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.

Investing is a Breeze with the Global Wind ETF

The much anticipated First Trust ISE Global Wind Energy ETF (FAN) launched this week with healthy trading volume and a tight spread. Renewable energy has been a hot topic as of late, especially wind energy because of its low cost, and high efficiency. With the launch of this new fund, investors now have a chance to profit from companies in the wind energy business, as well as companies that will be entering the space.

The First Trust ISE Global Wind Energy ETF (FAN) will aim to track the ISE Global Wind Energy Index. The index is comprised of companies that provide goods and services to the wind energy industry, and companies “determined to be significant participants in the wind energy industry despite not being exclusive to such industry”. In order to be considered for the index, the company must be engaged in some aspect of the wind energy industry such as manufacturing or design of machinery, distribution of materials, management of a wind farm, or distribution of wind generated electricity. The current top ten of the 52 holdings in the fund are as follows:

REpowersystems AG - 10.51%
Vestas Wind Systems - 10.28%
Gamesa - 8.81%
Hansen Transmissions - 6.80%
Japan Wind Dev. Co. - 5.13%
Babcock & Brown Wind Partners - 4.40%
Nordex AG - 4.34%
Theolia SA - 4.28%
Clipper Windpower - 2.94%
Gurit Holding AG - 2.81%

On a fundamental basis, the trailing P/E ratio for the fund is 25, and price to sales is around 2.2. The total net assets for the fund are around $9.1 million, but this is likely to balloon as more investors move into the fund. The expense ratio for the fund is 0.60%, and trades on the NYSE Arca exchange.

Solar ETFs Face off: TAN vs. KWT

With global energy demand on the rise, nations, businesses and individuals are looking more than ever for new, and more importantly, renewable sources of energy. This new surge of interest in the renewable space has many looking to the mother of all renewable resources, the sun. Now that the world is starting to take solar power seriously, investors are taking a second look at now profitable solar companies, and the ETFs that track them.

Currently there are two ETFs that dominate the solar sector, 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 is comprised of 25 securities covering small (42%), mid (30%), and large cap (28%) 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 27 securities covering small (35%), mid (38%), and large cap (27%) companies. When looking at the top five holdings of the two funds as a percentage of the total fund, TAN’s top five make up 34%, whereas KWT’s top five make up a much larger 47% of the fund. Also worth noting is MEMC Electronic Materials (WFR) is absent from KWT, but makes up roughly 5% of TAN and is listed as the sixth largest holding.

On a value comparison, TAN’s average trailing P/E ratio is around 45, while KWT is sporting a 55 trailing P/E. When looking at the top three in country allocation, TAN is 30% China, 29% Germany, and 26% United States compared to KWT’s 26% China, 36% Germany, and 24% United States.

Both of these ETFs are good investments for direct exposure to the solar energy sector, however Claymore’s TAN seems to be the better diversified of the two and would be our choice if we decided to put solar energy to work for us.

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.