Solar Investing: Buy Now For A Bright Future…
The industry many investors love to hate may be turning a corner.
You see, solar has been evolving into a mainstream energy contender for years. And the lure of solar profits has been dangling in front of investors’ eyes for just as long.
But so far the carrot’s been out of reach…
Stocks in the industry have had a few good moments, mixed with plenty of bad. The result is a long stretch of disappointment for solar investors. It seems the emerging industry is growing its wings, but isn’t quite ready to fly.
However, a recent development signals this troublesome trend is about to change…
French oil and gas giant Total (TOT) just signed a deal to purchase a 60% stake in US solar manufacturer SunPower (SPWRA). The $1.3 billion deal is a reassuring sign for the future of solar.
Why?
As the energy industry evolves, major oil companies will likely start diversifying their portfolios. Instead of providing fossil fuels alone, they’ll turn to other energy technologies.
Let’s face it, they need to secure their spot in the next generation of energy.
The trend will transform large oil and gas companies into broader energy companies. These next generation energy companies will provide wider energy solutions.
Solar and wind will make an ever increasing contribution to our energy supplies… and companies like Total know it. Why else would they pay a substantial premium to take a majority interest in SunPower… a 45% premium to be exact?
Clearly, the world’s 5th largest oil company sees a big future for solar.
Will the deal be a sign for the market to wake up to other opportunities in the solar industry?
At the moment, investors are shunning the industry as fears of a European solar slowdown take hold. But the current lack of investor interest has many top-notch solar companies trading at insanely cheap valuations.
Take Yingli Green Energy (YGE) for example…
The Chinese photovoltaic manufacturer is trading just over 7x their 2011 earnings estimate. That’s a low P/E for a company projected to grow earnings 20% a year going forward.
In other words, YGE is trading at a shocking 65% discount to their projected growth rate. No doubt about it, YGE is a superstar stock of tomorrow sitting at near rock bottom prices.
YGE has been trading sideways for almost a year. And they’re not the only one. A number of fast growing solar stocks with incredibly cheap valuations are stuck in a sideways slump.
But it won’t be long before the good deals in the solar sector are uncovered.
I’m sure I’ll receive some hate mail for pushing solar…
Like I said earlier, many investors have been burned by solar stock in the past. These stocks have looked sunny before only to have clouds roll in and rain on the parade.
The negative investor sentiment is what makes investing in the industry so challenging. Solar stocks can get bid higher in a hurry, but they fall even faster as “investors” race for the exits on bad news.
It’s really kinda funny… nobody wants to be stuck holding a bag of solar stocks.
But the Total deal may be the game changer the industry’s looking for…
Other large oil and gas companies are sure to follow in Total’s footsteps. They realize the future of energy depends on alternative sources like solar.
The real question is… will you?
Category: Stocks
