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In this episode of ETF Spotlight, I speak with Jason Bloom, director of Global Macro ETF Strategy at Invesco. We discuss solar and clean energy ETFs.
The Invesco Solar ETF (LON:TAN) is the best performing ETF of 2019, up about 60%, and the Invesco WilderHill Clean Energy ETF PBW has gained about 35%.
Enphase Energy (NASDAQ:ENPH) and SolarEdge Technologies (NASDAQ:SEDG) —the largest holdings in these ETFs—have skyrocketed 580% and 124% respectively this year. Are the gains sustainable?
These ETFs are usually quite volatile since their fortunes are tied to government subsidies and oil prices. Is there a correlation between oil prices and clean energy stocks?
The cost of renewable energy generation has been falling in recent years with continued technological innovation, and that has started changing the competitive balance between clean and traditional energy.
According to the investment firm Lazard, wind power is now less expensive to produce than coal or natural gas power, and utility-scale solar plants have become competitive with gas and cheaper than coal.
Why should investors consider solar and clean energy ETFs?
TAN is the only pure-play solar ETF. About 52% of its portfolio is invested in US companies. Top three holdings-- Enphase Energy (ENPH), SolarEdge (SEDG) and First Solar (NASDAQ:FSLR) --account for almost 30% of the portfolio.
PBW holds companies involved in renewable energy generation or conservation, in almost equal weights. Enphase Energy (ENPH), SolarEdge (SEDG) and SunPower (NASDAQ:SPWR) are among its top holdings.
Jason explains how stocks are selected and weighted in these ETFs. We also discuss the role of niche ETFs like TAN and PBW in a portfolio.
Please visit Invesco.com to learn more about these ETFs and other Invesco products.
Make sure to be on the lookout for the next edition of ETF Spotlight! If you have any comments or questions, please email podcast@zacks.com.
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