Revisiting Solar's Tricky Landscape

by: James Holden

This article is a follow up of one written on November 14th 2011 titled Solar's Tricky Investment Landscape Today. The original article outlined why at the time it was difficult to pick a single solar investment and why a solar exchange traded fund was a worthy option in order to avoid company specific risk. In November, it may have seemed as though a majority of all solar companies were on their way out of business but the premise of the article was that the industry would once again return strong, yet it was too difficult to pick one winner.

It's overly optimistic to consider today's positive news a full return of the industry, yet many have become upbeat as solar demand appears to be increasing. After the moves we have seen, it is a good time to observe what has happened and reevaluate the progress of solar stocks if you are still looking to get into a solar investment.

The following shows a comparison of key solar stocks highlighted in the earlier article and the current prices today.

Name Nov. 14th Price Current Price (2/9/2012) % Gain Country
Energy Conversion Devices (NASDAQ:ENER) 0.29 1.22 320.69 USA
MEMC Electronic Materials (WFR) 4.65 5.78 24.30 USA
GT Advanced Technologies (GTAT) 8.14 9.64 18.43 USA
First Solar (NASDAQ:FSLR) 44.65 49.03 9.81 USA
SunPower (NASDAQ:SPWR) 7.88 8.44 7.11 USA
LDK Solar (NYSE:LDK) 3.53 6.7 89.80 China
Renesola (NYSE:SOL) 1.99 3.17 59.30 China
Suntech Power (NYSE:STP) 2.71 4.18 54.24 China
JinkoSolar (NYSE:JKS) 6.75 10.07 49.19 China
Market Vectors Solar Energy ETF (NYSEARCA:KWT) 4.5 5.57 23.78 ETF-global
Guggenheim Solar ETF (NYSEARCA:TAN) 3.15 3.76 19.37 ETF-global
Click to enlarge

Market Vectors Solar Energy ETF is up 23.78% and Guggenheim Solar ETF 19.37%. In retrospect, Chinese solar far outperformed US counterparts with most growing upwards of 50%. Both Market Vectors Solar Energy and Guggenheim Solar are highly weighted in US solar, yet the higher Chinese holdings of the former have helped it outperform.

Domestically, the largest gainer was Energy Conversion Devices, with a gain of 320%. Many have been fearful of a default on convertible 2013 notes by the company. A January 2012 payment relieved some pressure, yet the jury is still out on how the company will refinance and raise cash or face the problems that once took the stock down to the $0.20 range. Buying under the constraints at $0.20 was nothing more than a gamble though a lucky few are happy they took the odds.

I still believe that an ETF is the best option and the solar industry has a long road of growth ahead. Chinese solar companies were harder hit in the downturn and I now believe that recent outperformance is warranted. I believe that the long term gains going forward will more consistent between American and Chinese companies, offering many options for those looking to take a position. Either ETF below would be a viable option for investors.

Top 10 Holdings of Market Vectors Solar Energy ETF (63.24% of Total Assets)
Company % Assets
MEMC Electronic Materials, Inc. 9.9
GT Advanced Technologies, Inc. 9.57
First Solar, Inc. 8.06
Trina Solar Limited Sponsored A (NYSE:TSL) 7.06
STR Holdings, Inc Common Stock (NYSE:STRI) 4.56
LDK Solar Co. Inc. American Dep 4.35
Yingli Green Energy Holding Com (NYSE:YGE) 4
Top 10 Holdings of Guggenheim Solar ETF
(64.5% of Total Assets)
Company % Assets
GCL-Poly Energy Holdings Limited 13.19
First Solar, Inc. 11.7
GT Advanced Technologies, Inc. 7.37
Meyer Burger Technology AG 6.64
Trina Solar Limited Sponsored A (TSL) 4.78
MEMC Electronic Materials, Inc. 4.44
Suntech Power Holdings Co., LTD 3.8
Yingli Green Energy Holding Com (YGE) 3.78
Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.