Good Day Sunshine
Solar stocks continue to dominate vs traditional energy stocks.
In 1966 the Beatles recorded “Good day sunshine”, and it was released on Revolver that same year. Today is (another) good day for solar energy stocks. Investors that have put their money into solar stocks are smiling.
We noted at the end of 2019 that Solar stocks had had their 3rd straight year of outperformance over traditional energy companies. During the stretch of Jan 2017- December 2019 The Invesco Solar ETF (TAN) outperformed the SPDR Energy Sector ETF (XLE) by over 100%. 2020 continues that outperformance with TAN up over 30% Year-to-date vs XLE down 9%.*
Why the outperformance? Today’s reason appears to come from one of TAN’s biggest holdings: Enphase Energy. Enphase posted blockbuster revenue for the latest quarter and more importantly raised guidance for the coming quarter. Meanwhile traditional oil company stocks remain mired in poor performance. The most recent reason: the coronavirus is expected to pressure oil prices due to decreased economic activity.
But is there something more going on here? This week’s news couldn't possibly explain the outperformance of the last 3 years. We think that we could be witnessing a long term trend that is in its very early stages. The movement to ESG investing may be partially responsible for the differing stock performance. As investors who practice socially responsible investing, we have noticed a dramatic shift in the general investing public. The ESG Investing movement is gaining strength. Younger investors are demanding investment solutions that are both responsible and profitable. “Socially responsible investing” is trending on Google and it has been mentioned much more frequently in the financial news in 2020. This is a good thing. Raising awareness for the benefits of ESG and socially responsible investing could potentially bolster the outperformance.
If you are interested in learning how ESG and socially responsible investing may benefit you, give us a call today.
Disclosure: we have owned and continue to own TAN in client accounts and family accounts. This is not intended to be a solicitation nor is it specific investment advice for any individual. We may chose to sell our position at any time without public notice. Stonebrook Capital Management is a registered investment advisor specializing in ESG and socially responsible investing.