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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some solar-energy-related stocks to your portfolio, the Guggenheim Solar ETF (NYSEMKT: TAN ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is 0.70%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed poorly, losing to the world market over the past three years. These have been some hard years for solar companies, though, and as with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Interest in alternative energies has been around for a long time, but it seems to finally be gaining some traction. The solar energy industry has taken a beating lately, though, but that just leaves some investors finding it more attractive than it was before.
Relatively few solar-energy-related companies had strong performances over the past year.
MEMC Electronic Materials (NASDAQOTH: SUNEQ ) , the second-largest U.S. polysilicon maker, bucked the trend, rising 12%. It recently announced plans to change its name to SunEdison, and warned of price weakness in 2013, sending its shares down sharply. The company will also focus on financing.
Power-One (UNKNOWN: PWER.DL.DL ) sank by 18%, as some see its inverters becoming commoditized, despite being quite efficient. Its net income has fallen recently, but it's free-cash-flow positive and is expanding globally, poised to benefit as the industry heats up. It looks like a bargain to some, with improved market share, financial results, and demand.
GT Advanced Technologies (NASDAQOTH: GTATQ ) plunged 63%, hurt by oversupply in the industry. Its emerging HiCz technology is promising, though, and may make solar even more efficient and cost effective. To some, the long-term prospects for GT Advanced are solid and the stock seems undervalued. Meanwhile, the company is also diversifying into sapphire technology, which might supplant Corning's Gorilla Glass in mobile devices..
New to market is SolarCity (NASDAQ: SCTY ) , which had its IPO late last year. Bulls are intrigued by its disruptive possibilities, helping consumers bypass traditional utility companies with its solar offerings, and also partnering with major entities such carmakers and Wal-Mart (NYSE: WMT ) to provide solar technology. However, it's not profitable, and its expenses are high.
The big picture
Demand for solar energy is likely to grow. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
If you don't think the time is quite right for solar energy, look into the smartphone industry. With the explosive growth of smartphones worldwide, many investors thought they would ride Corning's dominant cover glass to massive investment returns. That hasn't played out yet, as mobile growth has failed to offset declines in the company's core business. In this brand-new premium research report on Corning, our analyst walks through the business, as well as the key opportunities and risks facing it today. Click here to claim your copy.