Insights

Solar ETF Shining as Rest of Market Dives Lower

09 May 2019  |  TRADING IDEAS

The S&P 500 had its worst day in over a month, but one forgotten corner of the market was shining.

The Invesco Solar Energy ETF (TAN) rose 2.35 percent on Tuesday, bucking a drop of 1.65 percent for the broader S&P 500. TAN’s gain of almost 4.2 percent in the last week makes it the best-performing industry fund over that period.

Strong earnings and an apparent revival in green energy seem to explain the move.

Take Enphase Energy (ENPH), for instance. The maker of devices linking panels to residential electric systems is up 43 percent in the last week after blitzing past analyst estimates. So much for the winter season being a slow time for installs!

Enphase Energy (ENPH) chart with 50- and 200-day moving averages.

SolarEdge (SEDG) provides similar products and had similar results. It also had a similar move, up 23 percent yesterday after crushing forecasts across the board and raising guidance. Both are members of the TAN fund.

Growth Expectations on the Rise

Several industry watchers have grown more bullish in recent months. In March, the Solar Energy Industry Association and Wood McKenzie projected 14 percent growth this year. Their report, quickly echoed by Goldman Sachs, credited the increase on lower prices and resumed work on delayed projects.

Researchers at other firms have also turned positive on First Solar (FSLR), the fund’s largest holding. On May 1, Bank of America Merrill Lynch raised its price target from $60 to $71, citing a “materially improving outlook.” J.P. Morgan added it to their Focus List four days later in anticipation of a “strong earnings inflection.”

Haven’t thought about solar recently? You’re not alone because the industry has mostly been forgotten after a wave of bankruptcies earlier in the decade. But a lot of work has been done in the meantime as companies like Vivint Solar (VSLR) and TerraForm Power (TERP) provide financial backing for projects.

Invesco Solar Energy ETF (TAN) with select moving averages and relative strength indicator.

Members of the Invesco Fund

Here’s a breakdown of the five biggest holdings in the TAN fund.

  1. First Solar (FSLR): A maker of solar panels. FSLR was in the S&P 500 index until getting removed in March 2017 because its market capitalization was too low.
  2. SolarEdge (SEDG): A maker of optimizers and inverters for running solar arrays.
  3. Xinyi Solar Holdings: A Chinese maker of glass for solar panels.
  4. Canadian Solar (CSIQ): An Ontario-based provider of solar panels and components.
  5. SunPower (SPWR): Based in Silicon Valley, this company developers and manufacturers solar systems for residential, commercial and utility customers.

In conclusion, the TAN solar energy fund has outperformed pretty much every part of the market this year. It kept rising yesterday despite a big selloff in technology and energy. Investors seem to be responding to better fundamentals and a surge in demand. Hopefully this post helped you learn something about the industry.


This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 08/05/2019.

Risk Disclaimer: The information above is of general nature only and does not take into account your objectives, financial situation or investment needs. Prior to you make an investment decision, please make sure you carefully read and fully understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other relevant documents that you can obtain from this website. Monex Securities Australia Pty Ltd (AFSL No. 363972; ABN 84 142 210 179) is the Financial services provider. Financial products trading carries risks and may not be suitable for all investors. You are strongly recommended to seek independent financial advice before making any investment decisions.

Invesco Solar Energy ETF, Enphase Energy, First Solar, SolarEdge, Xinyi Solar Holdings, Canadian Solar, SunPower,

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