Solar's Time to Shine?

The bad: 

1. govt subsidy cutbacks

2. cash strapped homeowners

3. bad builder and commercial real estate markets

5. low price of oil

6. low price of natural gas

7. increased disbelief in global warming in US (according to recent poll)

8. enormous short interest

9. fluctuating poly and other resources that swing from shortages to gluts

10. questions about ecological safety of key elements in solar installations

The good:

1. continuing govt stimulus and mandates

2. even if solar isn't "the" alternative energy solution the situation requires development of all types

3. the best of these companies are sitting on cash with low debt

4. most solars did not participate in the run up to Dow 10,000

5. The U.S. Department of the Treasury and the U.S. Department of Energy will give $2.3 billion in tax credits to manufacturers of advanced energy equipment. 

Authorized by the American Recovery and Reinvestment Act (Recovery Act), this new program will provide tax credits to manufacturers who produce clean energy equipment.

6. The U.S. Energy Department is making up to $30 billion in loan guarantee authority available for renewable energy and electric grid modernization projects.

7. China's bid to boost the solar energy sector could draw more than $10 billion in private funding for projects and put China on track to become a leading market for solar equipment in the next three years.

Comments on individual stocks.  Prices as of Black Friday, 2009.

TAN  buy under 15 (9.22)

ETF with good exposure to EU as well as Chinese and American solar companies.  Less volatile than individual stocks but heavily invested in FSLR, QCELL, Solarworld, the "big caps" of solar .  Rival ETF KWT holds essentially the same positions at lower trading volume.

FSLR buy under 120 (120.30)

Still the dominant player, great management, demonstrated revenue model by selling plant to NRG recently, completed deal with China for plant in Mongolia,

bought OptiSolar, acquisition of SolarCity should provide revenue stream as residential solar installations resume their inevitable multiplication.  Big cash reserve.  FSLR should benefit from stimulus since they are the most stable and established US solar company.   Rapid ramp up of Google's Nanosolar with "three times better cost point" according to Nanosolar CEO is a concern we are watching.

ASTI speculative buy under 5 (4.50)

FlexPower technology cutting edge, working with military, executive officers hold research doctorates, Norsk Hydro, ASTI's major shareholder recently  bought another large position  at  6.50 pps.  A speculative buy since they do not have the established accounts and cash flow of an FSLR.

TSL buy under 50 (44.13)

Chinese cost leader positioned to expand market share,  Quality product reputation.  Excellent quarter.

*SWV.DE buy under 15 (15.21)

Leading German international solar provider.  Big, well established company but not well equipped to deal with Chinese competition.

LDK sell  (7.56)

Company has orders and deals but one billion in debt.  Some are willing to bet China will support the company but we would prefer to buy back into LDK when the confusion has been sorted out.

SOL hold (3.85) 

Good quarter but major debt

Highly speculative play with major upside due to risk.  

Could go the way of LDK.

ESLR hold or sell (1.37)

Great product but R&D cost intensive.  One billion + in orders (unverified).

Moving operations to China.  We would prefer to buy back once the new operation is in place and details become more transparent.

SOLF buy under 9 (6.39)

Cost cutting should boost margins, vertically integrated, their margins look better than CSIQ w/lower pps.

WFR  buy under 17 (12.06)

They make picks for miners but having production problems. Just bought SunEdison, biggest US solar rooftop installer, a move we like.

*SOLR buy under 5  (4.83)

Billion dollar backlog, clean balance sheet, great tech, p/e under 10 but customers are breaching contracts and there are questions about the  oversupply of poly.  The  new CEO comes from a magazine paper company which has puzzled many investors who expected someone with more experience in the solar sector.

JASO speculative buy under 6 (3.83)

Great quarter, increased orders, paying off debt, supported by China, improved eps, undervalued because founder left company, rumors company could be acquired.  New Innovalight ink technology could be breakthrough but unproven in mass production.  Shareholder class action suit because JASO did not reveal 100m Lehman loan but otherwise strong finances. 

AKNS sell (.95)

Installer still penning deals but too risky under $1.  On our watch list as a stock that may become attractive if the company survives long enough to participate in the solar surge.

RSOL hold (3.01)

This company with arguably the most unfortunate call letters of any stock in any market is low on capital but the recent deal in California for four affordable housing communities and its attractiveness as a potential acquisition target make it an interesting play for speculators with an appetite for risk.

STP buy under 16(14.18)

A leading Chinese solar and a competitor to FSLR in utilities business.  Their goal is to be the Walmart of solar with 20% of the US market and they are training the work force.

ENER very speculative buy under 12 (10.15)

Pps at 52 week low, low current demand for roof technology, they have great roof tile tech, light weight w/o mechanical apparatus,

works on flat roofs (warehouses) but they are sitting on too much inventory.

16% bonds for 2013 indicate market considers company at risk of default.

YGE buy under 12  (13.37)

Another leading Chinese solar they beat earning estimates, strong guidance from this competitor for FSLR in utilities business that also makes modules sold by installers all over the world.

CSUN hold (3.92)

Profits way down. Probably gets support from Chinese govt but there are better Chinese solar plays

*CSIQ buy under 25 (21.52) 

Gaining market share, profiting while deploying aggressive pricing.

SPWRA speculative buy under 20 (20.05)

Company doing well, completed second project with Agilent, just closed a major deal in Italy but flurry of lawsuits and investigations around accounting and alleged misstatements with company mea culpa in December. But nevertheless a leader in the solar sector w/nearly 900m in cash.  A shares rarely break under 20, strong demand around that pps.

*ASYS speculative buy under 5 (6.20)

Equipment supplier for YGE and others but stock at 52 week high despite changes in officers and bad quarter.  Strong forward guidance.

QCE.DE sell (10.54)

Downsizing work force after nearly quarter billion dollar loss last quarter

not well positioned to compete with China.

*up on Black Friday

Categories:

A. big players, safe bets

TAN

FSLR 

SWV.DE

WFR

B. Keep an eye on

ESLR (after move to China)

LDK (after dilution or other deals for debt)

AKNS (installer could do great if it survives current environment)

ASYS (watch for pullbacks in pps)

QCE.DE (in case they emerge leaner and meaner with help from EU)

C. higher risk

SPWRA (accounting problem could turn out to be minor)

ENER (great product, lousy economy, so so management)

JASO (great but unproven tech)

D. our favorites as of Nov 2009

TSL

CSIQ

SOLF

YGE

SOLR

STP

JASO

FSLR

TAN