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Thomas Westfall
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University of Ottawa graduate. Baccalaureate in Commerce, option in Finance. I have been investing for several years in many sectors, both in Canada and abroad. My market research is based on strong fundamentals and in-depth fundamentals analysis. I am the Co-Founder of LikeALittle.com,... More
  • Clean energy: How Chinese Solars will benefit. 5 comments
    Mar 28, 2011 8:42 PM | about stocks: FSLR, JASO
    Solars: An industry with sunny days ahead

    The past few weeks have seen turbulent times in the energy sector. The crisis in Japan has brought nuclear fears back to the forefront of many people's minds. This has put into question the future of nuclear power plants both in Japan and abroad. Nobody wishes to see the same kind long term fallout the Japanese are faced with.

    This week, after a historical win by the German Green Party, another country may be moving towards a nuclear-free energy plan. The fears caused by the Japanese crisis had a noticeable effect on the recent election and may have further repercussions on other industrialized nations. Green parties around the world will use this as a vaulting point for increased political power. We can rest assured a shift towards cleaner energy will be the end result.

    The Italian government recently backed out on plans to cap the amount of solar output in the country. This has given investors an optimistic outlook in both the short and long term.

    A tale of two countries

    Clean energy companies will be the first to benefit from the recent crisis. I will focus my analysis on two solar companies:

    JA Solar Holdings Co.
     (JASO)
    Shortly after the crisis, JASO rose 6.9% to outperform the market during the crisis. The entire solar sector has great potential in the coming months and years, however they have been hampered recently by very aggressive short positions. JASO currently has a 2.3 short ratio. The company is currently trading at a 4.52 P/E despite an over 400% quarterly earnings growth year-over-year. At $7.08, JASO is slowly approaching its 200 day moving average and will probably break through it with ease once the many short positions have covered their unrealistic positions.

    First Solar, Inc. (FSLR)
    FSLR is the largest solar company in the US and as such has benefited from much of the same environmental factors as JASO. The amount of short positions are significantly less with a 7.9 ratio. FSLR is also benefitting from positive analyst review given they are an American company in a time where Chinese organizations are depressed.

    These two companies are fundamentally similar, they both operate in the same sector, have similar returns on assets. However, the stock price of JASO is severely undervalued in comparison to its American counterpart. FSLR has a P/E almost five times higher, a price to book of almost 4 times higher. These trends should not hold for much longer given JASO's growth in earnings and the recent comments by the Japanese Prime Minister about the focus on clean energy for the rebuilding of Japan's north-east.

    The chinese solars will be great investments for years to come. JA Solar Holdings Co. with its 1.05 Price to Book ratio is selling at a discount that simply cannot last given the amount of positive news for the company and the sector.

    Disclosure: I am long on JASO.


    Disclosure: I am long JASO.
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Comments (5)
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  • Interesting article about the solar sector, I have been interested in a few of these companies due to the nuclear crisis in Japan.
    30 Mar 2011, 02:48 PM Reply Like
  • Author’s reply » Thank you LouisB, the sector has great potential. As do many Chinese clean corporations. CCGY (China Clean Energy) just released record earnings on strong company fundamentals and proper management. See here: yhoo.it/gNNiuI
    30 Mar 2011, 07:24 PM Reply Like
  • Great article, I enjoyed you analysis of the macro effects. As an academic, many of us can miss the big picture, but this helps ground us who rely far too much on technical analysis over logic.
    30 Mar 2011, 07:33 PM Reply Like
  • Can't wait for the short squeeze. US toying with prices on these Chinese solars too much.
    22 Apr 2011, 10:57 AM Reply Like
  • On JASO that is...
    22 Apr 2011, 10:58 AM Reply Like
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