Where to Next for Solar ETFs?

There was an interesting post in Barron's tech trader daily on Monday discussing how solar PV stocks are coming under pressure, in part because product prices are falling further than expected. About a month ago, I discussed the potential return effect for households in given states of removing the $2,000 ITC cap. Such measures, it seems, are failing to kickstart demand, and solar recovery might end up being significantly slower than many had been expecting.

Case in point, since hitting a high of $11.49 on June 11, the TAN ETF is down about 12%. KWT, for its part, hit a high of $17.35 on June 10 and is down 11% since. The S&P 500, in comparison, is down about 4% from its June 12 high. While both TAN and KWT are up >30% on the S&P 500 over the past six months, neither is up on the benchmark index over the past 12 months.

I took a long position in TAN in early March at $5.00 when an automatic buy order I had had on it for a while kicked in. At the time, I stated:

"I don't expect this investment to realize its full potential for another 18 to 24 months, so patience is of essence. Of course, certain catalysts, such as a rapid rise in oil prices, could push this ETF up before then, and I would be more than happy to take a little profit if that happened."

This is still very much my belief. I took some profit at $10.00 when an automatic sell order kicked in, and I'll gladly purchase a little more if it goes back down substantially. It must be said, however, that I use sell orders at set return levels to protect profit and not in an attempt to time the market.

Overall, those who are investing in one the two solar ETFs today and hanging on will be happy they did so two years from now and beyond. The road there, however, will be fraught with volatility.

DISCLOSURE: The author is long TAN.

Comments

[Windsun33:]

The problem with your logic is the same as 90% of the solar investors I see posting here - and that is that it is an oil vs solar play, when in fact it is coal/hydryo/NG vs solar. Solar has almost nothing to do with the consumption of oil.

Jun 18 02:16 PM

[Solar Guy:]

To windsun33. Excellent point, except that there is an indirect and psychological realtionship between solar and the price of oil. I know -- my company sells and installs solar panels, and when the price of oil then gas at the pump goes up our inquiries for solar panel installations skyrocket. Go figure...

Jun 19 01:22 AM