First Solar: Are You Buying This Solar Juggernaut?
The Dynamic Wealth Report
February 9, 2011
by Justin Bennett, Editor
We’re a month into 2011 and the stock market is continuing its steady
rise. Market analysts the world over were expecting a pullback for
stocks in January.
But so far the markets have only seen a few quick “hiccups”...
Here we are in early February and the S&P 500 is already sitting on
gains of nearly 5%. Stocks continue to creep upwards as many investors
feel increasingly bullish. Many industries are pushing to new 52-week
highs.
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But what’s the best performing industry so far in 2011?
Go ahead and take a guess… the outperformer is an unlikely one.
Technology? Nope…
Oil and Gas exploration? Close but no cigar…
How about health care, financials, or maybe basic materials? Guess
again…
The strongest industry performance since the first trading day of 2011
is none other than… drum roll please… solar. The industry many investors
love to hate is up nearly 15% since January 4th.
From worst to first?
Solar has been on the “cusp” of greatness for years now. But it isn’t
taking off as quickly as many thought. And for good reason… high costs
relative to cheaper alternatives like coal have been hindering solar for
years.
Solar investors suffered losses as the industry endured significant
growing pains in recent years. Solar module oversupply hampered the
industry in 2009. Fears of reduced European subsidies sent solar stocks
flailing in 2010.
It’s been a long couple of years for solar investors…
Solar stocks have underperformed drastically since the broad markets
bottomed in March of 2009. In fact, the Market Vectors Solar Energy ETF
(KWT) is up a mere 48% (still not bad!) while the S&P 500 is up a sweet
94%.
The relative weakness is convincing many investors solar is still a pie
in the sky idea. Just like it was decades ago when President Jimmy
Carter planted solar panels on the roof of the White House.
But some investors (and I’m one of them) think the solar industry is one
to watch in the near future.
Here’s why…
Currently, the amount of energy the world gets from solar is tiny
compared to a heavyweight like coal. In fact, worldwide energy
generation from solar came to a mere 0.03% of total energy produced in
2009… practically nothing.
But that means the industry has nowhere to go but up…
From now to 2015, the global solar industry is expected to grow at a
25%
compound annual pace. Regional markets in the US, Japan, and China are
expected to grow the quickest in coming years.
This growth has many analysts upgrading solar names in recent weeks…
A low cost producer of thin film solar modules, First Solar (FSLR) was
added to Goldman Sachs conviction buy list on January 24th. The
juggernaut of the solar industry is trading near 52-week highs on the
news.
But before you rush out and buy the high priced behemoth, consider these
cheaper alternatives…
Stocks like Trina Solar (TSL) and LDK Solar (LDK) are offering a good
value relative to their future growth prospects. LDK even raised Q4 and
full year 2011 guidance on January 6th. They’re seeing rising shipments
for solar wafers and expect higher revenues as a result.
Solar is going from worst to first…
Solar investors have taken a beating in recent years. But as
conventional energy prices rise and solar becomes more competitive,
solar companies are going to start basking in some major profits… so
should investors.
• Uranium (Over $70 a pound)
Uranium prices continue to surge as various mining companies recently
lowered production targets for 2011. A tighter uranium market means
higher prices for the nuclear fuel. Also, President Obama’s State of the
Union address wants low carbon electricity, like nuclear, to power 80%
of the US economy by 2035.
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