These clean energy funds have more than doubled this year — here's what they own

Published Wed, Dec 30 20209:42 AM ESTUpdated Wed, Dec 30 202010:13 AM EST

(This story is for CNBC PRO subscribers only.) In a year of ups and downs for the market, one area stands out: clean energy. Companies engaged in all areas of renewable energy — from solar panel installers to wind blade manufacturers to electric automakers — have seen their stocks soar this year amid investor enthusiasm, favorable economics and expected policy support. And as these stocks jumped to record highs, so have the funds that track them. Here's a look at some of the clean energy exchange-traded funds that have more than doubled this year: Invesco Solar ETF The Invesco Solar ETF (TAN) has more than tripled this year, with shares advancing 222%. This quarter alone the fund is up 53%, putting it on track to post its second-best quarter on record. The best quarter in the fund's history was the third quarter this year, when it gained 79.47%. "The strong performance has been driven by a convergence of improved company fundamentals, surging demand and a favorable policy outlook," an Invesco spokesman said in a statement. The fund tracks the MAC Global Solar Energy Index. Enphase Energy is the top holding, accounting for 10.9% of the portfolio. SolarEdge Technologies and Xinyi Solar Holdings represent 8.6% and 7.5% of the portfolio, respectively. Sunrun and First Solar round out the top five holdings. "There has been a clear shift away from traditional energy and into environmentally friendly energy players this year," said JC O'Hara, chief market technician at MKM Partners. O'Hara noted that while there are some signs that trends might start to look stretched, the advance in volume is encouraging. This December TAN's monthly average volume stood at 1.7 million shares, up from the monthly average of 150,000 in January. The firm has a proprietary ranking model that screens U.S.-listed ETFs based on a number of technical factors. Of the 600 funds on the list, TAN looks the best. In fact, clean energy funds account for seven of the top 10 funds on the list. But while the upside from owning a very specific slice of the market can be great, so can the downside. Because of potential volatility and more severe drawdowns, funds like TAN should be viewed as a complement to a portfolio rather than a core holding, UBS said in a recent note to clients. IShares Global Clean Energy ETF The iShares Global Clean Energy ETF (ICLN) is broader in scope than TAN, and includes companies involved in other areas of renewable energy including wind and electric vehicles. The fund has more than doubled this year on the heels of its top holding — Plug Power — gaining 927%. Enphase Energy is the second largest position, and the stock has gained 551% in 2020. Other holdings include Vestas Wind Systems , Orsted and First Solar. Astoria Portfolio Advisors' John Davi said that when constructing a portfolio, he looks for idiosyncratic stories that are separate from normal macro forces, such as interest rates, that can impact broad-based ETFs. "Clean Energy fits that bill plus we think there is an additional tailwind with [Joe] Biden's presidential victory," he said. The iShares Global Clean Energy ETF is his top pick within clean energy funds thanks to factors including its international focus, as well as its liquidity. He noted that TAN is highly concentrated within its top holdings, while ICLN offers more broad-based exposure. The iShares fund is also the top pick at Bank of America. ETF strategist Elias Lanik noted that it provides a lot of exposure to stocks that the firm has a buy rating on, with minimal exposure to those it doesn't recommend. Additionally, Lanik pointed to the fund's low expense ratio relative to peers, as well as its price momentum relative to peers. Invesco WilderHill Clean Energy ETF Shares of the Invesco WilderHill Clean Energy ETF (PBW) are up 195% for the year as bets on electric vehicle companies paid off. The fund's top holdings are Blink Charging and FuelCell Energy , which have gained 2,072% and 334% this year, respectively. Plug Power, which is up 927% this year, is the third largest holding. Shanghai-based electric vehicle company Nio , which was returned more than 1,000% this year, is the fund's fourth-largest position. Of the clean energy funds within its coverage, Bank of America said PBW is the least attractive given its low composition of stocks that the firm has an overweight rating on, as well as the fund's above-average expense ratio. ALPS Clean Energy ETF The ALPS Clean Energy ETF (ACES) , which is composed of U.S.- and Canada-based companies whose business models are at least 50% dependent on clean energy, has surged 130% this year. The fund is focused on two categories: renewables and clean technology, which is then divided into seven sub-segments — solar, wind, hydro/geothermal, biomass/biofuel, electric vehicles/energy storage, efficiency/LED, smart grid and fuel cells. Tesla is among the fund's top five holdings, as are Plug Power and Enphase Energy. - CNBC's Michael Bloom contributed reporting.

Solar panels above a Brooklyn neighborhood overlooking Manhattan.

Jeff Morganteen | CNBC

(This story is for CNBC PRO subscribers only.)

In a year of ups and downs for the market, one area stands out: clean energy.

Companies engaged in all areas of renewable energy — from solar panel installers to wind blade manufacturers to electric automakers — have seen their stocks soar this year amid investor enthusiasm, favorable economics and expected policy support. And as these stocks jumped to record highs, so have the funds that track them.

Here's a look at some of the clean energy exchange-traded funds that have more than doubled this year: