Want to keep the planet and your portfolio green? The Fool shows you how in our special series on Earth-friendly investing.
Solar energy is as hot as the sun, with high energy prices and strong demand from rapidly growing economies outstripping oil supplies. Trading opened on tax day for a new solar energy ETF with an easy-to-remember ticker symbol. The Claymore/MAC Global Solar Energy ETF (NYSE: TAN) tracks an index made up of 25 global solar companies and provides diversified exposure to a small but rapidly growing sector of the energy market.
Fund facts
- Inception date: April 15, 2008
- Expense ratio: 0.65%
- Net assets: $4.3 million
Green fund specifics
The Claymore Solar Energy fund tracks the MAC Global Solar Energy Index, which includes globally listed public companies that specialize in providing solar energy products and services. The total market capitalization of the stock constituents in the index is about $90 billion, while the average market capitalization of the stocks in the index is close to $3.8 billion and the median near $1.2 billion. Top holdings include First Solar (Nasdaq: FSLR), Suntech Power (NYSE: STP), SunPower (Nasdaq: SPWR), and JA Solar (Nasdaq: JASO). Companies from China, Germany, and the U.S. make up roughly 85% of the country allocation for the index.
Risks associated with solar energy
Oil prices and government intervention play large roles in the fortunes of solar energy companies. When oil prices fall, interest in solar energy is likely to drop off, as even at current high prices, petroleum-based energy is less expensive than solar.
However, a positive political environment for solar energy means favorable policies and subsidies are in place in a number of countries. Unfortunately, those government subsidies can fade with the vagaries of politics, and that could leave solar in the dark.
In addition, many solar stocks have already made huge gains in recent years. The question remains whether these companies can sustain growth long enough to justify their pricey valuations.
Portfolio fit?
Solar energy is one of the hottest sectors of the market, which makes it a tempting place to put some money. Solar power is a small part of global electricity consumption, and that means plenty of room for growth. With alternative energy options getting more demand, solar power could have a bright future and positive returns for investors in this sector.
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