Published January 07, 2013
Solar ETFs are taking a step back on Monday, but it is no secret these funds have been on fire to start 2013. Even with a loss of 2.4 percent on Monday, the Guggenheim Solar ETF (TAN) is still higher by 17.4 percent over the past five trading days.
The Market Vectors Solar ETF (KWT) is off about one percent today, but that fund is still up 17.2 percent over the past five sessions.
KWT and TAN are not the only ETFs offering exposure to the alternative energy theme that have soared since President Obama won reelection in early November.
"It may not be evident to all, but since the completion of the November elections in the U.S., alternative energy' focused ETFs have staged an impressive rally, closing at multi-month highs in some cases as recently to close out last week," said Street One Financial Vice President Paul Weisbruch in a research note.
Weisbruch highlights the PowerShares WilderHill Clean Energy ETF (PBW) as a prime example of an alternative energy ETF that has soared since Election Day. Home to $133.2 million in assets under management, making it the largest alternative energy ETF by that metric, PBW has gained about 13.4 percent since November 7, 2012, the first trading day after Election Day.
"In fact, if one quickly examines fourteen Alternative Energy based equity ETFs that are available to investors, one will note a recurring theme, swift rallies across the board since November whether the fund in question is related to Wind Energy, Nuclear Energy, or more broadly categorized as Clean Energy," said Weisbruch.
The move higher by alternative energy ETFs following Election Day is arguably not surprising because President Obama has long been an advocate for increased U.S. investment in solar and wind power, among other alternative energy sources. Obama has made that advocacy a cornerstone of his energy plans through two campaigns.
Conversely, Republican challenger Mitt Romney championed additional investment in domestic fossil fuel sources, such as coal, prompting a pre-election run-up and post-election slide for the Market Vectors Coal ETF (KOL).
What is critical for investors to note is that the recent surge in clean energy ETFs may be short-lived because Obama may lack the congressional support necessary to significantly expand U.S. use of solar and wind power. Republicans control the House of Representatives.
Despite the fact that Democrats control the Senate, many states that are rich in oil and natural gas such as Alaska, Louisiana and North Dakota have at least one Democratic senator. Montana has two. Those senators may not be apt to turn their backs on high-paying traditional energy jobs in their home states to embrace solar and wind projects.
On a related note, investors in the alternative energy space should recall the overall performance of these ETFs through President Obama's first term. Not only did KWT and TAN have to engage in reverse splits to artificially inflate their share prices, but from the time President Obama was inaugurated in January 2009 through Election Day 2012, PBW and the First Trust ISE Global Wind Energy Index Fund (FAN) each lost more than 40 percent.
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