Is There a Resurgence Ahead for the Invesco WilderHill Clean Energy ETF?

The Invesco WilderHill Clean Energy ETF offers investors exposure to the clean energy theme, tracking mid-and small-cap companies, including JinkoSolar and American Superconductors. Despite a sharp downturn in 2023, broad exposure to companies across the sector means the fund could benefit if interest rate cuts in 2024 revive green energy stocks.

• Invesco WilderHill Clean Energy ETF is down 27% year-to-date.
• While top holding JinkoSolar slumps 18% year-to-date, second-largest AMSC leaps 172%.
• Solar stocks could benefit if the Fed cuts rates in the next year.

Renewable energy stocks have plummeted this year, while green energy has become more expensive, partly thanks to interest rate hikes and inflation. The Invesco WilderHill Clean Energy ETF [PBW] has suffered as a result. The fund continued its 2023 slump over the last week, falling 2.5%. Year-to-date, it has fallen 27.1%.

Top holding JinkoSolar [JKS] slid 3.3% in the week. The photovoltaic module maker has fallen 17.8% year-to-date, while its share price has plunged 47.5% from its 52-week high of $61.27 in January.

However, it’s not bad news for all names in the fund. Second-biggest holding American Superconductor [AMSC] rose 2.25% across the week to 8 December, and has climbed 171.7% this year. Meanwhile third-largest holding Bel Fuse [BELFB] rose 1.4% across last week, with its share price soaring 171.7% year-to-date.

The passively managed PBW fund offers exposure to companies focused on clean energy and the carbon transition, tracking the Clean Energy Index run by eco financier and former academic Robert Wilder. The majority of businesses held are small- or mid-cap ventures. 

As of 8 December, 46.8% of the fund’s portfolio is in the industrials sector, with 18.5% in information technology,15% in consumer discretionary, 8.5% in utilities, 8.4% in materials and 2.7% in energy.

JinkoSolar Strong Buy Despite Stock Slump

The PBW fund gives roughly equal weightings to most of its holdings. As of 8 December, the largest holding is JinkoSolar, with a 2.2% weighting.

JinkoSolar has a customer base and production facilities for its solar modules that extend across the globe, encompassing China, the US, India, Europe and South America. It announced third-quarter (Q3) 2023 earnings on 30 October, posting revenues of RMB31.8 bn or $4.4bn, a rise of 3.7% quarter-over-quarter and 63.1% year-over-year. Module shipments increased by 107.9% year-over-year.

The second-largest holding in the Invesco WilderHill Clean Energy fund is American Superconductor Corp, with a 2% weighting. AMSC’s clean energy projects include WindTec, which offers custom-made wind turbines.

On 2 November, the firm posted Q2 earnings, announcing revenues of $34m, which rose 23% year-over-year. Net losses for Q2 were $0.09 per share, narrowing from losses of $0.35 per share in the year-ago quarter.

 Is Clean Energy About to Turn a Corner?

Clean energy stocks, including wind and solar, have suffered this year, with many falling by around a third, slashing billions from the sector’s market value. This is troubling news for funds focused on the sector, such as the Invesco Wilderhill Clean Energy ETF.

The pioneering fund was, according to Robert Wilder, the first to focus on the decarbonisation theme, but has experienced ups and downs over the last few years, most notably rising 206% in 2020 before a subsequent crash.

However, there may be light at the end of the tunnel. Invesco gives exposure to a wide variety of companies — there are 78 in the Clean Energy Index, covering everything from electronic parts to wind and solar. Its strategy of giving companies similar low weightings, with no holding currently much above 2%, makes it more resilient to individual losses.

Solar stocks are among the clean energy stocks tipped to make a comeback next year if the US Federal Reserve cuts interest rates, as is widely anticipated. Analysts at Morgan Stanley recently said in a note: “If rates fall in 2024, as our economists and strategists are predicting, we could see a meaningful improvement in clean energy valuations.”

PBW is rated a ‘moderate buy’ at TipRanks by a consensus of 78 analysts. The average 12-month price target of $43.60 would be a 59.8% increase from its last close on 8 December. 

JinkoSolar is rated a ‘buy’ by a consensus of six analysts at CNN, with three offering this rating, one recommending to ‘hold’ and two to ‘sell’. 

At CNN, all three analysts offering a rating on AMSC stock offer a ‘buy’ recommendation.