No, you did not misread that headline. The Market Vectors Solar Energy ETF (KWT) is in fact up a whopping 1,425% on the day. But the reason why is not quite as glamorous as solar investors were hoping. The fund underwent a reverse 1-for-15 stock split today as its share price has been plummeting for well over a year now. “The solar ETF was down 74% for the year ended June 28, according to Morningstar” writes Tom Lydon. The fund has just $9.4 million in assets and has been struggling alongside the solar industry in the past year. KWT had lost over 29% in 2012 though it was still able to maintain a decent dividend yield (which will likely change given the massive split) [see also 25 Ways To Invest In Alternative Energy].
As fossil fuels continue to get cheaper and natural gas discoveries continue to rise, alternative energy has simply gotten left in the dust. Until these clean energy sources are able to bring their costs down, there is simply no way for them to compete with oil and other non-renewable sources. Solar energy is performing relatively well on the day, with the Guggenheim Solar ETF (TAN) up about 1.9% on its own. As the future wears on for these funds investors need to keep their eyes on government subsidies and spending programs which seem to be flaring out. While many feel that resources like solar energy are the way of the future, putting a timeline on that switch may be impossible [see also The Ultimate Guide To Solar Power Investing].
Keep a close eye on KWT in the next few days as investors will likely heavily trade the fund until it settles in at a more natural price.
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Disclosure: No positions at time of writing.
[...] Alternative energy costs more to install and maintain, and with natural gas prices sitting so low and the supply growing by the day, you would be hard pressed to convince corporate America (or anywhere else in the world for that matter) that switching to clean energy is better for their business. It may help the environment, but it often hurts bottom line returns. [...]