Where To Next For Solar PV Stocks?

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Charles Morand

There was an interesting post in Barron’s tech trader daily on Monday discussing how solar PV stocks are coming under pressure, in part because product prices are falling further than expected. About a month ago, I discussed the potential return effect for households in given states of removing the $2,000 ITC cap. Such measures, it seems, are failing to kickstart demand, and solar recovery might end up being significantly slower than many had been expecting.

Case in point, since hitting a high of $11.49 on June 11, the TAN ETF is down about 12%. KWT, for its part, hit a high of $17.35 on June 10 and is down 11% since. The S&P 500, in comparison, is down about 4% from its June 12 high. While both TAN and KWT are up >30% on the S&P 500 over the past six months, neither is up on the benchmark index over the past 12 months.

I took a long position in TAN in early March at $5.00 when an automatic buy order I had had on it for a while kicked in. At the time, I stated:

“I don’t expect this investment to realize its full potential for another 18 to 24 months, so patience is of essence. Of course, certain catalysts, such as a rapid rise in oil prices, could push this ETF up before then, and I would be more than happy to take a little profit if that happened.

This is still very much my belief. I took some profit at $10.00 when an automatic sell order kicked in, and I’ll gladly purchase a little more if it goes back down substantially. It must be said, however, that I use sell orders at set return levels to protect profit and not in an attempt to time the market.

Overall, those who are investing in one the two solar ETFs today and hanging on will be happy they did so two years from now and beyond. The road there, however, will be fraught with volatility.

DISCLOSURE: The author is long TAN.

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  1. Boosts in PV subsidies in the US have been offset by falls elsewhere (Spain, especially, and in some states.)
    I personally don’t think now is a good time to hold PV stocks since I’m bearish on the whole market in the short term, and they tend to be high-beta stocks.

  2. China, with aggressive solar measures in its stimulus package, was the focus of much of the early rally in solar stocks.
    I think it’s probably a tad early to tell what the interplay between new incentives in some places, reduced incentives in others, lower module prices and lower electricity prices will end up meaning for the industry.
    Because of this uncertainty, coupled my certainty that beyond 18 months the macro picture for solar looks good, I am wary of trading in and out of a long position I entered at a really good price.
    More fundamentally, I’ve come to accept that I am a lousy market timer. I’ve thus given up on trying on to trade around where I think the market is going, and I focus instead on building positions at prices I like and protecting profits through automatic orders.


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