The Solar Invesco Fund (NYSE: TAN) jumped by more than 1% on Monday as the market focused on the ongoing debate on the US infrastructure plan and the upcoming earnings. It closed at $91.88, which was more than 13% above its lowest level this month.
Solar companies have lagged
Climate change has become a major political and economic issue globally. Millions of households in the developed countries are installing solar panels while governments are increasing their investments into the sector.
At the same time, fund managers increase their spending on their environmental, social, and governance (ESG) investments.
The Solar Invesco Fund is a popular vehicle for investors and traders who want exposure to the solar industry. Among others, it includes the leading companies in the sector like Enphase Energy, SolarEdge Technologies, Sunrun, and First Solar,
The TAN ETF has underperformed in 2021. Year-to-date, the fund has dropped by more than 12%, while the benchmark S&P 500 index has gained over 12% in the same period.
Still, in the past five years, the ETF has grown more than 320%, while the S&P 500 more than doubled.
TAN vs. S&P 500
The ETF’s performance has been driven by the overall demand for solar exposure from global funds like Blackrock and Vanguard.
TAN gains ahead of Enphase earnings
The Solar Invesco Fund gained on Monday as traders waited for earnings by some of its key constituent companies, including Enphase Energy, which comprises 10% of the fund.
The company will publish its results on Tuesday after the market closes. Data compiled by Seeking Alpha shows that the consensus earnings per share (EPS) estimate is $0.43 that is a 13.2% year-on-year increase.
They also anticipate the company to earn more than $291 million, a 41% increase. Its gross margin is expected to come in at 38.9%. Going by its track record, Enphase can beat these estimates since it has done that 100% of the time in the past two years.
Other top constituent companies of the TAN ETF are expected to publish their results soon. For example, on Thursday, Sunrun — the fourth-biggest holding, will publish its results. Other key firms in the ETF that will publish their results are SolarEdge and Sunnova Energy.
Meanwhile, the Solar Invesco Fund is also rising as investors focus on the ongoing infrastructure package being deliberated in the United States. Joe Biden has proposed a $2.3 trillion package, while Republicans have proposed a $900 billion spending plan. This means that there is a high probability that the US will have an infrastructure package in the next few months.
Such a package will benefit solar companies. In his infrastructure proposal, Biden has proposed spending hundreds of billions of dollars to transition the US into clean energy. This will include investing in solar and wind, meaning that the companies in the sector will benefit.
Solar Invesco ETF technicals
The four-hour chart shows that the Solar Invesco Fund has been attempting to rebound after falling to break down below $80.
Recently, it has moved above the 25-day and 15-day moving averages while the Relative Strength Index (RSI) has continued to rise.
At the same time, the fund has moved above the descending trendline that is shown in orange. It has also formed an island reversal pattern.
The ETF may resume a downward trend as some of its biggest constituent companies release their earnings. Besides, it has formed a descending triangle that is usually a bearish call.