The top five holdings in this ETF are: Enphase Energy Inc (ENPH, 11.34%); SolarEdge Technologies Inc (SEDG, 10.01%); Sunrun Inc (RUN, 7.18%); Xinyi Solar Holdings Ltd (00968, 6.88%); and First Solar Inc (FSLR, 6.21%).
Invesco Solar ETF (TAN)
From Internet Wealth Builder
The Invesco Solar ETF is used as a proxy for the solar industry and has 100% of its holdings in solar manufacturing and related equipment including the technology to operate power plants, store energy, and build related equipment. It is passively managed, follows the MAC Global Solar Energy Index, and is rebalanced quarterly. It has $3.2 billion in assets and 56 holdings.
Performance: The fund is down about 18%year-to-date but is about 65% higher year-over year.
According to Morningstar Research, the ETF had a total return on an annual basis of 239% in 2020 and 65.6% in 2019.
Holdings: About half of the companies are in the US, with roughly a quarter each in Asia and Europe.
The top holdings are California-based Enphase Energy Inc., which makes solar power management software (11.5%), and Israel’s SolarEdge Technologies Inc. (11.22%), which makes solar power inverter and monitoring systems for battery storage. China’s Xinyi Solar Inc. (7.5%) makes solar panels and develops and operates solar farms. Canadian Solar is a fund holding.
Discussion: The ETF offers broad diversification within the solar sector with a reasonable management expense ratio of 0.50%. Its higher weighting towards North American companies means a greater participation in higher margin solar products, including inverters, which are the brains of these systems.
Inverters convert the direct current (DC) power that solar panels create to alternating current (AC) power that is usable in homes. They also maximize power output and optimize the output of the farm.
In a recent interview, Jason Bloom, Global Macro ETF Strategist with Atlanta-based Invesco, noted that Chinese companies have dominated the commodity side of the solar panel business, while North American companies offer better quality and technology in this area.
Dividend: The fund paid a modest distribution in its latest 12 months yielding 0.11% on an annual basis.
Action now: A buy for a diversified solar energy holding.
Adam Mayers in Gordon Pape’s Internet Wealth Builder, buildingwealth.ca, 1-888-287-8229, September 13, 2021