Robert Powell is a long-time financial journalist and retirement expert, as well as the editor of Th...
Solar: Here to Stay
04/22/2015 9:00 am EST
A solar energy revolution has been rapidly brewing over the past two years. I think this bullish trend is here to stay, asserts Brittany Stepniak, contributing editor to The Outsider Club.
China installed 10.6 GW of new solar in 2014, pushing the country’s currently installed capacity up to near-30 GW. Japan—which is still weaning itself off nuclear energy—aims to install 28 GW of solar energy power by 2020, up from roughly 4 GW currently.
Meanwhile, India also intends to increase its renewable energy share to at least 15% from the current 6% in that time. The government has raised its solar investment target to $100 billion by 2022.
If you're betting on solar, but aren't quite sure which stocks are worth your time and effort, a good place to start is the Guggenheim Solar ETF (TAN).
I personally like sector ETFs like this because they give investors the opportunity to trade the entire industry as though it were one single stock.
Additionally, they offer most of the benefits associated with index funds—such as low turnover and broad diversification—but ETFs cost a lot less than mutual funds (for the most part).
With Guggenheim, you get exposure to 27 quality companies in various places on the solar value chain, from cell and module producers like Trina Solar (TSL), Canadian Solar (CSIQ), and First Solar (FSLR) to installers and leasers like SunEdison (SUNE) and SolarCity (SCTY).
Instead of limiting yourself to solar, you can also buy a broad-based alternative energy ETF that includes solar as well as wind, smart grid & lighting, biomass, and even hydrogen.
One of the most diversified we've found is the Market Vectors Global Alternative Energy (GEX). There, you get 31 companies with only two of the 10 being solar companies.
Eaton (ETN), which is a back-end power management play on renewable energy adoption, is actually the top holding.
Solar is on the upswing for good; demand and profits are on the rise all over the world. In my view, this is a sector that you want to buy and hold.
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