Solar stocks had another blowout week led by LDK Solar’s (LDK) 25% gain. First Solar (FSLR), Sunpower (SPWR) and Suntech Power (STP), what I consider the first-tier solar companies, all had a gain close to or above 20% for the week.
Also, interesting to note is that First Solar is now the only Solar stock that has a positive gain in 2008. Sunpower (SPWR) and Suntech Power are still about 30% and 40% down in 2008 respectively.
Suntech Power (STP) has gone from about 30 to 50 in the last two weeks with Sunpower (SPWR) going from 60 to 90 in the same time frame. So do they get back to 2007 highs?
I mentioned in my article last week that I missed an opportunity to buy Suntech Power (STP) in the low 30’s but now I even missed the opportunity to buy in the low 40’s.
I think this is the case of ‘a rising tide lifts all boats’. There are solar stocks out there that had no business going up but benefited by the overall solar rally. So what I am planning on doing now is to look at second-tier solar stocks that could be shorted (via PUTS) while staying away from from FSLR, STP and SPWR until I see an opportunity to go long.
What do you all think?
Solar Stocks Weekly and YTD Price Change – Week ending April 04, 2008:Â
* No holdings in any of the above mentioned stocks.
Solar stocks just capped a fantastic week with every solar stock except one (WFR) clocking a double digit gain. This seems like the best week solar stocks have had this year but are still far off from where they started in 2008.
The biggies, First Solar (FSLR), Suntech Power (STP) and Sunpower (SPWR), all made impressive comebacks. I am kicking myself for not buying Suntech Power (STP) when it was in the 30’s. I was closely watching it and was hoping to enter Suntech in the high 20’s. Well, before I knew it Suntech goes from 30 to 40 in a week.
The question is have the Solar Stocks turned a corner here? I don’t have the answer. Do you? Do you see this as an opportunity for a short-term Short or are you planning to go Long.
* No holdings in any of the above mentioned stocks
There is no good way to put this but Solar Stocks have been beaten down pretty bad since 2008 rolled in. Now there was some irrational exuberance when it came to solar stocks in 2007. This downtrend was inevitable but the overall market conditions might have made it worse then it should have been.
Crude Oil and Solar Stocks are moving in the opposite direction with predictions that oil will continue to move higher.
The inability of congress to extend the renewable energy tax breaks beyond 2008 is also creating uncertainty even though most solar cell makers depend on European countries for majority of their revenues.
At some point you have to look at some of the quality solar companies.
I personally only consider four solar stocks worth investing (you can trade in other solar stocks) at this point:
- Suntech Power (STP)
- Sunpower Corp. (SPWR)
- First Solar (FSLR)
- MEMC Electronics (WFR)
All of these are quality companies and leaders in different categories:
- Suntech Power (STP)- Biggest Solar company in China and one of the biggest pure play solar companies in the world. Suntech also has pretty considerable R&D and is not just a low cost Chinese solar cell producer.
- Sunpower Corp (SPWR) – This silicon valley based company is a leader in solar cell efficiency.
- First Solar (FSLR) – The leader in cost and doesn’t use polysilicon which continues to remain in short supply.
- MEMC Electronics (WFR) – As long as polysilicon supply remains tight MEMC electronics will benefit.
One thing that remains certain is that solar stocks will continue to remain volatile. These stocks could go either up or down 20% a month from now. But unlike Corn Ethanol, Solar Cells are here to stay and the technology continues to advance.
I have made my fair share of mistakes in the past when it comes to Solar investing. I am currently trying to see if I can pick a bottom in Suntech Power and SunPower.
Full Disclosure: No position in any of the above listed stocks.
American Council on Renewable Energy (ACOR) recently sent a letter to House Speaker Nancy Pelosi, House minority leader John Boehner, Senate Majority leader Harry Reid and Senate Minority leader Mitch McConnell to extend the renewable energy tax credits before March 1, 2008.
Some of the signatories on the letter included employees from Google, Applied materials, Fuel Cell Energy, GE Energy, Evergreen Solar, Kyocera Solar, Sharp Solar, SunPower.
Read the letter here on ACORE’s website.
Kaydon Corp. (NYSE: KDN) handily beat its earnings estimate when the company released its 4Q numbers on February 21st.Â Earnings per share (EPS)Â came in at 70 cents per share beating analysts estimates of 59 cents. Even if we add in the 9 cents per share one time gain from the sale of part of its friction control unit,Â Kaydon still beat the estimate by 2 cents.
The market initially reacted positively with Kaydon gaining as much as 8% but the stock gave up all of its gains and closed the day in red.Â The stock is basically sitting at where it was before the earnings report on Thursday.Â I am looking at this week to see how the stock reacts in the short term.Â Kaydon has been severely punished since the the start of the year with the overall marketÂ and in particular the alternative energy sector.
The long term story continues to develop nicely for Kaydon and it remains a compelling long term opportunity.
The near term downside remains if the Renewable Energy tax credits are not extended by Congress beyond the year 2008. However, the wind energy demand and record backlog has the company sitting pretty despite what happens with the current law.
Nevertheless, the alternative energy sector could use a boost by congress with the extension of tax credits beyond 2008.
Both Friedman,Billings,Ramsey &CoÂ and Robert W. BairdÂ came out with ‘Outperform’ ratings on Friday.Â Deutsche Securities already has a ‘Buy’ rating on the stock from January.Â Â The price targetsÂ range from $57 to $58.
S&P meanwhile has a ‘Sell’ rating and $40 price target.
I continue to remain bullish on the wind sector.Â Unites States is now the second largest wind market in the world after Germany.Â A recent article from NYT continues to paint a bright picture for the wind sector.
If you are optimistic about the overall market thenÂ you should put Kaydon on your watchlist.
Full Disclosure:Â I am long Kaydon.
What can you say about a sector when the worst performing solar stock clocks a gain of 50% in 2007. I am obviously overlooking the the one negative in the chart below courtesy of Energy Conversion Devices (ENER).
Crude Oil appreciating 78% only helped the cause for these companies in 2007.
I think its fair to say 2007 was a Solar Year on Wallstreet.
||2007 % Gain
|First Solar Inc. (FSLR)
|Ascent Solar (ASTI)
|JA Solar (JASO)
|Hoku Scientific (HOKU)
|SunPower Corp. (SPWR)
|Spire Corp. (SPIR)
|Trina Solar (TSL)
|Solarfun Power (SOLF)
|Canadian Solar (CSIQ)
|SunTech Power (STP)
|Evergreen Solar (ESLR)
|MEMC Electronics (WFR)
|LDK Solar (LDK)
|Daystar Tech. (DSTI)
|PS WILDERHILL ENR (PBW)
|China Sunergy (CSUN)
|Energy Conv. (ENER)