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Will Solar ETFs Shine on Apple-First Solar Deal? - ETF News And Commentary

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Apple ( AAPL ) is making a big move to the green energy space with a solar deal. The technology giant has collaborated with the U.S. solar-panel manufacturer behemoth First Solar ( FSLR ) for $848 million, in what is touted as the largest commercial power agreement in the clean energy industry.

Under the terms of the deal, Apple will receive power from 130 megawatts of First Solar's California Flats Solar Project in Monterey County for 25 years. The construction of the said project will start in middle of this year and end by the end of next year (read: Green & Dirty ETFs to Watch on Clean Climate Push ).

The transaction highlights the tech giant's intent to introduce more clean energy into the grid in areas it operates. Apple is definitely leading the way to clean up the climate and vowed to use 100% clean renewable energy to power its data centers. This solar project is expected to generate enough electricity for almost 60,000 Californian homes. Further, the renewable energy from the project will provide cost savings over alternative sources of energy as well as substantially lower the environmental impact.

The well-timed news was well received by the market, especially as President Obama is seeking a 7.2% increase in clean energy funding. The fiscal 2016 proposed budget includes $7.4 billion fund for clean energy technologies, above the $6.5 billion enacted by Congress for this year (read: Obama Budget Plan Drives Up These Sector ETFs ).

Market Impact

The solar deal not only spurred a rally in both stocks but also spread optimism in the entire solar energy space, which is entangled in vicious oil trading. Apple jumped about 2% to a record high of $122.15, racking in over $700 billion in market cap for the first time while First Solar surged 4.8% on the day. Given this, solar ETFs deserve a look and will be in focus in the days ahead:

Guggenheim Solar ETF ( TAN )

This ETF follows the MAC Global Solar Energy Index, holding 29 stocks in the basket. It is highly concentrated on the top five firms accounting for 44.1% of total assets. American firms dominate the fund's portfolio with nearly 47.3%, followed by China (22.9%) and Hong Kong (21%).

The product has amassed $321.4 million in its asset base and trades in good volume of more than 208,000 shares a day. It charges investors 71 bps in fees per year. The fund has gained about 10.5% in the year-to-date time frame.

Market Vectors Solar Energy ETF ( KWT )

This fund manages $21.4 million in its asset base and tracks the Market Vectors Global Solar Energy Index. In total, the ETF holds 34 solar stocks in its basket with higher allocation to the top five firms making up for 37.4% of assets (see: all the Alternative ETFs here ).

In terms of country exposure, China occupies the top spot at 38.3%, closely followed by U.S. (32.7%) and Taiwan (17.7%). The product has an expense ratio of 0.66% and sees paltry volume of about 2,000 shares a day. The ETF is up 6% so far in the year.

Bottom Line

The upward trend in the space is likely to continue in the near term as the solar industry has a solid Zacks Industry Rank in the top 27%, suggesting smooth trading in the days ahead. Further, Obama's climate change push will continue to act as a major catalyst for the industry growth, benefiting more solar companies.

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APPLE INC (AAPL): Free Stock Analysis Report

FIRST SOLAR INC (FSLR): Free Stock Analysis Report

GUGG-SOLAR (TAN): ETF Research Reports

MKT VEC SOLAR (KWT): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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