Take the Guggenheim Solar ETF (TAN) for comparison purposes, add the Energy Select Sector SPDR ETF (XLE) on a 3- to 6-month chart. What do you see? I see an evident parallelism between the two ETFs until September, but in the last three months that correlation turned into a divergence, as the solar stocks slowly deviated from the energy sector.
This was largely due to a softer demand in Europe, decreased lending and government subsidies in PIIGS, mixed with a fierce competition from China that severely lowered solar panel costs. While this is changing the playing field for smaller names as the pricing power is diminished, aggressive competition is, in fact, what the commercial consumers have been awaiting. Investors are anxious for solar prices to bottom and more struggling companies to go bankrupt or be acquired.
In my humble opinion, it still makes sense to diversify within the energy sector by picking up shares in the alternative energy industries, but not necessarily solar stocks. I would like to turn your attention to other names in the alternative energy window that are generating revenues from
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