Buying the sellers
While the funds represent good value and good protection for your money, they need to remain aware of these shifts in the market, from dominance by re-sellers to boom times for panel makers, and investing accordingly.
You will get good returns from TAN and KWT going forward. They will be less volatile than individual stocks. When you are buying the funds, you are buying their expertise, their ability to move in-and-out among individual stocks.
But over a longer time horizon, over the next five years, you may want to transition away from the funds, toward the companies that sell panels. Unfortunately, most of these are Chinese companies, like Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE), up 24% so far this year. Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) is the sector’s largest player, and the winner in the vicious price wars that took out so many competitors there in the last year.
The biggest risk in a panel maker like Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) is that technologies beyond polysilicon could emerge which threaten its market share. The same risk holds for First Solar, Inc. (NASDAQ:FSLR), which makes its thin-film panels from Cadmium-Telluride, a material it says is a waste product of mining.
Now might be a good time to take a flyer on a panel maker, while keeping the bulk of your solar investment in the index funds. Be ready to move more aggressively in that direction as the market realizes the power of going beyond grid parity.
The article The Best Way to Handle Solar’s Transition originally appeared on Fool.com is written by Dana Blankenhorn.
Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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