Solar ETF Update: TAN vs. 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.

Claymore Launches Global Shipping ETF

The new Claymore Global Shipping Index ETF (SEA) has been trading for a little over a month now, and a lot has changed since this new fund set sail. The top holdings of the fund are now more concentrated, the prior second largest holding is now the 14th largest, and the energy sector allocation of the fund has gained about a 4% additional weighting. The Global Shipping fund is based on the Delta Global Shipping Index, including companies that derive at least 80% of their revenues from the seaborne transport of goods or the operating and leasing of ships. The minimum market cap for a company to be included in the fund is $250 million, and a 30 day trading volume of $2 million.

SEA is country heavy in Greece (34%), the United States (17%), Bermuda (16%), and the Bahamas (11%).

The top 10 holdings in the Global Shipping Index ETF are:

Teekay LNG Partners – 5.48%
Frontline Ltd. – 4.89%
Tsakos Energy Navigation – 4.86%
Diana Shipping – 4.80%
Teekay Tank – 4.26%
Ship Finance International – 4.03%
DHT Maritime Inc. – 3.82%
Knightsbridge TA – 3.78%
Seaspan Corp. – 3.64%
Euroseas Ltd. – 3.60%

The fund is currently comprised of 30 companies, and has a price to earnings ratio of 6.6. The fee structure is capped at 65 basis points, and currently has total managed assets of around $5.7 million trading on the NYSE Arca exchange.

The First Middle East Frontier ETF

The eagerly awaited PowerShares MENA Frontier Countries ETF (PMNA) launched on July 9th, the second frontier ETF to hit the market. Claymore’s Frontier Markets ETF (FRN) started trading in June. Although both funds lay claim to the “frontier” market, the two couldn’t be any more different in their holdings. PowerShares’ fund is based on the NASDAQ OMX Middle East North Africa Index, whereas Claymore’s fund tracks the Bank of New York Mellon New Frontier DR Index. PMNA is country heavy in Egypt and Kuwait, and FRN is heavy in Poland and Chile.

PowerShares describes the index that PMNA is tracking in more detail on their website: “The Index seeks to provide direct exposure to liquid stocks of companies that have the majority of their assets or services residing in MENA frontier market countries, which include Kuwait, Bahrain, Qatar, the United Arab Emirates, Oman, Lebanon, Egypt, Jordan and Morocco.” The largest holding in the fund is Arab Bank PLC, which accounts for roughly 10% of the funds assets. In terms of sector allocation, the fund is 55% financials, 19% telecom, 13% industrials, 10% materials, and the remainder in energy and utilities. The current top ten holdings in the fund are as follows:

Arab Bank PLC – 10.08%
Emaar Properties – 7.71%
Nat’l Ind. Grp S.A.K. – 5.91%
Mobile Tele. Co. K.S.C. – 5.44%
Orascom Constr. Ind S.A.E. - 5.10%
Orascom Telecom Holding – 4.94%
Ban. Marocaine du Comm. – 4.69%
Maroc Telecom – 3.91%
Kuwait Fin. House K.S.C. – 3.65%
Solidere GDR Reg S – 3.49%

On a fundamental basis, the trailing P/E ratio for the fund is 14, and price to book is around 2.7 for the 50 issues that make up the fund. The expense ratio for the fund is 0.95%, and trades on the NASDAQ market.

Get a TAN with the new Global Solar Energy ETF

Claymore recently launched their newest ETF offering, the Global Solar Energy ETF. The top ten holdings as of the launch date were First Solar Inc, Renewable Energy Corp, Q-Cells AG, Suntech Power Holdings, Solarworld AG, Sunpower Corp, Ja Solar Holdings, LDK Solar, and MEMC Electronic Materials Inc.

The Claymore/MAC Global Solar Energy Index ETF seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an equity index called the MAC Global Solar Energy Index (the “Index”). The Fund will normally invest at least 90% of its total assets in common stock, American depositary receipts ("ADRs") and global depositary receipts ("GDRs") that comprise the Index.