Much of the climb in solar stocks looks justified by growth prospects, but buyers may still be in for a bumpy ride
2 min
Solar stocks are sizzling—quite an accomplishment for the simplest and most mature of the green-energy technologies. Finding companies that could keep shining might require looking in less obvious places.
The MAC Global Solar Energy Index has generated a 233% return including dividends for dollar investors during the past year. That is well ahead of returns from wind-turbine makers Vestas and Siemens Gamesa, nevermind the S&P 500’s 15%.
As public and political support for green power has broadened, markets have come to expect a decadeslong renewables rollout. It is hard to see any catalyst for a change in sentiment, says Sam Arie, a veteran utilities analyst at UBS. Solar panels can be the cheapest way to generate electricity in many parts of the world. “In some cases it is even cheaper to build a new solar farm than run existing coal plants,” says Alex Monk, a portfolio manager at asset manager Schroders.
The catch is that the shift to renewables doesn’t guarantee shareholder returns. To justify high valuations, investors need to ensure companies have a defensible business as well as growth prospects.
Solar investors have already experienced at least two stomach-churning cycles. A key lesson has been that making panels themselves is a low-margin, hypercompetitive market best avoided. But other parts of the value chain offer better prospects.
For example, SolarEdge and Enphase make power inverters, which convert a solar panel’s power to alternating current and adjust performance to maximize output. Their Nasdaq-listed shares have returned 179% and 444% respectively during the past year and now trade for 72 and 93 times forward earnings. That is a lot of growth priced in. However, the technologies are patent-protected and could also be central to managing a smart home’s power between electric vehicles, solar panels, batteries and the like—a potentially vast market.
Developers are another option. They bid for, build and run solar farms. While installing the panels isn’t complex, experience is valuable when pricing bids and navigating the permitting process, and scale is crucial to sourcing panels effectively.
NextEra Energy, Enel and Iberdrola have built huge renewable-power farms as part of wider utility businesses and have ambitious rollout plans for solar and wind. Their shares have given investors total returns of between 16% and 28% over a year, and now change hands for between 15 and 32 times forward earnings. Barclays utilities analyst Dominic Nash credits part of the rise to general growth investors coming into the sector for the first time.
Then there are U.S. residential developers, which offer homeowners rooftop solar-panels paired with battery storage. The products provide added reliability, and monthly payments for the cost of batteries and solar panels that are often lower than existing utility bills. “It’s a pretty easy sale,” says Stephen Byrd, an analyst at Morgan Stanley.
Shares in SunPower and Sunrun, two such developers, trade at Tesla-type multiples, 118 times and 360 times forward earnings respectively. Revenues will grow—U.S. solar penetration will rise from 3% now to 14% by 2030, says Mr. Byrd—but margins will also come under pressure once installers compete head-to-head rather than with incumbent utilities.
Investors need to choose carefully as the stock-market solar coaster speeds up again. The general direction of travel may be up, but it likely still has plenty of twists and turns in store.
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Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
