What’s Behind The Surge In Solar ETFs?

solar-energy-etfEasily one of the top performing sectors so far in 2013 has been the solar space. The segment has roared higher thanks to a huge level of panel installations, a focus on high beta and small cap stocks, and the desire by investors to get into quickly growing names.

This has propelled many stocks up by more than 100% on the year, with several companies seeing even better returns (including triple digit percentage moves in ETFs tracking the space YTD as well). Yet, leading up to a crucial earnings season for the sector, many solar stocks were in trouble.

The space saw flat to negative returns over the past two weeks, including a nearly 2% loss in solar ETFs at a time when the broad market was higher. Thanks to this, and due to worries over the looming earnings season, some were starting to wonder if the bull run in solar power investments was nearing a pause, if not an end.

However, recent trading in the space—and solid earnings—suggests that we might actually have a bit further to run in the solar investment space. In fact, both of the solar ETFs—the Guggenheim Solar ETF (TAN) and the Market Vectors Solar Energy ETF (KWT)—moved significantly higher (both added more than 5%) in Monday trading, and look to continue this run as more companies in the space report later in the week.

Behind the Surge

During Monday trading, gains were pretty widespread across the sector. FirstSolar (FSLR) added about 4.6% on the day, while SunPower (SPWR) jumped close to 10.6%, and SolarCity (SCTY) finished the session up more than 11.4% (also read First Solar Earnings Beat Puts Solar ETFs in Focus).

There were a number of reasons for this big jump, though solid earnings was definitely at the heart of the surge. Additionally, many are now looking for firms that report later in the week—such as SolarCity—to post solid numbers too, further adding to the trend.

Investors also saw some updated guidance figures for Canadian Solar (CSIQ), which were yet another reason to be bullish on solar power. The company announced that it expects Q3 shipments to be in the range of 460 MW to 480 MW, higher than the original guidance of 410 MW to 430 MW it provided on August 8th.

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