Underlying solar stocks like SolarCity keep the sector hot.
Solar stocks and related ETFs are flying high in 2014 after some nearly doubled last year, and investors looking for a correction in the space who aren’t on the fence should consider taking a leap of faith into the white-hot sector instead of waiting for a pullback before they buy, according to S&P Capital IQ.
The Guggenheim Solar ETF (TAN | B-40) and the Market Vectors Solar Energy ETF (KWT) returned 95 percent and 74 percent, respectively, in 2013. The industry was helped by the stabilization of the solar industry in the wake of China’s decision to cut solar output and by the Obama administration’s renewed support for the alternative energy.
In the first two months of 2014, TAN and KWT are picking up where they left off in 2013, gaining 26.8 percent and 21.3 percent, respectively, riding skyrocketing stocks such as Elon Musk’s SolarCity Corp., which has returned almost 50 percent year-to-date.
SolarCity, the largest installer of residential and commercial photovoltaic systems in the U.S. and a major holding of both ETFs, reported an 87 percent increase in revenue for the fourth quarter of 2013 to $47.3 million compared with Q4 2012, and expects to nearly double its solar installations this year.
“This really is a long-term thesis, and we think investors are really going to be rewarded by getting into the names right now,” Angelo Zino, equity analyst at S&P Capital IQ, said in a telephone interview.
Beyond 2014, the company and the sector is also riding tail winds in the form of President Obama’s proposed budget for fiscal 2015, which calls for some $2.3 billion to promote efficiency and renewable energy such as solar, wind, geothermal and hydropower to further reduce U.S. dependence on fossil fuels.
Chart courtesy of StockCharts.com
So when will the music stop for the high-flying but volatile sector?