In what can be considered a surprise given the current political makeup of Congress and the White House, the Guggenheim Solar ETF (TAN) is up 35.5% year to date. TAN, the largest exchange-traded fund (ETF) dedicated to solar stocks, is delivering one of the best performances among non-leveraged ETFs this year and is doing so against what many thought would be a challenging political backdrop for alternative energy equities.

TAN is up nearly 13% over the past month and is closing in on a new 52-week high. That solid performance comes after the ETF plunged more than 43% last year, including a steep post-Election Day sell-off fueled by speculation that the Trump Administration would be hostile to the alternative energy industry. (See also: Renewable Energy Suffers From Trump Win.)

In a note out Monday, MAC Solar Index reported, "Recent bullish factors for solar stocks include (1) continued strong overall world demand for solar with particular new strength coming from India, Latin America, the Middle East and Southeast Asia; (2) stronger demand for solar power due to the increasingly competitive price of solar versus alternatives as countries seek to meet their carbon-reduction targets under the Paris COP21 global climate agreement; and (3) continued low valuation levels that indicate that solar stocks are conservatively priced even after the recent rally." (See also: Solar Stocks Awaken From Long Slumber.)

The MAC Solar Index is the benchmark tracked by TAN. TAN holds almost 30 stocks and is reflective of the global nature of the solar industry. The U.S. is TAN's largest country weight at over 51%, but Hong Kong and China combine for 29.6%, illustrating TAN's exposure to the China solar trade. TAN's global composition also highlights the point that the ETF's price action is not as sensitive to U.S. political whims as some investors might think it is. Still, there are factors investors should consider before rushing into TAN.

MAC Solar Index outlines some of the potential issues in its recent report. "Bearish factors for solar stocks include (1) continued downward pressure on solar pricing and panel oversupply caused largely by a hangover from the solar install spikes seen in China and the U.S. in 2016; (2) uncertainty about U.S. clean energy policy and global climate change initiatives due to the new Trump administration; (3) uncertainty for the U.S. residential solar market amidst a shift to purchase/loans from leases and cutbacks in net metering in some states; and (4) ongoing solar trade disputes that have resulted in tariffs and various market dislocations." (See also: Is It Time to Take Solar Profits?)

Still, although Trump has been in office barely more than seven months, it is hard to ignore the fact that TAN is performing better now than it did while President Obama was in the White House. From Inauguration Day 2009 through Election Day 2016, TAN plunged nearly 67%.

Fortunately, solar stocks are not pricey even after this year's run higher. "Solar stocks are still trading at low valuation levels compared with the broad market even after the recent rally in solar stocks," according to MAC Solar. "The median forward price-to-earnings ratio of companies in the MAC Solar Index is currently 15.3, which is well below the forward P/E of 19.0 for the S&P 500 index." (See also: Top 3 Solar Stocks.)

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