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Solar Stocks Explode to the Upside

By Peter Lynch
Exclusively for InvestorIdeas.com
March 30, 2008

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Everyone who has followed solar stocks over the past 3 years has seen exciting times, to say the least. Solar stocks have been the “place to be” until the 4th quarter of 2007, when solar stocks began a prolonged (and much overdue) correction.  In addition, the market as a whole has been the most volatile market in many years, possibly the most volatile ever.  These are exciting times we live in.

Last week, seemingly out of nowhere, solar stocks literally exploded (up over 15% for the week) catching almost everyone by total surprise.   As you can see from the table below, almost every company participated in the rally and many  were up far greater than the 15% average.

Symbol

Company Name

Performance %

ASTI

Ascent Solar Technologies, Inc.

73.3

CSIQ

Canadian Solar Inc.

21.3

CSUN

China Sunergy Company Ltd.

4.7

DESC

Distributed Energy Systems Corp.

15

DSTI

DayStar Technologies Inc.

18.4

EMKR

EMCORE Corporation

-14.5

ENER

Energy Conversion Devices Inc

12.2

ESLR

Evergreen Solar, Inc.

8.3

FSLR

First Solar, Inc.

9.2

JASO

JA Solar Holdings Co., Ltd

18

LDK

LDK Solar Company Ltd.

20.4

SOLF

Solarfun Power Holdings Co.

20.3

SPIR

Spire Corporation

35.7

SPWR

Sunpower Corporation

7.9

STP

Suntech Power Holdings ADR

18.9

TSL

Trina Solar Limited

11.4

WFR

MEMC Electronic Materials, Inc.

-16

YGE

Yingli Green Energy Holding Company Limited

15

 

 

 

 

Average Performance 3/24/08 to 3/28/08

             +15.53

 

 

 

 

Major Indexes

 

DJIA

Dow Jones

-2.7

SPX

S&P 500

-2.6

NASD

NASDAQ

-2.8

What caused this impressive rally that literally caught everyone by surprise? 

The general market has recently been in turmoil over the housing crisis, the credit crunch and the looming fear of an impending recession.  Not exactly a general market environment conducive for rallies in any sector.  But in spite of this bleak backdrop the solar sector roared ahead regardless.

In my opinion, one of the primary reasons for this solar rally is really quite simple – NO MORE SELLERS were left to drive solar stock down any further.  If you look at the table below, solar stocks have been pounded mercilessly since the beginning of the year, with the average stock being down over 46%, some suffering much great damage. At some point, things just simply go too far in one direction and simply run out of downside selling pressure. I think this is what happened with the solar sector.  There were literally no more sellers left and only buyers remained.


Symbol

Company Name

Performance %

ASTI

Ascent Solar Technologies, Inc.

-66.9

CSIQ

Canadian Solar Inc.

-40.6

CSUN

China Sunergy Company Ltd.

-58.2

DESC

Distributed Energy Systems Corp.

6.5

DSTI

DayStar Technologies Inc.

-60.2

EMKR

EMCORE Corporation

-59.7

ENER

Energy Conversion Devices Inc

-25.1

ESLR

Evergreen Solar, Inc.

-54.6

FSLR

First Solar, Inc.

-27.5

JASO

JA Solar Holdings Co., Ltd

-35.6

LDK

LDK Solar Company Ltd.

-50.9

SOLF

Solarfun Power Holdings Co.

-70.5

SPIR

Spire Corporation

-56.1

SPWR

Sunpower Corporation

-53.2

STP

Suntech Power Holdings ADR

-62.7

TSL

Trina Solar Limited

-47.7

WFR

MEMC Electronic Materials, Inc.

-7.6

YGE

Yingli Green Energy Holding Company Limited

-61.9

 

 

 

 

Average PV Stock Performance 1/1/08 - 3/20/08

-46.25

 

 

 

 

Major Indexes

 

DJIA

Dow Jones Industrials

-6.8

SPX

S&P 500

-9.5

NASD

Nasdaq

-14.9

 

 

 

What does the future hold for the solar sector?

The bottom line is that the future of the solar stock sector and the solar industry as a whole is incredibly “BRIGHT”.  Actually given the currently state of all other energy sources (fossil fuels – oil, coal and natural gas) there really cannot be an alternative to solar and other renewable over the long term.

However, investors should keep in mind that although the future is certainly bright it will be very volatile and it will exhibit all of the characteristics of a typical emerging industry.  There will be big winners and some losers as technology develops and accelerates to produce better and more efficient solar products. 

At the current time I can see a number of potential problems (excess supply in early 09, failure to extend U.S. tax credits etc.) waiting in the wings for the solar sector, but I think the companies who will survive will be the companies that can accelerate their technology development, maintain their margins and expand their business.  Examples of these types of companies would be companies that are:  vertically integrated  in the traditional silicon segment, have cost effective thin film products or are in higher margin areas such as building integrated photovoltaics (BIPV).

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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