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Solar Stocks in 2007 - Photovoltaic Boom Times

By Peter Lynch
Exclusively for InvestorIdeas.com
January 15, 2008

In past articles I have tried to apply general descriptions for activity in the years that I feel were, in retrospect, the Dawn of the Solar Age.

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2005 was “The Year of Solar Stocks”, solar stocks outperformed the general averages by 20 FOLD, gaining an average of 134% verses the major indexes average gain of 6%.

2006 was “The Year of the Solar IPO”, a year in which the largest number of solar related companies, to date, came public though IPO’s.

2007 was “The Year of Thin Film Solar” this was the year when the industry and the general public really seemed to focus in on thin film technologies and their longer term potential. In addition, I think the foundation was set for huge future growth in thin film technologies.

On the other hand, most of 2007 was a “neurotic” year for the majority of American stocks. The market experienced incredible volatility with wide swings in the major indexes.  With huge up days followed by huge down days and incredible volume. After all of this activity, the market ended up approximately 3.5% for all that activity and effort. Activity like this, when viewed from an historical perspective is NOT a positive indicator for the overall stock market.

But in the midst of all of this chaos, solar stocks have had a simply incredible year with an average gain of over 200%.

Symbol

Company Name

Performance % 2007

ASTI

Ascent Solar Technologies, Inc.

757.2

CSIQ

Canadian Solar Inc.

168.6

CSUN

China Sunergy Company Ltd.

50.18

DESC

Distributed Energy Systems Corp.

-88.9

DSTI

DayStar Technologies Inc.

67.1

EMKR

EMCORE Corporation

176.7

ENER

Energy Conversion Devices Inc

-1

ESLR

Evergreen Solar, Inc.

128.1

FSLR

First Solar, Inc.

795.2

JASO

JA Solar Holdings Co., Ltd

365.4

LDK

LDK Solar Company Ltd.

27.13

SOLF

Solarfun Power Holdings Co.

179.3

SPIR

Spire Corporation

185.6

SPWR

Sunpower Corporation

250.8

STP

Suntech Power Holdings ADR

142.1

TSL

Trina Solar Limited

184.7

WFR

MEMC Electronic Materials, Inc.

126.1

YGE

Yingli Green Energy Holding Company Limited

251.82

 

 

Average Gain

209%

 

Indexes for 2007

Performance % 2007

DJIA

Dow Jones

6.4

SPX

S&P 500

3.5

NASD

NASDAQ

9.8

 

 

 

As incredible a year as this was there is good news and bad news that comes as a result of this record setting performance.  The good news is that this type of performance is allowing solar stocks to get the attention of the investment community and attract much needed capital for future expansion.  The bad news is that this type of performance is more than likely NOT sustainable.  Solar stocks have moved too far too fast and are long overdue for a much needed correction.

I have been worried about this “bubble like” action in solar stocks for a while and have warned investors that this is a dangerous time and that caution is advised.  In addition, the general market has been in a serious downdraft since the beginning of the year.

As a result, solar stocks have taken a fairly serious beating in the first 8 trading days of 2008 with an average loss of over 10.5%.

Symbol

Company Name

Performance % 2008

ASTI

Ascent Solar Technologies, Inc.

-12.4

CSIQ

Canadian Solar Inc.

-23.1

CSUN

China Sunergy Company Ltd.

-26.6

DESC

Distributed Energy Systems Corp.

70

DSTI

DayStar Technologies Inc.

-8.8

EMKR

EMCORE Corporation

-16.1

ENER

Energy Conversion Devices Inc

-18

ESLR

Evergreen Solar, Inc.

-12.9

FSLR

First Solar, Inc.

-17.3

JASO

JA Solar Holdings Co., Ltd

4.5

LDK

LDK Solar Company Ltd.

-7.5

SOLF

Solarfun Power Holdings Co.

-22.8

SPIR

Spire Corporation

-7

SPWR

Sunpower Corporation

-16.7

STP

Suntech Power Holdings ADR

-18.8

TSL

Trina Solar Limited

-21.7

WFR

MEMC Electronic Materials, Inc.

-18.9

YGE

Yingli Green Energy Holding Company Limited

-10.7

 

Average Loss

-10.5%

 

Indexes year to date 2008

 

DJIA

Dow Jones

-5

SPX

S&P 500

-4.6

NASD

NASDAQ

-8

 

 

 

This type of volatility has been all too common in solar related stocks throughout 2007 and early 2008.  It has always been my experience that volatility like this is more characteristic of the peak of a cycle, rather than the bottom of a cycle. As a result, of this and a number of potential problems that could arise in 2008 (which I will cover in the next article), I would take a VERY cautious approach to the market and to solar stocks in particular. This is still a very high risk market and one only suited for the most aggressive and fleet footed traders. Photovoltaics have indeed, been “booming”, but it is always wise to consider  - that what goes up, must also come down and after a “boom” there frequently comes a “bust”.

This in no way alters my bullish view of our bright solar future and solar stocks in general. I just think we are in a period of transition where there will still be plenty of money to be made, but investors will just have to be more savvy and selective in their investments.

J. Peter Lynch has worked, for 31 years as a Wall Street analyst, an independent equity analyst and private investor, and a merchant banker in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977and is regarded as an expert in this area. He is currently a financial and technology consultant to a number of companies. He can be reached via e-mail at Solarjpl@aol.com.

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