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ETF News And Commentary

Exchange traded funds tracking the solar industry again excelled, providing investors with good gains to extend their rally once more. The Market Vectors Solar Energy ETF (KWT - ETF report) was up 9.43% while the other ETF tracking the space, the Guggenheim Solar ETF (TAN - ETF report), performed even better rising 10.5% in the last trading session.

Beyond these ETFs, investors also saw one of the biggest players in the market, First Solar (FSLR - Analyst Report), add over 7.5%, showcasing how wide the rally was in the space, but that small and mid cap stocks were even bigger beneficiaries (Finally Some Good News for Solar ETFs?).

Volume also surged on the day, with both of the ETFs crushing their daily averages. TAN and KWT both saw levels that were roughly five times normal, suggesting that it was an extremely active day for the space.

Strength in SunPower Corp (SPWR - Analyst Report) prices could be one of the reasons behind the rally in solar ETFs beyond some favorable policy moves around the world as the company soared over 47% in its last trading session.

The company has announced a sale of its 579-megawatt Antelope Valley Solar Projects in California to MidAmerican Solar, a subsidiary of MidAmerican Renewables, which is part of Warren Buffet’s Berkshire Hathaway. The sale price is fixed between $2 billion and $2.5 billion (Is It (Finally) Time To Buy the Solar Industry?).

KWT manages an asset base of $12.5 million which it invests in a portfolio of 26 stocks. SunPower holds thirteenth position in the ETF with a share of 3.8%. The fund charges a fee of 65 basis points on an annual basis.

On the other hand, TAN has a larger asset base of $54.6 million with same number of holdings as KWT. However, SunPower holds the fourth position in the fund with asset investment of 5.72%.

This positive development comes on the back of some favorable news in the fiscal cliff deal for the solar industry, and good reports out of China’s solar industry as well. The country seeks to double its upper limit capacity for solar power to 40 gigawatts by 2015 which is again a good development to boost the solar energy ETFs as China accounts for a healthy asset base in both the funds.

KWT has 27.6% in direct exposure to China while TAN has assigned 37.4%, while both have even more thanks to the country’s surging demand and massive solar power export facilities (Solar ETFs in Focus on Chinese Import Tariffs).

Solar ETFs have still been terrible performers over the long term, even when taking into account the recent impressive strength. The space could be a bigger player in the years ahead, but risk will remain the name of the game in solar ETFs going forward.

A strong stomach will definitely be necessary for investment in solar power, but if the last month is any guide, we may finally be seeing the end of the solar bear market.

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