Socially responsible mutual funds were introduced in the 1990s, but they never gained traction. They underperformed and there wasn’t a consensus on which companies were socially responsible. Now there is a sector Exchange-Traded Fund (ETF) that is clearly socially responsible and it was last year’s best performing non-leveraged ETF. The ETF is Guggenheim Solar (NYSE: TAN).
Guggenheim Solar ETF, which invests strictly in solar energy stocks, leaped 125 percent in 2013. Why? Material costs have fallen enough to compel end users to make the switch from traditional power. The number of solar installations — both large and small — is booming. In 2013, the United States added enough new photovoltaic panels to generate a maximum of 4.2 gigawatts of electricity, roughly the output of four nuclear reactors.
The performance didn’t end in 2013. Guggenheim Solar ETF is already up 18 percent in 2014. Solar installations on residential properties is expected to rise by 45 percent in 2014 and India, the world’s third largest economy, announced that they will spend $4.4 billion on what will be the world’s largest solar energy plant.
Guggenheim Solar’s largest holding is Solar City (SCTY). Élan Musk’s Solar City soared 376 percent in 2013 and is the leader in residential installation. This company allows customers to lease the energy rather than requiring them to purchase the panels. TAN is a global ETF, however, and Chinese solar stocks represent 37 percent of the portfolio. Its expense ratio is 0.86 percent. This is a volatile ETF.
Solar energy has become political. That’s a shame. The thought is that it will take profits from more traditional energy sources. With fracking, however, oil and natural gas companies are doing extremely well (more on this in an upcoming article).
The stock market doesn’t care about politics and the strong solar energy stocks point to a bright future for sun-powered energy.
David Vomund is an Incline Village-based fee-only money manager. Information is found at www.ETFportfolios.net or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.