Solar Investing: Solar’s Up Huge… What’s
Going On?
The Dynamic Wealth Report
January 12, 2012
by Justin Bennett, Editor
Alternative energy investors are keenly aware that 2011 was a disaster
for solar manufacturers. A global solar cell supply glut sent panel
prices plunging. As a result, profit margins at the world’s top solar
cell makers dropped like a stone.
Not surprisingly, investors decreased their exposure to solar stocks in
a big way. Nearly every stock in the industry was taken out to the
woodshed over the past eight months.
But now it looks like the tide is turning…
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Yesterday was a huge day for solar stocks. Here’s a quick rundown
of a few big solar movers…
- JA Solar (JASO) - up 35%
- JinkoSolar (JKS) - up 32%
- Trina Solar (TSL) - up 29%
- Suntech Power (STP) - up 27%
Why were these names up so much yesterday?
A widely watched Deutsche Bank analyst said solar demand may improve
more than expected in 2012.
What’s more, one of the most bearish analysts on the solar industry, Axiom
Capital’s Gordon Johnson, changed his tune yesterday.
He wrote to clients that he was removing a sell rating on five big name
solar stocks. First Solar (FSLR), Yingli Green Energy (YGE),
Trina Solar
(TSL), Suntech Power (STP) and Power-One (PWER) rallied hard on the
news. Short sellers ran for the exits like rappers at a Reba McEntire
concert.
But there’s more good news…
It appears solar cell pricing is stabilizing in recent weeks… and that’s
a huge deal. It means the solar cell supply glut is starting to wear
off.
As many of you know, I’ve made bullish calls on the solar industry in
the past. In my opinion, the long-term prospects for this industry are
huge. I’ll also admit, the short-term pricing issues caused more damage
to solar stocks than I thought possible.
But notice how I’m calling out a distinct difference between short-term
industry road bumps and long-term industry potential.
I pointed this same fact out to Energy Investor subscribers in September
2011. In that issue, I was talking about a deeply undervalued Chinese
solar heavyweight.
I wrote…
“Solar industry analysts expect the supply glut to start reversing in
early 2012 as Japan, Australia, India, and South Korea heat up their
solar programs. (XX) stated in a Q2 earnings call they’re exploring
growth opportunities in all of these markets.”
I went on to say…
“The good news is, these margin issues are pushing the stock down to
bargain basement levels. And when solar cell prices stabilize on growing
demand from Asian countries, (XX) margins should stabilize as well.
When that happens, investors should rush back into (XX) shares...”
The stock I talked about in that issue is now up nearly 30% from our buy
price. Of course, I’m not mentioning which stock because it still has
enormous upside potential. These kinds of profit ideas are reserved for
Energy Investor subscribers.
Why am I mentioning this?
I’ve caught plenty of flack for being a believer in the solar industry
over the past six months. Of course, it’s easy for solar skeptics to
toot their horn when most stocks in the industry were down 50% or more
last year.
But don’t let 2011’s industry headwinds fool you…
What we saw was a short-term pothole on the long-term alternative energy
super highway. And now, many of the stocks in the solar industry are
insanely undervalued because of it.
Keep in mind, most solar companies are still likely to report horrific
Q4 2011 earnings in coming weeks. However, I think that news has been
priced into the market many times over at this point.
If you’re not long solar at these levels, you’ll kick yourself in years
to come.
Until next time,
Justin Bennett
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