First Solar: Are You Buying This Solar Juggernaut?

| February 9, 2011 | 0 Comments

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.

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.

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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