Solar ETF: TAN a Better Choice than KWT

Over a year ago we took a look at the two most popular solar ETFs, Claymore’s Global Solar Energy Index (TAN) and Van Eck’s Market Vectors Solar Energy ETF (KWT). At first glance these two funds look to be quite similar, and in many aspects they are. However, a closer look reveals many of their differences in structure, size, and value.

The first solar energy ETF to hit the market was Claymore’s TAN, which tracks the MAC Global Solar Energy Index. This index has grown from 25 securities a year ago, to 30 today. The market cap size over the past year has drifted lower to small (51%), mid (38%), and large cap (11%) companies. Shortly after the launch of TAN, Van Eck’s KWT hit the market, which tracks the Ardour Solar Energy Index. This index is comprised of 29 securities, up from 27 a year ago, covering small (38%), mid (53%), and large cap (9%) companies. When looking at the top five holdings of the two funds as a percentage of the total fund, TAN’s top five have dropped from 34% to 25%, whereas KWT’s top five has dropped from 47% to 31% of the fund. Also worth noting is MEMC Electronic Materials (WFR) was previously absent from KWT, but is now the fund’s third largest holding.

On a value comparison, TAN’s average trailing P/E ratio is around 13, while KWT is sporting a 14 trailing P/E. When looking at the top three in country allocation, TAN is 30% China, 30% United States, and 27% Germany compared to KWT’s 35% United States, 27% Germany, and 27% China.

Over the past year both of these ETFs have shifted to a smaller average market cap, and have seen their P/E ratios drop significantly. Although KWT has become more diversified, Claymore’s TAN still seems to be the better choice.

Comments

[Mad Hedge F...:]

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Oct 06 01:55 PM

[Alan Young:]

You have listed differences so trivial as to be meaningless. I don't see your point at all. Is the headline defensible?

"Over the past year both of these ETFs have shifted to a smaller average market cap." That is, the price of solar stocks crashed, I assume--or did they add some new small-cap companies to the index?

Oct 07 11:03 AM

[Etf Planet:]

Seeking Alpha has changed my title, as they always do.

The title that I chose was: Solar ETF Update: TAN vs. KWT

Most of the reduction of average market cap was in fact due to the drop in the market, but there were smaller issues added to both funds.


On Oct 07 11:03 AM Alan Young wrote:

> You have listed differences so trivial as to be meaningless. I don't
> see your point at all. Is the headline defensible?
>
> "Over the past year both of these ETFs have shifted to a smaller
> average market cap." That is, the price of solar stocks crashed,
> I assume--or did they add some new small-cap companies to the index?

Oct 08 01:49 PM