In the current political environment, when lawmakers agree on something it's going to be big. As today's Daily Intelligence Briefing details, that's what just happened when Congress unexpectedly approved an extension of federal subsidies for renewable energy. The tax credits for solar were set to expire next year while the credits for wind already lapsed last year. Both have now been extended and MRP is affirming a recommendation to be long a basket of solar stocks and adding wind in a combined Clean Energy theme.
Solar has been an MRP theme since April 14, 2015 despite the potential loss of subsidies that was then in the cards because, as we observed at the time, as "silicon panel costs drop, fossil fuel prices firm, and new energy storage technologies appear on the horizon, solar power generation is reaching a tipping point where it can compete with traditional energy sources, even without subsides." The restoration of federal subsidies only adds fuel to this fire. Here's a select list of the securities in Guggenheim's TAN Solar Energy Index ETF. Notably, the analysts following these stocks have been reducing their ratings (the chart in the lower right), a trend that MRP expects to reverse as the analysts upgrade their earnings forecasts and ratings in the months ahead.
Likewise, here is a select list of securities in First Trust's FAN Global Wind Energy ETF, excluding stocks with low exposure to the theme such as GE. As a group, the wind stocks have been holding up nice and outperforming the S&P 500 Energy Index (the lower left chart), trends that MRP expects to continue given the clean energy mandates of many countries, now freshly reinforced by the recent Paris conference, and given new lift by the renewal of federal subsidies in the US.
