Suntech, SunPower, MEMC and First Solar: Four Solar Stocks Worth Investigating

There is no good way to put this but solar stocks have been beaten down pretty badly since the start of 2008. There was some irrational exuberance when it came to solar stocks in 2007. This downtrend was inevitable, but the overall market conditions might have made it worse than it should have been.

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Crude oil and solar stocks are moving in the opposite direction with predictions that oil will continue to move higher.

The inability of congress to extend the renewable energy tax breaks beyond 2008 is also creating uncertainty even though most solar cell makers depend on European countries for majority of their revenues.

At some point you have to look at some of the quality solar companies.

I personally only fell that there are four solar stocks that are worth investing in (you can trade in other solar stocks) at this point:

Suntech Power (STP)

Sunpower Corp. (SPWR)

First Solar (FSLR)

MEMC Electronics (WFR)

All of these are quality companies and leaders in different categories:

Suntech Power (STP): The is the largest solar company in China, and one of the biggest pure play solar companies in the world. Suntech also has pretty considerable R&D, and is not just a low-cost Chinese solar cell producer.

Sunpower Corp (SPWR): This Silicon Valley-based company is a leader in solar cell efficiency.

First Solar (FSLR): It is the leader in cost, and doesn’t use polysilicon which continues to remain in short supply.

MEMC Electronics (WFR): As long as polysilicon supply remains tight, MEMC electronics will benefit.

One thing that remains certain is that solar stocks will continue to remain volatile. These stocks could either be up, or down 20% a month from now. But unlike corn ethanol, solar cells are here to stay, and the technology continues to advance.

I have made my fair share of mistakes in the past when it comes to investing in solar companies. I am currently trying to see if I can pick a bottom in Suntech Power and SunPower.

Full Disclosure: No position in any of the stocks listed above.

Comments

[ecd4me:]

Why would you exclude Energy Conversion Devices (Unisolar) given their rapid build out of capacity, lack of debt, and the fact that existing capacity is sold thru 2008 and most of 2009? Also they have a very good niche market due to thin film design (lightweight for existing roofs) and no polysilicon requirement.

2008 Mar 03 10:50 AM

[bugts:]

Dear Himanshu Pandya,

Obviously you have forgotten the world largest Solar Company,
REC (Norway)
www.recgroup.com/defau...

Regards
Bugts

2008 Mar 03 11:43 AM

[Piggybank:]

All these seekingalpha guys forget about such company's as REC and Q-cells. In general there is very very few talk here about european renewable stocks. Even as they hyped the market in 2007 few ever came to talk about such great company's like Vestas or Gamesa, wich is wind power.

But my money is mostly in european renewables. REC, Q-cells, Vestas, Gamesa, and not to forget Roth & Rau, wich is an excelent company and just tottaly forgotten here.

2008 Mar 03 12:51 PM

[smooth:]

I agree that STP is going to be a winner long term. I do NOT agree that FSLR is a buy at these levels. FSLR has some of the best cost control measures and operating margins in the business. But FSLR is also trading at a HUGE premium/85x earnings. This stock continues to be pumped by Wall Street, but eventually valuation will have to come down. Too Risky!

Ironically, this author left out one of the best vertical plays in the industry...Yingli Energy (YGE).

This company is only trading at around 9x foward earnings...is expected to do $1 BILLION in revenue (more than FSLR) in 2008...is growing earnings at 75% rate, and is expanding in Brazil. They have solid financials, great reputation in Europe, and an excellent management team.

My two picks: YGE, and STP...these two companies will be long term winners.

2008 Mar 03 01:34 PM

[oceandude:]

And don't forget Q-Cells signed a huge contract for supply from LDK. Yet LDK is not trusted by Wall St... these companies signing huge deals with LDK must know something that everyone else doesn't.

2008 Mar 03 01:34 PM

[anthonyandj:]

evergreen solar is by far the best pick in my book i see this company way over sold and i see this company going up huge by the end of the year ESLR has great story's to come in the near future.

2008 Mar 03 02:10 PM

[Himanshu Pa...:]

Hey Guys,

The reason I don't include Q-Cells and REC is because they are not listed here in the US.

Also, you have to decide on your entry point for all of these stocks but I think during these tough times you have to stick with quality if you are an investor. If you are a trader then go on and trade those other Chinese Solar stocks.

Also, I would love to invest in some of these Euro Solar and Wind companies but they are not listed here in the US. There is really no pure play wind company listed in the US and that is a shame.

2008 Mar 03 04:31 PM

[Himanshu Pa...:]

For all of you who track the european solar and wind sector is there an ETF that can give me exposure to these companies?

2008 Mar 03 04:33 PM

[solar wind:]

Yes, there is a pure wind play here in the US - NACEL - NECN. I'm in it. And, not long from now, there will be others.

2008 Mar 04 02:03 AM

[GH:]

Solar wind, thanks for the heads-up about NECN.

Himanshu, regarding other American wind pure plays, there is a near-pure play: CPTC, which owns DeWind turbine, now a CPTC subsidiary. CPTC also produces high-performance power transmission lines.

2008 Mar 05 08:43 AM

[GH:]

By the way, a correction: NACEL's trading symbol is NCEN .

2008 Mar 05 08:46 AM

[fxtrader07:]

it's a very static look at the solar industry. silicone will be in oversupply not later than a year from now changhing the rules of the game. less-efficient thin film (FSLR) will lose its only advantage in the process, which is costs. While most Chinese solar plays are rather reasonably priced even counting in margin pressures and oversupplies going forward, the only true solar bubble stock is FSLR. ironically, everybody talsk about a bubble in chinese stocks and bargains in uS-stocks. when it comes to solar, it is exactly the opposite

2008 Mar 05 08:52 AM

[mkreisel:]

It's silicon. Silicone is for women.

2008 Mar 11 12:45 AM