Tag Archives: alternative

Is A Liquidity Crunch In The Solar Sector Ahead?

By Ronald Delegge Stocks in the solar and alternative energy space are getting crushed. Will it lead to a liquidity crunch? Since the beginning of the year, the Guggenheim Solar ETF (NYSEARCA: TAN ) has lost a stunning 21.80% in value compared to a +0.20% gain for the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). And while a 21.8% loss is most certainly ugly, many individual stocks within the solar sector are getting slaughtered. Widely held solar stocks like SolarCity (NASDAQ: SCTY ) and SunEdision (NYSE: SUNE ) are down 55.85% and 81.92%, respectively. Others like First Solar (NASDAQ: FSLR ) have lost 17.29% while SunPower (NASDAQ: SPWR ) is down 32.99%. All of these stocks are among the top 10 holdings in the $262 million Guggenheim Solar ETF. Most solar stocks are reporting large earnings per share (EPS) losses. For third-quarter earnings, SunEdison reported a $284 million loss compared to a $283 million loss from a year earlier. That prompted its stock to sink further and the company is slashing up to 15% of its workforce and scaling back its growth plans by 20%, according to reports. The Maryland Heights, MO-based company is the globe’s largest developer of renewable energy. Meanwhile, SUNE holders are getting burned, literally. Top institutional owners of SUNE include David Einhorn’s Greenlight Capital, Daniel Loeb’s Third Point, and Vanguard. Hedge fund managers like Einhorn and Loeb are having their worst collective performance since 2011. Like SunEdison, SolarCity has negative earnings and missed its third quarter EPS of $-2.41 by 46 cents. SolarCity, which is headquartered in San Mateo, CA, designs, installs, and leases its solar power systems. (click to enlarge) Other alternative energy ETFs that own solar shares like the Market Vectors Global Alternative Energy ETF (NYSEARCA: GEX ) and the PowerShares WilderHill Clean Energy Portfolio ETF (NYSEARCA: PBW ) have dropped more than 20% over the past six months. Negative earnings coupled with crashing stock prices plus changing risk appetite by investors will lead to an inevitable shakeout in the overcrowded solar marketplace. And the liquidity crunch has already started. In the meantime, prudent investors should add these questions to their due diligence checklist before diving in: When will the risk appetite for financing the aggressive growth plans of money-losing solar projects wane? When will institutional investors with significant losses finally bail and what further impact will it have on already beaten up share prices? How will a recession or credit crunch impact the ability of solar companies to operate? How much will existing shareholders be diluted when solar companies decide to sell more shares to raise capital? With cheap natural gas prices, will utilities increase competition with solar by lowering electricity rates? Sector ETFs that invest in solar stocks, if you decide to hold them, always go into a person’s non-core investment portfolio, whereas a person’s core portfolio is always diversified across the five major asset classes via ETFs that are accurate proxies of each category. Disclosure: None Original Post

Bet On European Economic Recovery With This New ETF

Ongoing policy easing and hopes for further stimulus (if need be) have put the spotlight on the Euro zone stocks and related ETFs. Since available funds are tacking on gains and assets on a potential economic recovery, issuers are putting out all the stops in rolling out more and more innovative Europe-based funds. Most recently, WishdomTree launched the WisdomTree Europe Local Recovery Fund (BATS: EZR ) , which better reflects the European growth prospects on corporate profile. Let’s dig a little deeper and find how one can wager on the potential bounce in the European economy by this ETF (read: ETF Strategies for 2H ). EZR in Focus The fund seeks to provide exposure to the European companies susceptible to economic growth prospects in the Euro zone and that generate over 50% of their revenues from Europe. Thus the fund may benefit from the ongoing economic recovery and rising purchasing power in the Euro zone. By tracking the WisdomTree Europe Local Recovery Index, the fund fulfills its objective. This strategy results in the fund holding 212 stocks in its basket, which are quite well diversified across the portfolio. The top 10 names form roughly 15% of total assets, with just 2.22% allocated to the top fund holding – Total SA. (NYSE: TOT ), BASF SE ( OTCQX:BASFY ), Allianz SE ( OTCQX:AZSEY ) and BNP Paribas ( OTCQX:BNPQY ) are some of the other top holdings of the fund. However, there seems to be some sector concentration in the fund as the top three sectors – Financials, Industrials and Consumer Discretionary- alone occupy four-fifth of total fund assets. Energy and Information Technology have the lowest allocations in the fund. Capitalization-wise, the fund has a mixed approach with about 35% of weight invested in small and mid caps each, while the remaining 30% goes to large-cap stocks. While France and Germany have roughly 25% allocation each in the fund, Italy occupies about 16% and Spain has 9.42%. The fund charges 48 basis points as fees making it a relatively middle-of-the-road product in terms of costs in the European ETFs space. How Does It Fit in the Portfolio? The newly launched ETF can be a good choice for investors looking to gain exposure to the pure possibilities of the Euro zone. This is especially true given that these companies are closely tied to the European economy and generate a huge bulk of their revenues from the domestic market and thus remain less susceptible to euro depreciation (read: 3 European ETFs Rebounding Sharply ). Notably, Euro zone is presently undergoing a QE stimulus and the European central bank has recently hinted at the beefing up of the ongoing monetary policy, if growth slackens further. These measures are expected to spur bank lending, boost activities and battle low inflation within the Euro zone. ETF Competition The broad European equities fund space is teeming with a number of ETFs such as the Vanguard FTSE Europe ETF (NYSEARCA: VGK ) , the SPDR Euro Stoxx 50 ETF (NYSEARCA: FEZ ) , the iShares MSCI EMU ETF (NYSEARCA: EZU ) and the iShares Europe ETF (NYSEARCA: IEV ) . However, aforementioned ETFs are mostly large-cap in nature and thus can’t be direct competitors to this newbie ETF EZR. Since large-caps only take about one-third of its portfolio, small-cap Europe ETFs including the SPDR STOXX Small Cap ETF (NYSEARCA: SMEZ ) and the WisdomTree Europe SmallCap Dividend Fund (NYSEARCA: DFE ) are likely to pose as threats. In fact, country and sector specification-wise, EZR and SMEZ share many similarities. The newly launched fund is cheaper than DFE – which charges 58 basis points as fees but it is slightly costlier than SMEZ which charges 45 bps in fees. Also, given the greenback strength in the wake of looming policy tightening and euro depreciation, this un-hedged ETF might see tough times ahead. Otherwise, we expect EZR to be successful among risk-averse investors as capitalization-wise, its spectrum is diversified. So, several risk-fearing investors who seek to gain true exposure to the Euro zone but dread the volatile nature of the smaller-capitalization might find EZR’s midway approach lucrative. Link to the original post on Zacks.com

AlphaClone Goes International With New Downside Hedged ETF

By DailyAlts Staff AlphaClone’s proprietary Clone Score methodology is used to power its popular AlphaClone Hedge Fund Downside Hedged Index and the related AlphaClone Alternative Alpha ETF (NYSEARCA: ALFA ), which was launched in 2012 and now has approximately $155 million in assets. On November 2, the firm launched a new index, the AlphaClone International Downside Hedged Index, that also uses the Clone Score methodology but is focused on American Depository Receipts (“ADRs”) – certificates that trade in the U.S. but represent shares of foreign stocks. As a follow on, AlphaClone launched a new ETF to track the new index, the AlphaClone International ETF (NYSEARCA: ALFI ). In Pursuit of Alpha “Pursuing the potential for alpha is even more important today for long-term investors, given the anemic growth forecasted for equities and bonds over the next several years,” said AlphaClone CEO Maz Jadallah, in a recent statement. “We’re delighted to introduce an international version of our index, further expanding the number of alpha-seeking index strategies available to global investors.” The new index will consist of at least 40 “high conviction” ADRs selected from the regulatory filings of select institutional investors. The proprietary Clone Score is used to continuously rate managers based on the “efficacy of following their disclosures,” and then aggregates the high conviction holdings from the managers with the highest scores. The index also features a “dynamic hedge” that introduces short-selling when the S&P 500 closes below its 200-day moving average at any month’s end. “Having seen success with our methodology inside separately managed accounts over the past five years, we’re excited to further expand access to our innovative investment methodology and are committed to helping long-term investors succeed,” Mr. Jadallah said. More detailed information about the index and its calculation methodology (see “Guidelines” document link) can be found here: AlphaClone International Downside Hedged Index . New International ETF AlphaClone’s new ETF, the AlphaClone International ETF, aims to track the new international index. As is the case with the index, the fund can hedge the long portfolio based on a trend following signal, and will use an MSCI EAFE Index based security to hedge the portfolio. The advisor to the fund is Alpha Clone Inc., while the sub-advisor is Vident Investment Advisory, LLC. Fees on the ETF are 0.95%, which is the same as the U.S. equity focused AlphaClone Alternative Alpha ETF. Earlier this year, AlphaClone announced its plan to launch four new ETFs based on the Clone Score methodology, including one that will be based on the new index. In addition, the firm announced in September that it had received a $2.25 million venture investment from Operative Capital , allowing it to expand its marketing and sales operations.