A recent Associated Press article states that "A group of seven U.S. solar panel companies filed a federal trade complaint Wednesday against Chinese companies they accuse of "dumping" solar products on global markets to depress prices. The U.S. solar companies filed their case with the Department of Commerce and International Trade Commission. The complaint asks the government to impose tariffs of "well over 100 percent" on Chinese solar imports, said Greg Stanko, a spokesman for the U.S. companies. The group of U.S. solar manufactures said in a statement that China is unfairly subsidizing its industries with "an arsenal of land grants, contract awards, trade barriers, financing breaks and supply-chain subsidies to advance its pricing and export aggression." Read more on the complaint here.
I can't say I really agree with the complaint since the whole industry is suffering from low prices. Most solar stocks have been a disaster for the past few months and this newly filed complaint is just another sign of the distress this industry is in now. Furthermore, polysilicon prices continue to drop which only exacerbates the situation. Once this storm has passed, it's likely that more solar companies might be out of business and there could be some consolidation in this sector. Whether or not the complaint changes anything, it seems clear that only certain Chinese solars will be long term winners and very few (maybe a couple) of publicly traded U.S. based solars will be able to compete. The pain for investors is likely to continue for awhile but at some point, if you pick the right stock and buy at the lows, some of these could provide large gains. Here are some solar stocks to watch for signs of a bottom:
LDK Solar (NYSE:LDK) is trading at $3.05. The 50-day moving average is $4.63 and the 200-day moving average is $8.64. LDK has earnings estimates of about 23 cents per share for 2011, and 35 cents for 2012. These estimates are sharply lower than what they were a few weeks ago due to margin pressures and a significant reduction in revenue guidance from LDK. The high level of debt at LDK is a major concern for some investors, and that concern only grows when profit margins are being squeezed.
Jinkosolar Holding Co., Ltd. (NYSE:JKS) is trading at $8.34. The 50-day moving average is $10.70 and the 200-day moving average is $21.67. The 52 week range is $4.55 and $41.75. JKS has earnings estimates of about $4.34 per share for 2011, and $1.82 for 2012. JKS recently announced the idling of one factory due to possible pollution issues. The stock sold off on that news but has since rebounded. I think this stock could retest the recent lows, so this could be a good time to sell before another possible decline.
ReneSola, Ltd. (NYSE:SOL) trades at $2.08. The 50-day moving average is $2.70 and the 200-day moving average is $6.73. The 52 week range is $1.46 and $14.13. SOL is estimated to earn about 42 cents per share in 2011 and 41 cents in 2012. SOL has a book value of $7.11, so these shares are trading well below book value. Renesola has been buying back shares in recent weeks and the balance sheet is not as leveraged as some of the other solar companies here. I own a small position in this stock and I am looking for signs of a bottom before considering any further purchases.
JA Solar Company, Ltd. (NASDAQ:JASO) trades at $1.80. These shares traded down from a 52 week high of $9.77, and recently hit new lows of $1.46. The 50-day moving average is $2.72 and the 200-day moving average is $5.36. JASO has earnings estimates of about 43 cents per share for 2011 and 42 cents for 2012. This puts the PE ratio at about 4. JASO has a book value of $6.76. It appears that many investors believe that JASO will not meet current and forward earnings estimates, but if they do this stock looks cheap.
Trina Solar, Ltd. (NYSE:TSL) has pulled back to about $6.83. The 50-day moving average is $10.53 and the 200-day moving average is $20.96. The 52 week range is $5.28 and $31.08. TSL is estimated to earn $1.43 per share in 2011, and $1.28 in 2012. TSL has a book value of about $17.41 per share. Trina is been an industry leader and this stock is a good candidate for a rebound ... at some point.
Yingli Green Energy Holding Co., Ltd. (NYSE:YGE) is trading at $3.53. The 52 week range is $2.75 and $13.59. The 50-day moving average is $4.59 and the 200-day moving average is $8.85, so the shares are trading well below support levels. Estimates for YGE are about 83 cents per share in 2011, and 49 cents for 2012. This puts the PE ratio at about 4. Yingli shares have been a little stronger when compared to some other solar stocks. This is another stock I would consider buying when a clear bottom is in for this sector.
First Solar Inc. (NASDAQ:FSLR) shares trade for $51.07. The 50-day moving average is $80.38 and the 200-day moving average is $122.77. FSLR has earnings estimates of about $8.94 per share for 2011, and $10.39 for 2012. This puts the PE ratio at about 7. Book value is listed at $41.43 per share. This company is based in the United States, and it is one of the few American firms that have a shot at competing with Chinese firms listed above. This is a high quality company and FSLR shares are worth considering after it bottoms out. This stock hit a new 52 week low of $50.88 this week, so it is still too early to say this is the bottom.
The data is sourced from Yahoo Finance and Stockcharts.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes.
Disclosure: I am long SOL.