Green Energy Sector Stocks Slump

February 27, 2012

Shares in solar, wind, and geothermal energy were hot-ticket investments when the federal government began handing out lucrative loans to renewable energy companies in 2009. But the combination of a dragging economy and the failure of solar company Solyndra has led to a slump in the green energy sector.

The Wall Street Journal reports:

The growing promise of solar power, wind power and geothermal energy has excited investors in recent years but resulted in too much hype and overpriced shares, and a profound slump for the sector.

Investors in renewable energy companies have also suffered through the recession and the slow economic recoveries in the U.S. and Europe. Other troubles abound: The high-profile bankruptcy last September of U.S. solar panel maker Solyndra LLC, which had received more than $500 million in government loans, has jarred the sector, and more fallout may come from a complaint lodged with U.S. trade authorities that Chinese solar panel makers are dumping products in the market.

A prime example of the troubles faced by investors in renewable energy is the Guinness Atkinson Alternative Energy Fund GAAEX -0.60% , which has had average annualized losses of 21.6% over the last five years, according to Morningstar. The S&P 500 index had average returns of 0.8% over the same period. Over the past year, the fund tumbled 40%, while the S&P was up 5.4%.