which is a rules-based, modified global-capitalization-weighted,
float-adjusted index. This intends to give investors a means of
tracking the overall performance of a global universe of listed
companies engaged in the solar energy industry.
The Index provides exposure to publicly traded companies from
around the world that derive at least 66% of their revenues from
solar energy. On a weighted basis, the index constituents derive in
excess of 90% of their revenues from solar energy (Read:
Solar ETF Investing 101
TAN holds 29 securities in its basket. First Solar Inc., GCL POLY
Energy Holdings Ltd. and GT Advanced Technologies are its top 3
holdings. The fund is more concentrated in its top 10 holdings,
which contribute almost 60% of the assets to the fund.
KWT holds 33 securities in its basket. MEMC Electronic Materials,
First Solar Inc. and GCL-Poly Energy Holdings Ltd. occupy the top 3
spots of the fund. Like TAN, this product is tilted more towards
its top 10 holdings, which account for a 58% share.
TAN gives more exposure to securities in the Information Technology
sector, which take almost an 80% share, while Industrials takes up
the rest. Meanwhile, KWT gives 50% exposure to Information
Technology, while Industrials takes a 44% share.
TAN gives almost a 50% exposure to micro-cap stocks whereas
small-cap and mid-cap take almost an equal share (see all
ETFs). KWT gives an almost equal share to micro, mid and small cap
Top 5 country exposure for TAN includes the U.S. (42.32%), China
(27.25%), Hong Kong (12.58%), Germany (7.53%) and Norway (4.43%).
For KWT, the top 5 countries include the U.S. (32%), China (20.4%),
Taiwan (18.4), U.K. (7%) and Norway (5.3%).
Both the products have given impressive returns on a year-to-date
basis. TAN has given returns of around 68% and a dividend yield of
5.3%, while KWT has generated a return of about 40% and a dividend
yield of 2.52%. (Read:
Can Solar ETFs Continue Their Bull Run?
Fees & Expense:
Both the funds are a bit expensive in the space. TAN charges
investors a hefty 70bps in fees, while KWT is a tad cheaper
charging 66bps in fees.
AUM & Average Daily Volume:
TAN has amassed $167 million in assets so far and has an average
trading volume of around 216,000 shares a day whereas KWT is low in
AUM with assets of only $15.3 million and is relatively illiquid in
nature trading in a small volume of only 4,800 shares a day.
Solar ETFs have still been terrible performers over the long term,
even when taking into account the recent strength. Though the broad
solar sector remains risky, the space could be a bigger player in
the years to come.
Investors seeking exposure to the solar power space could tap the
current opportunities as the recent rally could (hopefully) be an
end point to the bearish trend. Just remember some of
the key points outlined above when you are deciding between the two
solar ETF options currently in the market.
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FIRST SOLAR INC (FSLR): Free Stock Analysis
MKT VEC SOLAR (KWT): ETF Research Reports
GUGG-SOLAR (TAN): ETF Research Reports
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