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.

Clean Energy ETFs Face off: GEX vs. PBW

Global energy demand is on the rise and nations, businesses and individuals are looking more than ever for new renewable, clean sources of energy. This new surge of interest in the clean, renewable energy space has many people looking to the sun, the wind, the ocean, ethanol & bio fuels, and other more obscure technologies. Investors are pouring money into new projects such as wind farms, solar farms, and other breakthrough technologies. Even T. Boone Pickens, a lifetime oil man, is getting behind the revolution.

Currently there are two ETFs that dominate the clean alternative energy sector, PowerShares WilderHill Clean Energy Portfolio (PBW) and Van Eck’s Market Vectors Global Alternative Energy ETF (GEX). These two funds appear 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 of these ETFs to hit the market was PowerShares’ PBW, which tracks the WilderHill Clean Energy Index. This index is comprised of 54 securities covering small (58%), mid (26%), and large cap (16%) companies. Roughly 2 years after the launch of PBW, Van Eck’s GEX hit the market, which tracks the Ardour Global Index. This index is comprised of 30 securities covering small (11%), mid (40%), and large cap (49%) companies. When looking at the top five holdings of the two funds as a percentage of the total fund, PBW’s top five make up 15%, whereas GEX’s top five make up a much larger 45% of the fund. Take a closer look at the individual holdings, and you will see just how different these two funds are. The older PBW has some very small companies, such as ReneSola (SOL) and EMCORE (EMKR) as its top solar holdings, compared to First Solar (FSLR), Q-Cells, and Suntech Power (STP) in GEX. Below is a comparison of the top 10 holdings of each fund.

On a value comparison, PBW’s average trailing P/E ratio is around 38, while GEX is sporting a 47 trailing P/E. Both of these ETFs are good investments for direct exposure to the wind and solar energy sector, however Van Eck’s GEX seems to be the more appropriately weighted of the two, despite its lack of diversification. If the underlying index that PBW tracks were to reshuffle to a more relevant weighting, it would deserve a second look.

For more ETF resources, visit http://www.etfplanet.com/