Harris Roen

Long only, mutual fund analyst, etf investing, energy
Harris Roen
Long only, mutual fund analyst, ETF investing, energy
Contributor since: 2011
Company: Swiftwood Press LLC
The Wall Street Journal has woken up and smelled the renewable energy dividend coffee: "IPOs Bring Fresh Wind for Green Investing" http://on.wsj.com/1IVMPHz
I agree that SPWR and SCTY are direct competitors, since they both offer a wide array of solar services, from large power plants to commercial installations to residential rooftop. Also, they are also both very vertically integrated, from manufacturing to finance to install to maintenance. RGSE is less vertically integrated, and has a small operating area, so I concur that they may feel some squeeze from these larger players.
Having said that, I believe the big picture is that there is enough opportunity for growth in solar that there will remain plenty of room for competition. Growth projections remain strong for solar, so there should be many avenues for a variety of businesses in this white-hat technology.
Another good resource to research this is at http://bit.ly/yE6bt4. You can find more resources at http://bit.ly/1DCIRh4.
I believe overseas exports will likely only have a small influence on domestic natural gas prices. Moving natural gas overseas is not like moving oil, where you can basically get it out of the ground and poor it in a big tanker. In order to prepare natural gas for export it must be pre-refined in a sense, cooled, compressed and contained. This additional processing will always keep a price differential in place.
The decrease in supply due to exports may have a small affect domestic prices. But as I said above, domestic infrastructure, or lack thereof, will be the main driver of domestic prices in the long-term.
I agree with your second point that natural gas is not a panacea. There is no perfect energy choice when it comes to base-load capacity, all come with tradeoffs. Though coal is plentiful, there are huge tradeoffs on pollution impacts, which are not priced in to its cost.
I disagree that natural gas prices will increase due to exports coming on line. Exports will likely only have a small influence on local prices for this abundant domestic resource. What will have more of an impact are improvements, or lack thereof, of domestic infrastructure (pipelines, etc.) that will allow natural gas to move more economically to power plants. The more choke points there are in the supply chain, the more volatile natural gas prices will be.
The rule takes nuclear into account in its goal to allow flexibility to states. To quote the proposed rule:
"Building Block 3 is based on shifting generation from affected fossil units to new renewable energy generating capacity, which is added over time, and new or preserved nuclear capacity, all of which is expected to be in place by 2020."
Nuclear, however, is not promoted as an option the same way renewables and natural gas are.
You can find the alert here http://bit.ly/1pFwIp8
Coincidental that you should mention SSNI, we just issued a stock alert to subscribers today noting that the company extended its smart grid “Speed-to-Value” infrastructure program to municipal utilities.
I am concerned about its negative earnings, but like the fact that they are starting to compress. I would be interested to hear why you think it is superior to either TTEC or AMRC.
Glad to have facilitated this commerce. It highlights the point that SolarCity has a business model with a low barrier to entry, another reason for caution.
Thanks for your in-depth addition. I agree with much of what you are saying, and it was not my goal in this article to lay bare what are incredibly complicated financials for SolarCity. I still contend, however, that income statements as reported are extremely important to look at. If for no other reason, that is where the majority of stock watchers are seeking comparisons.
Concerning CSIQ, You may have missed the part of the article that says:
...(even though CSIQ is headquartered in Canada, virtually all of its operations are in China).
Good point about HSOL, though the SEC filings still lists its HQ in China http://1.usa.gov/NTw46t
Nice analysis. I'd like to see the chart, but I can't get the link to work.
I believe a correction will happen to the sector as a whole, though there may be individual stocks that buck the trend. Having said that, a downdraft in some of the more closely followed stocks may pull down others in the short-term.
ASYS and ALTI also fall into the low debt camp.
Thanks Tom, I was going to create a similar list.
There are many utilities that have solar and wind as a small percentage of their energy portfolios, including Duke Energy http://bit.ly/M476QN and NextEra http://bit.ly/M476QP . More "pure play" options are harder to find, but one with a lager percentage of renewables is NRG Yield http://bit.ly/M476QR .
Good point. In addition to that, using “revenues” as “sales” is always tricky for a financial company, which is essentially what Hannon Armstrong is. To your point, I just looked at total revenue net of investment interest expense over the six quarters previous to the current reporting period, which averages to $3.6 million. This is about 25% less than what was reported in the most recent period.
I would like to see sales at JKS get back up to 2011 levels to make it a top pick.
SUNE is still looks quite speculative with relatively high debt levels, persistently negative cash flow and negative earnings. Still, sales have been steady, and I agree with you that solar install is a very good business area to be in going forward. It is also one of the most widely held stocks in alternative energy mutual fundshttp://http://bit.ly/1hujtAZ .
Retail "plug-and-play" solar is a challenge, unless you are off the grid. This is because getting the electrical connection between the house and the grid correct is critical, and best left to an electrician at this point. Having said that, Panasonic has been exploring retail solar and may be the best to successfully execute, see http://bit.ly/1dyn2a4
Yes, AMSC is a good wind play. You can read my company profile page here http://bit.ly/1aBsC7z
Good point, I hadn't thought about the seasonality factor. This will be even more important as SCTY expands beyond its current 13 state region into more northern areas.
Agreed. See my article on SCTY from last month http://bit.ly/1cvPhSf
I plan to add Silver Spring Networks (SSNI) to my tracking system this month.
The simple answer is that fair value is EPS*PE. The hard part is knowing which earnings numbers to use. I find that the “fairest” way is to look at a combination of trailing earnings, forward earnings, and historic PEs.
So for CSCO, I average three years of trailing annual EPS (1.87, 1.50, 1.17) and three years of projected annual EPS (2.11, 2.26, 2.43) and current quarter projected earnings (0.51) and total EPS for the last 12 months (1.87), which averages to 1.714.
The bottom of the fair price range is determined by taking the median of current PE and annual PE lows for the past three years (10.515), and multiplying it by the average EPS determined above (1.714) to get a low fair price of 18.02. The top of the fair price range is similarly calculated by using the median of current PE and annual PE highs for the past three years (13.545) multiplied by the average EPS (1.714) to get a high fair price range of 23.22.
CSCO was trading at 23.51 when fair value was calculated. If we take difference between its actual price and its low fair price range (23.51 - 18.02 = 5.49), and divide it by the difference between high and low fair price range (23.22 - 18.02 = 5.2), that puts it at 106% of its fair value range, which I consider overvalued.
For more information on fair value, see http://bit.ly/1i4T11J
Your research confirms that changing market conditions require changing strategies.
Thank you for your comment. It seems that generating technologies garner the bulk of attention in the alternative energy investment world─ it is easy to see a future with growing solar and wind installations. Understanding the importance of how that power gets delivered seems like a much less exciting phenomenon. The reality, however, is that grid infrastructure improvements are essential, and thus inevitable. For a full copy of my smart grid report please see http://bit.ly/18hMhq0
I believe supply and demand plays a role in commodity prices, particularly for a domestic energy source such as NG that does not transport well across oceans. Global oil as a commodity, however, has less to do with supply and demand. It is basically a speculators game that has turned into a proxy for the stock market. See http://bit.ly/1iPwa7P
Relative to other alternative energy ETFs, GRID has a good risk/reward ratio, is very tax efficient and has low management fees.
Out of all the alternative energy funds, the Roen Financial Report rates GRID as a Rank 2 fund on a scale of one to five, one being best.
Interesting stock and technology. I can't get behind it yet as an investment, but it looks to have potential so I will surely follow its developments.
In order to find a less speculative solar company, I would expand the universe to companies that are involved in solar, but it is not their principal business. Examples are KYO, GLW and AOS (for a complete list of companies involved in solar, see http://bit.ly/1gUYV4V)
First question: I'm not exactly sure what you mean by Soalr Film, as there are so many solar technologies being developed now. Please elaborate.
Second question: I write about many types of alternative energy companies for my investment website http://bit.ly/H7zqA8
As stated in the article, I consider SCTY as a speculative company at this point. This type of company may or may not fit in to a portion of one's portfolio depending on many factors, including asset allocation, diversification, time horizon, risk profile, etc.
Obviously success can be measure many different ways, and long-term commercial success of SolarCity can only be determined several years from now. However, for an IPO that is not yet a year out, success is measured by the steady increase in stock price, the ability to issue another stock offering, and two corporate acquisitions. Very few IPOs can boast this much success in just 10 months.
I would need to do more digging to confirm, but I surmise that SCTY is shifting its customer base to more and more individual homeowner installs relative to larger commercial-scale projects. So more customers, but less revenue per customer.