Solar Shines: Sector Analysis and ETFs to Watch This Year

The future is here. Solar & wind generation stocks (and companies) have performed quite well over the past year while traditional oil & gas exploration & production (E&P) stocks have struggled.

Fundamentally, solar & wind represent the majority of new power generation fuel sources in the coming years.

By contrast, natural gas should start to flatline and coal continues its decline.

Looking at the price performance of various Solar stocks ETFs in the space, the TAN and FAN ETFs have done the best.

TAN is the Invesco Solar ETF while FAN is the First Trust Wind Energy ETF.

A third ‘green’ ETF is SMOG, or the VanEck Vectors Low Carbon Energy ETF.

These contrast the more well-known XOP ETF (S&P Oil & Gas Exploration & Production fund).

Solar stocks have shined in the last year, gaining more than 60%. SMOG has outperformed at +39% while FAN is the laagered of the three darlings of the renewable energy crowd at ‘just’ 26%. Of course the S&P 500 has been on a torrid pace – returning 28% for comparison.

solar etf tan chart price trend higher bullish year 2020

Meanwhile, not so pretty in pink as the chart depicts, the traditional energy E&P ETF has been downright awful for shareholders in the last year – down nearly 30%. 

Now, let me take you trade school for a moment. While the CMT charterholder in me says “just look at the price action”, the analyst in me wants to dig into the weeds a bit more. 

TAN is very highly weighted in US small cap technology stocks. The IT sector has performed very well, as most investors know, in the last year and beyond. So perhaps some TAN’s returns can be attributed to the nature of the ETF’s holdings. See below from MorningStar.

Also, a key risk of which to be aware if you are looking to invest in the array of solar stocks via this fund – the top 10 holdings are a whopping 61% of the portfolio. Very concentrated. Should a shoe drop among the major holdings, the ETF could see a significant hit.

solar etf investing returns performance analysis tan holdings january year 2020 morningstar

I am a Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT). I have passed the coursework for the Certified Financial Planner (CFP) program. I look to leverage my skills in an hourly-fee consultant role for financial advisors – that could be portfolio analysis, planning, writing etc. Please reach out to me at mikeczaccardi@gmail.com for more information. Connect on Linkedin.

Twitter:  @MikeZaccardi

The author may hold positions in mentioned securities.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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