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The Copenhagen meeting starts next week, and world leaders have been
pledging to combat global warming, with President Obama promising a 17%
CO2 cut by 2020 and a 40-42% cut in 2035, according to the White House.
This is rare because the US has never promised such a thing to the world, even during the Kyoto protocol meeting. This is why the Copenhagen meeting is getting a more serious response. Look at China, right after the US commitment, the nation promised a 40-45% CO2 cut by 2020 with US$454B being spent on green energy development over the next 5 years. That is $45B per year.
I have mentioned in my previous article that A-Power and First Solar
will get a big chunk of the stimulus money and get a huge boost in
their business. Westerners have been dubious about China for decades
now, but they have succeeded every time when they plan to do something.
China has a strategic plan every 5 years to commit to solving issues
facing the nation. Last time, it was Deng Xiaoping, the de facto leader
at that time, who pledged to quadruple China's GDP from the 1980 level.
By 2000, they exceeded their goal. This time the nation is facing an
energy shortage and nationwide pollution and the solution proposed by
the Chinese government is simple, to invest US$454B in 5 years to solve
it. One thing for sure is that investors don't have to ask "where do
they get the money from?", because simply China has the money, while
the US government does not. So the question becomes really, "how are
they going to invest?"
Investors look no further than these three sectors:
1. Solar energy
China
is leading the solar energy market. The Chinese government knows how to
make full use of it to achieve their environmental goal. Here are some
companies already benefiting from China's green stimulus.
Solarfun:
the company earned $0.37 EPS in Q3 with a revenue of $144.6M, guided
strong Q4 and 2010, market cap is merely $350M. SOLF is the most
undervalued solar stock based on EPS and market cap. The stock was
trading at $6.5 on Monday.
Trina Solar:
the company is red hot as a momentum play and also reported very good
Q3 with EPS of $1.29 and revenue of $249.7M, and is expanding in China
and the US. The small float of outstanding shares makes its share price
very volatile. The stock was trading at $45.5 on Monday.
Suntech Power:
Suntech is turning the corner as well, however the company is so big
that it may take some time to gain momentum in its business. It is no
doubt that Suntech is the leader in the sector in terms of capacity and
market share.
2. Wind energy
Wind energy
definitely has more advantages over solar in terms of cost per watt. As
I stated in the previous article, A-Power is a major player in China
and worldwide. Its business is well supported by local government (this
means a guarantee of stimulus cash into the company). Revenue growth in
2010 could be exponential given the contracts the company is signing
both domestically and overseas. One thing that is interesting is that
the stock has 20% short interest, which could trigger a vicious rally
if Q3 earnings beat this week. Some other local wind energy companies
are also playing a big role in China, such as Goldwind.
3. Environmental control sector
This
is the sector investors usually ignore, however with the huge boost
from the Chinese government, companies in this sector are benefiting.
Companies such as GE (GE), Siemens (SI) and China's Rino international (RINO) are deserving of investment.
Disclosure: long GE, SOLF, FSLR
