Sunday, May 18, 2008

Solar stocks hot again ?

With oil prices hovering above $125 and energy demand not slowing down as expected, solar stocks are hot again. There are quite a few macro reasons for this:

  • Oil prices above $125 since new supplies not coming to market. Expected gap in supply and demand could be 1 to 2 million barrels per day. With Saudi Arabia thumbing their nose on President Bush's request and Goldman Sachs predicting oil to go above $141 very soon, looks like oil prices are going to remain frothy
  • Solar companies reporting growth of over 50% in revenues and profits
  • Government credits in Germany and other European countries
  • US congress considering extending solar tax credits
  • Overall pro-environment awareness
  • Economies of scale reducing cost of solar power
Prices of solar stocks picked in Nov 07 only to fall hard in Jan/Feb 08. Some of them came down more than 50-70%. However last few weeks they have been on tear. Check out following:

  • CSIQ up by 100% (this is part of my model portfolio 2008)
  • SOLF up by 100% from recent lows (disclaimer: I have small investment in this)
  • FSLR up by 60%
  • STP up by 60% from it's low below $30
  • LDK up by 70% from lows
There are just too many stocks like these to list. Here are some investing ideas:

  • Evergreen Solar (ESLR) - this has not participated in recent rally of solar stocks even though it beats profits estimates. This is due to high capital requirements coming up. However EverQ IPO (which is 1/3rd owned by ESLR) should provide a good catalyst for this stock to move up. At $9.50, this stock provides an excellent opportunity to make about 50% in next 12 months with target price of $14
  • SOLF - this stock is already up by 100% in just last 2 weeks. Results are going to be published next week. This stock could shoot up like CSIQ if results are good or fall back to teens. So this is extreme speculative play but could be a good option play
  • If you just want exposure to this play, consider ETFs like TAN, PBW or KWT
Finally if you strongly believe that oil rally is going to continue, take some position in DIG (oil ETF) when oil falls between $110-115

Have a good weekend

No comments:

Diyas, Democrats & Data Centers...!

Happy Diwali and Naya Saal Mubarak! What a week to light the diyas: a blue wave, the first national referendum on AI data centers, the worst...