Solar stocks, as represented by the Guggenheim Solar ETF TAN, have been in a downturn since April, down by 70% peak-to-nadir, dragged down by weakening demand on account of macroeconomic weakness in its major markets in Europe and North America on the one hand, and on the other hand, huge capacity expansions by manufacturers. The capacity expansions, for example, in the case of solar modules, are estimated to be in the area of 115% in 2011 and 135% in 2012.
However, as the solar stocks have tumbled, solar installations are growing rapidly in the U.S. and worldwide, with installations in the U.S. scheduled to pass the 1 GW mark soon, on their way to 1.8 GW this year, according to Greentech Media.
In this article, we analyze the investing activities of the world's largest fund managers, managing between $100 billion and over a trillion dollars, in the solar sector. The list includes prominent managers such as Wellington Management ($1.6 trillion in total assets under management), Vanguard Group ($1.4 trillion), Fidelity Investments ($640 billion), T Rowe Price ($330 billion), and Goldman Sachs Asset Management ($580 billion), among others.
We determined, based on our analysis, that mega fund managers are neutral on solar sector, and they are significantly overweight in the group. During the June quarter, these mega fund managers together added a net $15 million to their $5.12 billion prior quarter position in the group, selling $796 million and buying $812 million worth of stocks in the group. Furthermore, overall they are overweight in the group by a factor of 1.4; that is, taken together, the 30+ mega funds have invested 0.10% of their assets in the group, significantly more than the 0.07% weighting of the group in the overall market.
The following are the major solar companies that these mega fund managers are most bullish about (see table):
GT Advanced Tech Inc. (GTAT) provides poly-silicon production technology and multi-crystalline ingot growth systems, and related photovoltaic manufacturing services for the solar industry worldwide. Mega funds added a net $24 million to their $575 million prior quarter position, and taken together mega funds hold an outsized 58.3% of the outstanding shares, more than their 43.2% weighting in the group. The top mega fund holders are Fidelity Investments ($148 million), Neuberger Berman Group ($107 million) and Vanguard Group Inc. ($72 million). Overall, 251 institutions hold 60.07% of GTAT shares, with Fidelity Investments, UBS Global Asset Management and Neuberger Berman being the largest holders with 9.8%, 8.6% and 7.1% of the outstanding shares respectively.
Trina Solar Ltd. (TSL) is a vertically integrated Chinese manufacturer of mono-crystalline ingots, wafers and cells to the assembly of high quality solar modules. Mega funds added a net $52 million to their $144 million prior-quarter position. The top mega fund buyers were BlackRock ($51 million) and Fidelity Investments ($28 million). Overall, 160 institutions hold 67% of TSL shares, with Maverick Capital being the largest holder with 11.0% of the outstanding shares.
Suntech Power Holdings (STP) is a Chinese manufacturer of photo-voltaic cells and modules for worldwide distribution. Mega funds added a net $23 million to their $98 million prior quarter position. The top mega fund holders were T Rowe Price ($38 million) and Morgan Stanley ($19 million). Overall, 133 institutions hold 21.9% of STP shares, with T Rowe Price being the largest holder with 3.2% of the outstanding shares.
Yingli Green Energy (YGE) is a Chinese manufacturer engaged in the design, development, marketing, manufacture, installation, and sale of photovoltaic products, including PV cells, PV modules, and integrated PV systems, as well as poly-silicon ingots, blocks, and wafers. Mega funds added a net $7 million to their $66 million prior quarter position. The top mega fund holders were BlackRock ($26 million), Deutsche Bank ($13 million), Invesco Ltd. ($13 million) and Bank of America Corp. ($13 million). Overall, 98 institutions hold 41.0% of YGE shares, with Maverick Capital and SAM Sustainable Asset Management being the largest holders with 10.1% and 5.1% of the outstanding shares, respectively.
Canadian Solar Inc. (CSIQ) is a Chinese manufacturer of ingot, wafer, solar cell, solar modules and other solar applications. Mega funds added a net $7 million to their $25 million prior quarter position. The top mega fund buyer was Fidelity Investments ($11 million); the top mega fund holders were Fidelity Investments ($12 million), Invesco Ltd. ($6 million) and UBS Global Asset Management ($6 million). Overall, 68 institutions hold 39.3% of CSIQ shares, with SAM Sustainable Asset Management Ltd. and Columbia Wanger Asset Management being the largest holders with 12.7% and 8.8% of the outstanding shares, respectively.
The following are the major solar companies that these mega fund managers are most bearish about (see table):
JA Solar Holdings (JASO) is a Chinese manufacturer of mono-crystalline and multi-crystalline solar cells for solar modules and systems. Mega funds cut a net $27 million from their $87 million prior quarter position. The top mega fund seller was Morgan Stanley, selling $37 million worth of shares during the June quarter. Overall, 123 institutions hold 22.8% of JASO shares, with Investec Asset Management being the largest holder with 5.4% of the outstanding shares.
Renesola Ltd. ADS (SOL) is a Chinese manufacturer of mono-crystalline and multi-crystalline wafers for solar power products. Mega funds cut a net $6 million from their $30 million prior quarter position. The top mega fund seller was Bank of America Corp. ($5.5 million). Overall, 92 institutions hold 26.4% of SOL shares, with Investec Asset Management being the largest holder with 4.9% of the outstanding shares.
Hanwha Solarone Co. (HSOL) is a Chinese manufacturer of photovoltaic modules, photovoltaic cells, silicon ingots and silicon wafers. Mega funds cut a net $12 million from their $28 million prior quarter position. The top mega fund sellers were Wellington Capital Management ($6 million) and Ameriprise Financial ($5 million). Overall, 66 institutions hold 3.5% of HSOL shares, with Citadel Advisers being the largest holder with 0.6% of the outstanding shares.
Power One Inc. (PWER) designs, manufactures, and markets power conversion and power management solutions for the renewable energy, communications infrastructure, and other high technology markets. Mega funds cut a net $9 million from their $223 million prior quarter position. The top mega fund sellers were Ameriprise Financial ($13 million) and Credit Suisse AG ($10 million). Overall, 207 institutions hold 82.0% of PWER shares, with Waddell & Reed Financial, Vanguard Group, and Wells Fargo & Co. being the largest holders with 7.9%, 6.8% and 6.4% of the outstanding shares, respectively.
General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
