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When Will Solar Stocks Bottom? $LDK $FSLR $TSL

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Summary

Solar stocks have continued their weakness relative to the marketsince the beginning of the year continuing their sub-par performancesince January of 2010.

As I have mentioned a number of times in the past one of the bestand simplest indicators, from my experience, is to compare the price ofany stock to its 50 day moving average (50 Day MA) and its 200 daymoving average (200 Day MA).

IF a stock price’s is below its 50 Day MA it is a short termnegative and it if is above its 50 Day MA it is a short term positive.These two points can be very successfully used to trade a stock – it ismoves above the 50 Day MA you buy it and if it breaks below its 50 DayMA you sell it.

Current Status

If you look at the table below it lists all of the 22 Photovoltaicpublicly traded stocks we follow in the U.S. markets. I think thenumbers speak for themselves:

91% of the stocks are trading BELOW their 50 day MA. The only exceptions being SOLR which is the last remaining stock we hold and SPWRA which is up as a result of a purchase of control of the company by the French oil company TOTAL.

86% of the stocks are trading BELOW their 200 Day MA. The only exceptions being SOLR,SPWRA and EMKR.

In addition, 82% of the stocks (18 of 22) have their 50 Day MABELOW their 200 day MA – another very negative indicator. A healthystock will always have its 50 Day MA ABOVE its 200 Day MA.

US Photovoltaic Companies – as of the close 5-27-2011

Symbol Name Recent
Price
50 Day
MA
200 Day
MA
ASTI Ascent Solar Technologies, Inc. 1.32 1.802 2.988
CSIQ Canadian Solar Inc. 9.28 10.19 12.839
CSUN China Sunergy Company Ltd. 2.38 3.549 4.19
DSTI DayStar Technologies Inc. 0.72 0.824 1.451
EMKR EMCORE Corporation 2.35 2.396 1.655
ENER Energy Conversion Devices Inc 1.37 1.924 3.811
ESLR Evergreen Solar, Inc. 0.73 1.355 3.163
FSLR First Solar, Inc. 121.37 138.56 140.413
HSOL Solarfun Power Holdings Co. 5.9 6.566 8.928
JASO JA Solar Holdings Co., Ltd 5.67 6.348 7.212
JKS JinkoSolar Holding Company Limited 25.29 25.539 26.526
LDK LDK Solar Company Ltd. 7.02 10.461 10.793
RSOL Real Goods Solar, Inc. 2.42 2.491 2.709
SOL ReneSola, Ltd. (United Kingdom) ADR 7.2 8.795 9.948
SOLR GT Solar International Inc 11.53 10.763 9.507
SPIR Spire Corporation 3.39 4.144 4.831
SPWRA Sunpower Corporation 20.79 18.4 14.893
STP Suntech Power Holdings (China) ADR 8.04 8.725 8.74
TSL Trina Solar Limited (China) 22.02 26.703 26.346
WEST Akeena Solar, Inc. 1.18 1.743 2.084
WFR MEMC Electronic Materials, Inc. 10.12 11.601 11.932
YGE Yingli Green Energy Holding Company 8.74 11.425 11.437

Solar Seven Selection Criteria

Back in the beginning of 2010 I explained that we were rating allof our solar stocks and that the seven strongest stocks – later named -"The Solar Seven" were the strongest stocks among the industry. Myrating system to select the "strongest" stocks is a proprietarycombination of various relative strength measures, technical measuresand some fundamental components.

What can we learn from this amazing performance in a terrible solar market?

What we can learn is that there are always stocks going upsomewhere, even in a terrible market and if you select the "strongest"stocks in a given market segment you will, on average, do quite well.Even if, the strongest stocks are all umbrella’s companies and we are in a drought – regardless of what you "think" you know or "think" shouldbe – always remember that "what is, is" and always buy the strongeststocks in a sector or market. You may not always know "why" somethinghappens, but you will, on average, do much better than most investorsand most likely better than the market.

Why are Solar Stocks down and when will they turn around?

As to why solar stocks are down – there are ONLY opinions and no real answer. It could be a number of things:

  • Worldwide capacity is almost double worldwide projected demand
  • Margins are, as a result of #1, probably going to shrink industry wide.
  • The U.S. Treasury Grant may not be renewed after it expires at the end of 2011
  • Recession has cast further doubt on the status of feed in tariffs worldwide
  • General lack of any long term or coherent energy policy in the U.S. despite over 30 years of talk only and ZERO significant action.

But it is really not important to understand exactly why solarstocks have dramatically underperformed over the last 18 months. Whatis important is understand when to buy them and when to sell them. Itrequires buying and selling utilizing some form of system and to beconstant. The system can be as simple as buying when a stock goes ABOVE its 50 Day MA and selling when it goes BELOW.

What you should NOT do is to buy stocks because you "think" orsomehow "know" what they should do. That is a system that will, withoutquestion, leave you with far less money than you started with. You have to remember to look at "what is" and NOT what you think should be andalways remember the words of Warren Buffer – "Never lose money"…..if you find a system that works it will minimize your loses and let yourprofits run.

When will solar stocks turn around?

Solar stocks will give us a signal when they are starting to turnaround. Stocks 50 Day MA will move ABOVE their 200 Day MA and stock’sprices will break above their 50 Day MA. It will happen right beforeour eyes and also, at the same time, you will probably read in the press how hopeless the solar sector is and that it will never get better. At that point, the final group of sellers will finally give up and through in the towel and all that will be left will be buyers. That is the wayit has always worked and I certainly believe it will happen this wayagain.

Background Notes

Keep in mind that there are two basic types of equity (stock)analysis. Below is a brief description of each and its primary purpose:

Fundamental Analysis – this is the analysis ofthe fundamental financial condition of the company to identify whichstocks are stocks you may want to buy when the timing is right. Thisform of analysis will give you NO indication of the best time to buy the stock.

Technical Analysis – this form of analysis willtell you "when" to buy a stock. It will do this by showing you (in chart format) the basic interaction of supply and demand and when the twochange and shift which will indicate a time to buy or a time to sell.

Mr. Lynch has worked, for 34 years as a Wall Street security analyst, anindependent security analyst an investment banker and private investorin small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this field. He wasthe contributing editor for 17 years to the Photovoltaic Insider Report, the leading publication in PV that was directed at industrialsubscribers, such as major energy companies, utilities and governmentsaround the world. He is currently a private investor and advisor to anumber of companies. He can be reached via e-mail at: SOLARJPL@aol.com. Please visit his website for the promotion of solar energy – www.sunseries.net

Subscribe to the Peter Lynch solar RSS feed; https://www.investorideas.com/RSS/feeds/PL.xml

Disclaimer: The views and opinions expressed in the researchpublished are those of the individual companies and writers and notnecessarily those of Investorideas.com® or any of the industry sectorportals. At the time of publication, writers may hold positions in thestocks or companies mentioned.

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Solar Stocks Continue to Sizzle

A month ago (September 2nd) I said that the market over the past weeks(August) had been a “trendless” and very frustrating market forinvestors and traders alike and that the volatility was very extreme. I also said that the solar sector was “quietly” starting to come alive.

Well things have sure changed and they have changed for the better.The market turned in early September (historically the worst month ofthe year for stocks) and proceeded to produce the 5th best September in history and the best in the last 40 years – what a turnaround!

All of this positive activity – right in the face of general mediaworry over the possibility of a double dip recession, loss of jobs, aweak dollar and China taking over the world (just like Japan was goingto do in the 1980’s). What happened is what I have mentioned many times in the past – all bad news and the market simply turns and just climbsup that “wall of worry” to the utter amazement of our media “experts”.Hint: never watch the financial news – it is all short term speculation based upon things no one couldreally know and more importantly it is usually dead wrong.

What happened to our solar stocks during this incredibly positivetime? While the major indexes moved up an average of 6.8% in Septemberalone, our solar stocks were up 22.3% for the month, approximately 325%better performance!

As any of you longer term readers know I have always said that two of the simplest keys to successful investing are:

  1. Stocks moving above their 50 day average is a good indicator that, at least for the short term, stocks have changed their direction topositive and
  2. Looking at the relative strength of all of the solar stockscompared to the market and to each other will tell you which solarstocks are the "strongest stocks" and therefore the which stocks willtend to be the leaders in the next big up move.

At this time 18 of our 22 solar stocks are above their 50 daymoving average and are in strong positive trends. The only laggardsare: Akeena (WEST), Emcore (EMKR), DayStar (DSTI) and Suntech (STP),obviously the market is telling us that these stocks, at least for now,are not ones you would want to count on to be leaders in the nearfuture.

On the other hand the strongest stocks continue to be our “solarseven” from the September 2nd article: JASO, JKS, LDK, SOL, SOLF, SOLRand TSL. These stocks were up and average of 23.8%. These stocks are the current leaders and have been the leaders since the beginning of 2010.As a result, they are more than likely to be the leaders in the nearfuture.

Below is a table of our solar stocks showing their performance verse the major market indexes over three time periods:

  1. January 2010 to June 2010
  2. June 2010 to October 7th 2010
  3. January 2010 to Present (Year To Date)
Symbol Current Price % Change 1/10 – 6/10 %Change 6/1 – 10/7/10 %Change YTD
ASTI 3.51 -43.02 16.2252 -33.77
CSIQ 15.28 -58.85 28.84 -46.98
CSUN 4.4 -22.94 23.5955 -4.7619
DSTI 1.73 -52.62 -1.1429 -53.16
EMKR 0.87 -4.6729 -14.6961 -18.6822
ENER 4.73 -51.56 -7.6172 -55.25
ESLR 0.71 -41.0596 -20.2247 -52.9801
FSLR 138.64 -20.89 29.44 2.39
JASO 8.95 -18.95 93.72 57.02
JKS 29.75 0 187.72 0
LDK 9.99 -19.97 78.07 42.51
RSOL 3.23 7.7399 -7.1839 2.7
SOL 12.23 15.1261 123.18 156.93
SOLF 12.3 -9.5675 78.26 61.21
SOLR 8.18 -4.3165 53.76 47.12
SPIR 5.1 -35.63 47.83 -4.8507
SPWRA 13.57 -48.27 10.78 -42.69
STP 8.83 -40.77 -10.36 -46.9
TSL 28.49 -38.3 71.11 5.58
WEST 0.59 -34.4 -27.9146 -52.712
WFR 12.33 -22.32 16.54 -9.47
YGE 13.12 -43.64 47.25 -17.01
Solar Average   -28.04% 37.15% -3.3%
S&P 500 1159.97 -3.98 8.34 4.02
Dow Jones 10967.65 -3.87 9.41 5.17
NASDAQ 2380.66 -2.06 7.12 4.91
Index Averages   -3.30% 8.30% 4.70%

The data clearly shows that solar stock started to “wake up” about mid year andsince then they have dramatically out-performed the general market,whereas prior to June they had dramatically under preformed the market.

For the time being solar stocks look great, but keep in mind thatthey are far more volatile (higher Beta’s) than the market in generaland that an investor needs to keep a sharp eye on their activity and set appropriate stoplimits to coincide with their individual level of risk tolerance.

 

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Solar Stocks Continue Upward Movement

As I said in my last article over the past few months the market hasbeen one of those “trendless” markets that can drive investors crazy and make it very difficult to make money. The markets as a whole are still in a longer term down trend but one day the market drops over 100points and the next it moves up over 200 points, but that is the recentvolatility that we will have to learn to live with.

However, quietly behind the scenes the solar sector has continued tocome alive and more and more of the solar stocks have been showingstrength with 21 of our 22 stocks now above their 50 day moving averages

As any of you longer term readers know I have always said that two of the keys to successful investing are:

  1. Stocks moving above (positive) their 50 day average is a good short term trading tool; and
  2. Looking at the relative strength of all of the solar stockscompared to the market will tell you which solar stocks are the“strongest stocks” and therefore which stocks will tend to be theleaders in the next big up move.

The recent action, shown below, clearly shows that the solar sectorafter dramatically underperforming the major indexes on a year to datebasis has dramatically outperformed the major indexes (gainedsignificant relative strength compared to the market) since June 1 2010by roughly a factor of 5 to 1.

Symbol Current Price % change since 6/1/2010 %Change YTD
ASTI 2.96 -1.9868 -44.15
CSIQ 13.09 10.37 -54.58
CSUN 4.38 23.0337 -5.1948
DSTI 1.7 -2.8571 -53.97
EMKR 0.85 -16.5686 -20.4673
ENER 4.89 -4.4922 -53.74
ESLR 0.62 -30.4494 -59.0066
FSLR 144.74 35.13 6.9
JASO 7.36 59.31 29.12
JKS 28.91 179.59 0
LDK 8.2 46.17 16.98
RSOL 2.67 -23.2759 -17.3375
SOL 10.3 87.96 116.39
SOLF 11.7 69.57 53.34
SOLR 7.9 48.5 42.09
SPIR 4.09 18.5507 -23.69
SPWRA 12.33 0.6531 -47.93
STP 8.86 -10.0508 -46.72
TSL 27.94 67.81 3.539
WEST 0.71 -13.7195 -43.4
WFR 11.41 7.845 -16.23
YGE 11.74 31.76 -25.74
Average Gain for solar Stocks 26.49% -11.08%
Major Indexes
S&P 500 1124.66 5.04 0.86
Dow Jones 10594.83 5.69 1.6
NASDAQ 2303.25 3.64 1.5
Average Gain for Indexes 4.79 1.32

Who really knows the reason why this is happening? Actually it does not matter, all that matters is that it very apparent that the sun iscurrently shining on the solar segment of the market at this time andthat this segment is clearly gaining strength relative to the generalmarket.

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10 Solar Stocks that are Outperforming the Market

Most investors have not been having a pleasant time since themarket topped in late May (5-24-2010). The major averages have beendown between 4% and 5% and the gloom is spreading as fast as the oil inthe Gulf of Mexico.

But under the cover of all this gloom there are 10 solar stocks thatare quietly shining and actually have posted gains as the market wasdeclining – i.e. very high relative strength to the markets.

This is not to say that they will continue to do so, all that itsays is that these stocks are stronger than the other stocks in theirpeer group and are the most likely to lead the pack when and if themarket does turn around.

Symbol

Curr Value

$Change

%Change

CSUN

3.76

0.04

1.0753

FSLR

120.52

11.31

10.36

JASO

5.08

0.22

4.5267

SOL

6.84

1.47

27.37

SOLF

7.43

1.02

15.91

SOLR

5.65

0.06

1.0733

SPIR

3.74

0.06

1.6304

SPWRA

12.81

1.89

17.31

TSL

19.28

1.62

9.17

YGE

11.12

1.72

18.3

Major Indexes

S&P 500

1022.58

-51.07

-4.76

Dow Jones

9686.48

-380.09

-3.78

NASDAQ

2091.79

-121.76

-5.5

 

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Solar Stocks Continue Under Performance

As the old saying goes, “A rising tide raises ALL boats”, but bewarebecause the reverse is also true. Since April 23rd, the tide has beenheading out and the majority of stocks as well as our solar stocks arebeing swept down with the flow.

The market is in the midst of giving us our first significantcorrection (greater than 10%) since this bull market startedin March of 2009. The underlying technical indicators I follow arestill holding up, but for the first time they aresignaling caution. In the next few weeks we will seeif this is the 10% correction we were looking for in the natural courseof a market cycle or the beginning of something worse.

As I said last earlier this month:

“The market has NOT had a correction of 10% or greater since Marchof 2009. Why is that significant? It is significant because there hasNEVER been a bull market in the last 80 years that has NOT had at leastone 10% correction BEFORE it topped out (Credit: Invest TechResearch). As a result, it is likely (from an historicalstatistical point of view) that we will have at least one 10%correction and then another move upward before the end of this bullmarket. Historically a lot of money has been lefton the table after the first 10% correction, if you sold out too soonand did not give the market a chance to run its course”.

This is not to say that things cannot get significantly worse fromhere, but the historical odds are overwhelming stacked in favor of themarket turning around and heading off to another high this year beforeanything truly serious occurs. But it is without question a time to bealert and to at least lighten up on weaker stocks and prepare to movequickly on the balance if conditions get worse.

Solar Stocks

If we look at the current market situation, and relate it to solarrelated stocks, it is a combination of a higher risk overall stockmarket and a solar stock sector that has been weak and is gettingweaker. Given these odds this certainly is NOT a time to be buying solar stocks, unless you are a pure trader who can move in and out of stocksdaily. It is not a good idea, in a declining market, to establish newpositions especially in one of the weakest market sectors.

Every solar stock we follow is currently trading close to or belowits 50 day moving averagetherefore it is possible some of the stronger solar stocks may rallyfrom this “oversold” position. But once again, you have to be a traderto profit from this current situation.

Below is a chart of what the market and solar stocks have donesince the beginning of 2010 and it is not a pretty sight. Solar stocksare down close to 10 fold greater when compared to the major indexes and are among the weakest of all the industry groups.

Solar Stocks Year to Date 2010

Stock Symbol Current Price $Change YTD %Change YTD
AKNS 0.84 -0.415 -33.2
ASTI 3.25 -2.05 -38.68
CSIQ 12.95 -15.87 -55.07
CSUN 3.83 -0.79 -17.0996
DSTI 2.2 -1.49 -40.44
EMKR 1.06 -0.01 -0.9346
ENER 5.56 -5.02 -47.45
ESLR 0.95 -0.56 -37.0861
FSLR 112.36 -23.04 -17.02
JASO 4.87 -0.83 -14.5614
LDK 6.07 -0.94 -13.4094
RSOL 3.5 0.27 8.3591
SOL 6.17 1.41 29.62
SOLF 7.46 -0.17 -2.228
SOLR 5.46 -0.1 -1.7986
SPIR 3.51 -1.85 -34.51
SPWRA 13.23 -10.45 -44.13
STP 10.1 -6.53 -39.27
TSL 17.5 -9.49 -35.15
WFR 11.35 -2.27 -16.67
YGE 9.16 -6.65 -42.06
Solar Stocks
AveragePerformance:
    -24.60%
Market Averages
S&P 500 1089.41 -25.69 -2.3
Dow Jones 10136.63 -291.42 -2.79
NASDAQ 2257.04 -12.11 -0.53

Many times I get the sense that investors are afraid, that if theydelay, they will miss the chance to profit from the solar industriesbright future. This is NOT true. There will be plenty of time and manyadvances and declines in the future. Be patient, look for both themarket and the solar sector to be more positive and try not to get swept up in the crowd, because the crowd is always wrong.

Never forget the two investment rules of the great Warren Buffet,one of the greatest investors of our time:

  1. Never lose money
  2. Never forget rule #1.

Mr. Lynch has worked, for 33 years as a WallStreet security analyst, an independent security analyst an investmentbanker and private investor in small emerging technology companies. Hehas been actively involved in following developments in the renewableenergy sector since 1977 and is regarded as an expert in this field. Hewas the contributing editor for 17 years to the Photovoltaic InsiderReport, the leading publication in PV that was directed at industrialsubscribers, such as major energy companies, utilities and governmentsaround the world. He is currently a private investor and advisor to anumber of companies. He can be reached via e-mail at: SOLARJPL@aol.com. Please visit hiswebsite for the promotion of solar energy – www.sunseries.net

https://www.renewableenergystocks.com/PL/

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The State of Solar Stocks $STP $LDK $FSLR

Solar stocks did great for the first 12 months of the current bull market (3/09 –3/10) – up an average of 124%. But as I mentioned in an earlier articlethe vast majority of that gain was centered in a 8 CHINESE stocks -CSIQ,CSUN,JASO,LDK,SOLF,STP,TSL and YGE which were up an amazing267.96% on average, certainly the major reason that the group as a whole was up 124%. Without the Chinese companies the solar group would haveactually underperformed the major averages for that 12 month period.

Looking a bit deeper, OVER 50% of the 267.96% gain was from 2 stocks – CSIG and TSL. This is an extreme case of narrowing (2 of 21)leadership in a sector and is usually a bad sign for the sector. Alsonote that all of these “leaders” were Chinesecompanies, which indicates to me that the trend is clearly to LOWEST COST. Good for theChinese companies, maybe not so good for U.S. and European basedcompanies.

Looking at the first quarter of 2010 the numbers reflect thisnarrowing with solar sector underperforming the general marketsignificantly.

Solar Stock Performance First Quarter 2010

All Solar Stocks Average -9.89%
Dow Jones +4.11%
S&P 500 +4.87%
NASDAQ +5.6

 

So what does all this mean for the investor interested in the solar market sector?

  • It means that the industry is starting another transition phase in its long term growth. This is a period of “lowest cost wins” and ofindustry wide profit margin compression.
  • It means that because of these factors and probably a host ofother factors (lower natural gas prices, uncertainly of governmentpolicy etc.) that the solar segment has been a lagging market sector and probably not one which is optimal at this time for new investment.Especially given the higher risk level that the general market is atnow.
  • It also means, in my opinion, that the U.S. has to wake up andstart to move forward NOW (instead of our “usual” approach of -thinking about having a meeting to discuss planning to do somethingmaybe sometime in the future etc. etc. – i.e. all talk and very littleaction of any significance) with a strategy to compete with ourlower cost Chinese friends. I do not think we can beat them at their own game – lowest cost via cheap labor etc. What we have to do NOW is to do what we do bestINNOVATE. This is the time forinvestment and focus on new technologies, “out of the box” technologiesand not the same old thing. This is a time to increase focus, investment and activity NOT slow down and wait around for someone else to dosomething that we have historically always been the best at doing. Theball is in our court.

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The Solar Industry: One Year after the Stock Market Bottom

One year ago today the stock market bottomed and started thedramatic recovery that we are still experiencing. There were basicallytwo corrections along the way – July 2009 and January 2010, but otherthan that it has certainly been a classic "bull market" that has gonestraight up in a very orderly manner.

To give yousome perspective below are the performance numbers of the market ingeneral and for the Photovoltaic (PV) segment from March 9th 2009 totoday. Keep in mind that these one year numbers INCLUDE the currentmostly negative numbers in the last column.

No matter how you look at it, the last 12 months were amazing for the market as a whole and for solar stocks in particular.

Theaverage solar stock has moved up 124% since March 9th 2009 and theaverage gain for just the 8 Chinese based public solar companies (CSIG,CSUN,JASO,LDK,SOLF,STP,TSL,YGE) was an amazing 267.96%! Chinesesolar companies were obviously the place to be for maximum profits, faroutdistancing the rest of the market.

The Chinese are movinginto the solar industry at light speed, dwarfing any similar attemptsin the U.S or Europe. We are arguing about small items and meaninglessscale and it is beginning to look as if it will end up as just "talk"and, once again, no meaningful action. Meanwhile the Chinese havealready made their decision, taken action and are moving forward in avery significant and deliberate manner. It is no longer a questionwhether or not the U.S. will take the lead in the clean tech race – atthe moment we are not even in the race!

 

If we look at these numbers, are they telling us something elseabout the industry that we should pay attention to? I think there maywell be something to consider given this data and what is happeningcurrently in the industry.

The Chinese are producing qualityproducts at very low costs and most, in spite of margin pressure aremaking money. This tells me that the first industry shake-out isunderway and the trend is becoming very clear – LOW COST WINS.The Chinese are ramping up production and achieving economies of scaleenabling them to drop their prices, strictly control their costs andstill maintain their margins.

What needs to Happen?

Thecost of Photovoltaics has come down dramatically over the past 10years, but the cost of PV has to continue to drop significantly if itis to make a meaningful contribution (greater than 20%) to the world’sfuture electricity needs. We need to start thinking about GIGAWATTS(billions of watts) of solar electric generation verses MEGAWATTS(millions of watts) and we may even need to think about TERAWATTS(trillions of watts) in the near future. Thoughts always proceed actionand we need to begin to conceptualize PV production at these levels ifwe are to get there in a reasonable period of time, if at all.

Thereare only two ways that the industry can get down to the costs necessaryto achieve these manufacturing scales and their respective economies ofscale:

  1. Current production and technology must bescaled up to MUCH larger capacity factories such that the economies ofscale will bring the price down, as it has in many other industries inthe past.

    Or….

  2. A dramatic breakthrough inphotovoltaics needs to be discovered and rapidly commercialized. Thenew technology will have to be a revolutionary change in the way that Photovoltaics are produced, NOT just an incremental change.I think this breakthrough will be the result of "out of the box"thinking and I do not think it has "arrived" yet. So keep your eyesopen!

What will this mean for solar stocks and the industry in the short term?

It will mean exciting times for the industry and dangerous times for the unwary investor.

Ifthe industry starts to ramp up capacities, the prize will obviously gothe more mature and well financed companies. So the balance sheet ofsolar companies will become increasingly important for investors to beaware of. I also think that because of the historical higher volatilityof the solar market segment that it will continue to be an area thatinvestors will NOT be able to just "buy and hold". They will have toapproach the industry from the point of a trader and be ready to movein or out of these stocks when dictated by market action.

Onthe other hand, there is always the possibility of a major technicalbreakthrough. These technology driven advances are one of the thingsthat America is famous for and is "hopefully" just around the corner.But in order for that to happen:

  1. We have to keep anopen mind and be flexible to new possibilities and not remain focusedon the methods of the past. We have to guard against thinking that thisis the way we have always done this and therefore it is the only way itwill work.
  2. We will have to step up and explore higher riskor unconventional technologies – playing it safe "sounds" good but itcan sometimes (especially in technology) lead to actually taking thebiggest risk of your life.
  3. Stop wasting valuable time andmoney on silly technologies, like "clean coal", which does not evenexist and that has very little chance of ever becoming commerciallyviable technology.

The bottom line is that we livein exciting times so keep your wits about you, stay nimble on your feetand look forward to a wild ride that will hopefully end with dramaticbreakthroughs that will move our world into the middle of this centurylead by a sustained clean energy boom.

Mr. Lynchhas worked, for 33 years as a Wall Street security analyst, anindependent security analyst and private investor in small emergingtechnology companies. He has been actively involved in followingdevelopments in the renewable energy sector since 1977 and is regardedas an expert in this field. He was the contributing editor for 17 yearsto the Photovoltaic Insider Report, an early publication in PV that wasdirected at industrial subscribers, such as major energy companies,utilities and governments around the world. He is currently a privateinvestor and has from time to time been a financial/technologyconsultant to a number of companies. He can be reached via e-mail at: solarjpl@aol.com. Please visit his website for the promotion of solar energy – www.sunseries.net.

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Solar Stocks Commentary with J. Peter Lynch Market and Solar Outlook for 2010

November 23- To date 2009 certainly seems to be following thehistorical trends that I presented in February 2009. If you look athistory many of the worst years in stock market history are followed bysome of the very best years and 2009 certainly seems to be no exception.

Background History on the broad Stock Market

Inorder to fully evaluate solar stocks and where the industry will beheading we have to look at the broad stock market first, at least, forsome short term guidance regarding stocks in general. If the market asa whole decides to decline, then all stocks, including solar relatedstocks will be affected.

As we all know, 2008 was one of theworst years in history for the stock market in general. In fact, theDow Jones was down 31.1% for the year, which ranks as the 6th worstyear in history. Take a look at the tables below:

Ten Worst and Best Years for the Dow Jones Industrials

Year Yearly return Year Yearly Return
1931 -52.67 1933 66.69
1907 -37.73 1928 48.22
1930 -33.77 1908 46.64
1920 32.9 1954 43.96
1937 -32.82 1904 41.74
2008 -31.1 1935 38.53
1974 -27.57 1975 38.32
1903 -23.6 1905 38.2
1932 -23.07 1958 33.96
1917 -21.71 1995 33.45

 

Itis interesting to note that when the market goes to EXTREMES (eitherplus or minus), it tends to correct to the opposite extreme. It appearsto build up momentum in one direction and when it finally turns aroundand reverses itself, it overshoots in the opposite direction.

Forexample: Four of the worst years ever were 1929(-17.17%), 1930, 1931and 1932 which are generally known as the great depression years.However look at the two BEST YEARS in history, 1928 and 1933. One year(1928) was the TOP of the bullish extremes of the 1920’s and the other(1933) was the explosive momentum off of the 4 year bear market of thegreat depression, which continued up through 1935 until this extremetoo was corrected in 1937 (– 32.82%).

The next serious down period was the recession of 1973 -1974 (-27.57%) which was reversed by the strong gains of 1975 (+38.32%).

Mostrecently we all experienced the "technology bubble" of the late 1990’sand the terrible crash in the technology heavy NASDAQ exchange. TheNASDAQ index fell -39.3%, -21.1% and -31.5% in 2000-2001 and 2002 onlyto rebound UP 50% in 2003.

This strong rebound in 2003 setthe stage for the long bull market of 2003 – 2007, which ended inOctober of 2007 and resulted with the NASDAQ down 40.5% , the Dow down31.1% and the S&P 500 down 36.1% in 2008.

What about overall market volatility? Once you review the numbers below you will see that there is also a clear correlation between down stock markets and the volatility in the market during those years:

Years with the HIGHEST Volatility in the Stock Market

  • 1931
  • 1929
  • 1932
  • 2008
  • 2000
  • 2001
  • 2002
  • 1973
  • 1974

Asyou can see, 2008 was the fourth most volatile year in stock markethistory. The table shows that the worst times were during the greatdepression (1929-1932), after the internet tech bubble (2000-2002) andafter the terrible recession of 1973-1974. If you look at the yearsAFTER these three time frames you will see that 1933, 2003 and 1975were three of the BEST years in stock market history.

Now ifwe take a look at 2009 year to date, we see that despite all the "gloomand doom" that permeates the general media that the stock market hasgenerally climbed the proverbial "wall of worry" and to date has put upsome of the best numbers in wall street history with the Dow up 17.57%, Nasdaq up 36% and the S&P index up 21%.

What is to be learned from this brief glance at stock market history?

  1. Historydoes seem to repeat itself and as a result we should have some verygood years AFTER this current mess has been resolved.
  2. Theold stock market adage, "Buy them when the blood is running in thestreets" appears to hold some validity; it is only a matter of timingWHEN to buy. Maybe, in retrospect, March of 2009?
  3. Thereasons why we as investors, never seem to learn from these extremesare in my opinion are VERY simple and very easy to forget: FEAR (stockmarket bottoms) and GREED (stock market tops).

What do these historical trends tell us about the present situation?

Theytell me that we have past the FEAR period – November 2008 until April2009, and are now in the "worry" period, the period between FEAR andGREED. Every step of the way since April we have heard the popularfinancial press tell us a litany of things to worry about -foreclosures, unemployment, the growing deficit etc. Even though themarkets have done so well in such a short period of time in 2009, themarket is performing in a very orderly manner and the underlying technical measurements are sound and are still pointing to a higher market despite all of these "worries".

Someadditional historical data is worth considering at this time is thatsince the beginning of this new bull market the market has had 3corrections of approximately 5%, which is a healthy situation.A market that goes "straight" up with no corrections is a dangeroussituation NOT a healthy situation. However, the market has NOT had acorrection of 10% since early March of 2009. Why is that significant?It is significant because there has NEVER been a bull market in historythat has NOT had at least one 10% correction BEFORE it topped out(Credit: Invest Tech Research). As a result, it is likely that we willhave at least one 10% correction and then another move upward beforethe end of this bull market. In addition, the market has entered itsfavorable season (November to May) which has historically been a verypositive period for stocks.

What has the Solar industry segment done year to date?

Theaverage solar stock year to date has increased 25%, so on the surfaceit appears that 2009 has been a very good year for solar stocks.However, if you look a bit deeper you will see that while 25% is notbad it is far less than the 36% gain that the Nasdaq has posted. I amcomparing it to the Nasdaq because it is the index which most closelyresembles the solar sector – smaller companies and many technologyrelated companies.

In addition if you take out the two solarstocks with the biggest gain for 2009 – Canadian Solar (CSIQ) + 225%and Trina Solar (TSL) + 378% the average solar stock actually droppedclose to 5% year to date. As a result, while the market in general andthe smaller stocks in particular have had outstanding years the averagesolar stock has done poorly.

Stock Symbol Curr Value 2009 $Change 2009 %Change
AKNS 1.07 -0.65 -37.7907
ASTI 4.82 1.06 28.19
CSIQ 21.01 14.55 225.23
CSUN 4.29 0.34 8.6076
DSTI 0.52 -0.421 -44.7872
EMKR 0.98 -0.32 -24.6154
ENER 10.57 -14.64 -58.07
ESLR 1.47 -1.72 -53.92
FSLR 121.18 -16.78 -12.16
JASO 3.96 -0.41 -9.3822
LDK 8 -5.12 -39.02
RSOL 3.01 -0.64 -17.5342
SOL 4.08 -0.33 -7.483
SOLF 6.64 1.63 32.53
SOLR 4.74 1.85 64.01
SPIR 4.29 -0.85 -16.537
SPWRA 21.48 -15.52 -41.95
STP 15.18 3.48 29.74
TSL 44.46 35.17 378.58
WFR 12.08 -2.2 -15.41
YGE 13.75 7.65 125.41

 

The Solar Stock Market Segment

Currently the solar industry has been subjected to a number of negative influences simultaneously:

  1. The2 or 3 year long silicon shortage which drove solar stocks over thepast few years has turned into a significant silicon surplus, causing adrop in silicon prices and a resultant drop in panel prices.
  2. Asa result of #1 solar companies are experiencing extreme margin pressureon their business. As a result, a large number of companies haveexperienced losses verses prior year gains.
  3. The currentfinancial crisis, specifically the credit crunch has resulted in alarge number of projects being cancelled or postponed due to lack offinancing. This has resulted in an excess build up of inventory andsignificant pricing pressure on companies to manage their inventory.
  4. Solarstocks were the "high flyers" of 2005, 2006 and 2007 FAR out performingthe general market, but in 2008 solar stocks were down 76% on average,over twice the decline of the general market. Sound familiar?Individual stocks, industry segments and the market in general ALWAYSgo to extremes and at some point correct these extremes with a swing tothe opposite extreme. However, in this case, the solar stocks will NOTcommand the high PE’s that they did prior to this.
  5. Finallythe solar industry is basically a "start up" industry in the VERY EARLYstages of its development that is not yet well accepted in the generalmarketplace and has not fully developed its technology future in any ofits market sub-sectors. It is too bad the industry had to go thoughtthis phase of its development when all of these other "problems"outside the industry were occurring.

What is next for the Solar Industry?

Thenext phase of development for the solar industry is the same phase thatall new industries went through – autos, semiconductors, computers etc.– it is the consolidation and shake-out phase.

The industryWITHOUT question has a very bright future. However, as in all newindustries the strong will survive and the weak will be acquired or goout of business. New technology will emerge and new leaders willdistance themselves from the pack. This is NOTHING NEW and will not beunique in any way to the solar industry. The industry is certainly infor "exciting" times in terms of growth and dramatic innovation, but itwill also be a very dangerous time for investors who are not attentiveand very nimble.

What can Investors expect?

Investorscan expect very erratic movements in solar stocks until the overallmarket volatility starts to get back to the "normal" range. One canalso expect, and we have already seen, significant industryconsolidation and some (unfortunately) company failures. Keep in mindthat this is NOTHING NEW in dramatically emerging industries, butremember that with this dramatic growth will also come greater thanaverage volatility.

With this said is there a way to lookat solar stocks (or any stocks for that matter) today and try to "pick"the ones that have the most potential? Once again, it is impossible toaccurately determine which will be the winners and which will be thelosers. However I think that there are at least three areas that aninvestor should look that I would consider to be critically importantespecially in the current climate. If a company possesses ALL three ofthese characteristics it would have much higher probability that itwill be a leader in the next phase of the emerging solar boom.

First: CASH. During times like this CASH IS KING. So an investor will have to make sure to check each potential company’s balance sheet and insure that they have adequate cash reserves to carry them through at least 2009 without need of further financing.

Second: RELATIVE STRENGTH.In periods like this good stocks and bad stocks BOTH are carried downwith the general market. However, the better stocks generally drop lastand come back (when the tide changes positive) first. These stocks willalso most likely be the ones with the most cash (best financial shape)therefore with the best future prospects. As a result, an investorshould look for the solar stocks with the highest relative strengthcompared to the general market – they will be the early leaders in thenext market stage and the first to break above their 50 day movingaverages (see below).

As a note: the three top solar stocks:Trina Solar, Canadian Solar and Yingli Solar ALL had and continue tohave dramatically higher relative strength as compared to the market ingeneral and to the other solar stocks in their sector.

One ofthe simplest short term methods I have used over the years to determinetrading points for stocks (and the market in general) is the 50-daymoving average. To summarize:

  1. If a stock is trading OVER its 50-day moving average it is in an uptrend.
  2. If a stock is trading UNDER its 50-day moving average it is in a downtrend".

Third: PRODUCT DIFFERENTIATION.With a new industry like solar the longer term leaders are generallythe companies with some form of competitive advantage or productdifferentiation. Remember these companies may have innovative products,but they must also pass the first two hurdles (cash and relativestrength) in order to warrant further consideration as an investment.

Mr. Lynchhas worked, for 31 years as an independent analyst and investor insmall emerging technology companies. He has been actively involved infollowing developments in the renewable energy sector since 1977 and isregarded as an expert in this field. He was the contributing editor forthe past 17 years to the Photovoltaic Insider Report, the leadingpublication in Photovoltaics industry that was directed at industrialsubscribers, such as major energy companies, utilities and governmentsaround the world. He can be reached via e-mail at: solarjpl@aol.com or at his new website: www.sunseries.net.

Source

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60 Shelter Rock Receives Largest Solar Grant

Solaire Development LLC located at 60 Shelter Rock Road in Danbury, CTis pleased to announce that it has received a grant of $2,578,717 forthe 550 KW solar electric (photovoltaic/PV) system it has installedcovering almost 2 acres of rooftop at the 60 Shelter Rock IndustrialPark.

"This grant has greatly enhanced the ability of Solaire Developmentto put this showcase solar system in operation by completelyeliminating the complexity and time delay of the earned tax credits itreplaced," said Peter Lynch, a partner of 60 Shelter Rock Associates."We are grateful to Treasury Secretary Geithner, Energy Secretary Chuand the Obama Administration for their forward thinking and swiftaction in pressing forward with this much needed financing enhancement."

Thisgrant is part of the effort to spur private sector investments in cleanenergy and create new jobs for America’s workers, Treasury SecretaryTim Geithner and Energy Secretary Steven Chu announced on September 1,2009, $502 million in the first round of awards from an AmericanRecovery and Reinvestment Act (Recovery Act) program that provides cashassistance to energy production companies in place of earned taxcredits. The new funding creates additional upfront capital, enablingcompanies to create jobs and begin construction that may have beenstalled until now.

"The Recovery Act is investing in ourlong-term energy needs while creating jobs in communities around thecountry," said Treasury Secretary Tim Geithner. "This renewable energyprogram will spur the manufacture and development of clean energy inurban and rural America, allowing us to protect our environment, creategood jobs and revitalize our nation’s economy."

"These grantswill help America’s businesses launch clean energy projects, puttingAmericans back to work in good construction and manufacturing jobs. Theinitiative will help double our renewable energy capacity over the nextfew years and make sure America leads the world in creating the cleanenergy economy of the future," said Energy Secretary Chu.

Createdunder Section 1603 of the Recovery Act, the program is expected toprovide more than $3 billion in financial support for clean energyprojects by providing direct payments in lieu of tax credits. Thesepayments will support an estimated 5,000 bio-mass, solar, wind, andother types of renewable energy production facilities in all regions ofthe country over the life of the program. As a result of this firstround of funding, more than 2,000 Americans will have access to jobs inthe renewable energy industry – both in construction and inmanufacturing – while moving the nation closer to meeting theAdministration’s goal of doubling renewable energy generation in thenext few years.

The Treasury Department opened theapplication process for the 1603 program on July 31, 2009 and iscurrently making the first awards in half the statutorily mandatedturnaround time of 60 days. Additional awards under the program will beannounced in the coming weeks.

"We hope that our building at60 Shelter Rock will serve as an example to business people around thecountry that solar is not only good for the environment and thecountry, but that it makes financial sense to business owners andtenants as well," said Peter Lynch.

Solaire Development alsofeels that widespread education about solar energy is critical and hasoffered to make the facility available to any corporation, local highschool or college course wishing to schedule a field trip to thebuilding. This will enable students and professionals to see afull-scale commercial solar photovoltaic system in operation and learnfirsthand about the benefits of clean, green solar electricity.

For further information contact Peter Lynch at 914-763-9093 or email at Peter@60shelterrock.com, or visit www.60shelterrock.com.

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Solar Red – Finally some PV Innovation on the roof

Residential solar photovoltaic (PV) systems potential in the USalone is a half a trillion dollar market; yet only 13,000 residentialinstallations were completed in the US in 2007, out of 73 million homes(.0002%). There are many reasons for this lack of adoption, for whatshould be a very popular technology:

  • Installation requires a significant amount of expert labor
  • The cost of residential PV is high relative to grid power prices
  • There is a lack of financing options for consumers

Solar Red (www.solar-red.net)is taking a unique approach to making residential PV systems ubiquitouson homes, which addresses all of these key industry issues. Solar Redis attacking the high cost of sales and installation by leveraging the23,000 roofing firms that replace approximately 5,000,000 roofs in theUS each year (National Roofing Contractors Association).Solar Red will provide products and services to the roofers which makeresidential PV systems uniquely easy and inexpensive for them to selland install. By doing this, Solar Red is dealing with a largelyunaddressed, yet significant component of the cost structure ofresidential PV.

Solar Red’s offering includes three components:

  • Proprietary and patent pending technology that greatly simplifies and reduces the cost of installation
  • Aset of services that provide the roofers with missing back-roomfunctions, which are needed to enter the residential PV installationbusiness
  • A consumer-financing vehicle that deals with thesingle largest barrier to the mass adoption of residential PV, theconsumer’s up-front capital expenditure

The Technology

SolarRed’s "plug-and-play" residential PV system is quickly and easilyco-installed with a new roof by any roofer with standard roofing skillsand tools. By enabling the roofing industry as residential PVinstallers, Solar Red lowers the overall cost of residential PV by25-30% (i.e. nearly $6,000 for a $20,000 system). Solar Red’s all-AC,parallel system architecture increases overall system efficiency by 7%and eliminates differential shading problems that can cause poweroutput to plummet in a traditional system.

The simplicityof the Solar Red solution ensures quality installation, which in turnensures years of reliable power flows. The system is modular and canaccommodate residential PV arrays of any size, and allows forsnap-in/snap-out installation of the solar panels once the brackets areinstalled with the roof. This innovation allows for quick and easymaintenance or changes in future technology. The snap-in/snap-outtechnology also addresses fire safety concerns as the panels can bequickly released and dropped to the ground should firefighter access tothe roof become necessary. This avoids potentially significant futurefire safety limitations on residential PV systems.

SolarRed’s proprietary system allows it to assemble the best in classtechnology for a complete and cost effective turnkey system. BecauseSolar Red can pick and choose the PV panels and other technologies itoffers from all available sources, it can quickly take advantage ofchanges in technology as they occur. Solar Red will continually improveits own products as well as search the world for the best residentialPV technology to offer enhanced value to their customers.

The Services

SolarRed’s services, created specifically for roofers, are designed toleverage technology to create great efficiencies and enable them to getinto the business quickly and easily. The services will includesatellite aided computerized system design and estimating, training,building permit preparation, tracking and processing of rebates andfinancing for the PV system. This will allow roofers to earn additionalprofit on each job they perform with little or no additional overheadinvestment and allow Solar Red to share in the installation profits oneach job. Leveraging the re-roofing market provides instant deal flow(roofers make approximately 5 million roofing sales annuallycollectively worth $23B).

Sales Channel

Approximately10% of roofer’s nationwide control 80% of the re-roof market and willbe our primary targets for developing long term business relationships.Through these key services Solar Red will enable roofing firms in theUnited States who are missing out on the growing residential PV marketbecause they lack the skills and knowledge to easily and quickly addsolar installation to their existing business. The roofing firmsprovide Solar Red with an untapped sales channel worth thousands ofsales each year at NO additional sales cost and a low cost vehicle forinstallation.

Financing

Solar Red andinvestors will provide pools of funds to purchase residential PVsystems which are then leased on a long term basis to consumers. Thisovercomes the single largest barrier to mass adoption of residential PVwhich is the high upfront capital costs. With today’s banking systemmelt-down and the real estate crisis, even if consumers had the will,it is unlikely that they could find financing for a residential PVsystem. The lease structure solves this problem, is simple forconsumers to understand, has low transaction costs and still allowsSolar Red and Investors to take advantage of depreciating the systems.All billing will be automated and the consumer will be responsible forthe maintenance of the system.

Business Overview

SolarRed is in the business of providing services and technology to helproofers successfully tackle the residential PV installation market,while building a strong brand within the channel for service, qualityand innovation. Solar Red will generate revenues through all threeactivities outlined above:

  1. Sale of hardware to our Authorized Dealers at standard manufacturing markup
  2. Margin sharing with the roofers on each installation
  3. Lease payments on the residential PV financing pools

Throughthe efficient installation of residential PV systems and the use of thelease financing structure, Solar Red will create long-term, recurringcash flows that grow with time, while creating strong value for theconsumer. They will create value by reducing costs, consolidating dealflow, managing risk and assuring high quality, long lasting power andcash flows. Solar Red is focused on building a business that will besustainable in a world of mass market adoption of residential PV, wherethere are a million or more residential installations per year.

SolarRed’s management team fervently believes in creating a world of massmarket adoption of residential PV by 2017, in which roofer installedresidential solar system sales volumes exceed 1,000,000 systemsannually. This represents a total of 5GW – the equivalent of building 5large nuclear power plants each year.

Solar Red was foundedby a solid team of entrepreneurs with extensive startup experience andexpertise in Cleantech, Solar, Residential Construction and PublicPolicy dedicated to creating value and moving the company to the nextlevel.

Current Company Status

Thecompany is perfecting the engineering and fabrication for the prototyperesidential PV system hardware. Solar Red will installed their firsttest roof in May 2009 in San Jose, CA. They will work directly withroofers to insure they have the best system available and that it livesup to expectations for ease of installation. The company hopes to haveits second generation system up and running in early fall of 2009 withthe assistance of a DOE grant.

The company is looking for itsfirst round of outside financing to complete the testing andcertification of the technology, develop the back-room services andprovide general start-up funds. In addition, Solar Red is looking forinvestors interested in funding the lease pools.

Solar Red,by virtue of its proprietary installation system, services andfinancing plan, will lower the cost of residential solar PV systems andmake their installation commonplace with any new roof. Should you haveany questions regarding Solar Red or desire more details, please do nothesitate to contact the company at www.solar-red.net. The CEO, Joe Augenbraun, may be reached at joe@solar-red.net or contact Mr. Lynch for details.

Source

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Not All ETF’s are Created Equal

Below are two ETF’s related to the oil market sector – one iscapitalization weighted (RYE) and the other is Equal weighted (IYE).

You can see from three stocks that are common to BOTH ETF’s thattheir percentages in the respective ETF’s  are very different and youwill also note that the performance of the equal weighted ETF – IYE wasSIGNIFICANTLY better (almost 5 times better) since the beginning of2009.

 Rydex S&P Energy ETF (RYE)

  • Exxon Mobil Weight = 2.60%
  • Chevron Weight = 2.60%
  • Conoco Phillips Weight = 2.70%
  • Total = 7.9%

 iShares Dow Jones Energy ETF (IYE)

  • Exxon Mobil Weight = 21.19%
  • Chevron Weight = 11.87%
  • Conoco Phillips Weight = 5.47%
  • Total = 38.53%

 The lesson learned here is that you have to do some research intoeach ETF to see how they are weighting their holdings and if you feelthat their weighting is appropriate. You can get this information fromeach ETF’s website. In regard to the solar market segment, at this timeI feel that it would be best to try and find an ETF what gaverelatively EQUAL weight to all solar stocks since the industry is sonew and is highly volatile.

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The Stock Market and Solar Market Sector Outlook

As I have said many times over the years solar stocks have a brightfuture, a very bright future. But investors have to understand a numberof things about the current stock market and solar stocks in particularin order to fully take advantage of this long-term trend.

Marketsgo up and markets go down and these moves usually occur when it isleast expected. At the present time solar stocks, the energy industryand the market in general have been in a totally amazing rally sinceearly March 2009. Unfortunately the market and solar stocks have put onthe equivalent gains two excellent years (NOT average years) in thepast 8 weeks and in my opinion this is simply not sustainable.

As I said in early March in my previous article:

"TheDow Jones Industrial Index recently recorded a twelve year low and themedia is FULL of doom and gloom. This terrible news was all over thefinancial press, accompanied by scenarios of more of the same to come.In fact, the recent survey from the American Association of IndividualInvestors (AAII) had fallen to the most bearish level in history – 70%of those surveyed felt that the direction of the market would be DOWNover the next 6 months".

Nothing is 100% for sure, as we all know. ButI think we are either at a significant bottom or very close to it.Everything is so "oversold" at this time, that I think the worst caseis that we get a significant rally in what could still be a bearmarket".

"Keep in mind that ALL the bad news outthere is in media now. We already know all the bad news. Remember thatthe stock market IS actually a discounting mechanism which looks out 6to 9 months into the future. We do not need GOOD NEWS to turn themarket around, only LESS bad news".

Well in retrospectthat was certainly prescient insight and the market took off with mostof the major indexes being up over 25% and some of the foreign marketsbeing up over 35% percent and the solar sector of the market being UP over 70% in JUST 8 WEEKS more than triple the general market indexes.

Symbol

Current Value

%Change Since 3-12-09

%Change Since 1-1-2009

AKNS

1.28

88.2

-25.5

ASTI

5.55

63.2

47.6

CSIQ

8.23

131.8

27.4

CSUN

3.39

111.8

-14.2

DSTI

0.86

-33.2

-8.4

EMKR

1.11

48

-14.6

ENER

16.41

-7.1

-34.9

ESLR

2.28

88.4

-28.5

FSLR

190.65

50.7

38.2

JASO

3.72

74.6

-14.9

LDK

9.42

133.1

-28.2

RSOL

2.28

33.3

-37.5

SOL

3.8

65.2

-13.8

SOLF

5.2

92.6

3.8

SOLR

7.22

85.6

149.8

SPIR

7.13

56.0

38.7

SPWRA

27.25

17.9

-26.4

STP

16.45

141.2

40.6

TSL

17.5

139.1

88.4

WFR

16.53

6.6

15.8

YGE

9.23

119.2

51.3

Solar Average

 

72%

12%

 

 

 

 

S&P 500

908.35

20.99

0.56

Dow Jones

8469.11

18.12

-3.5

NASDAQ

1715.92

20.32

8.81

The Solar Stock Market Sector Then and Now

Then

InMarch solar stocks had been doing terribly since the second quarter of2007. Just like the general market, we need to look a little deeper,past the media hype, and see what is actually happening with solarstocks in the market. One of the measures (tools) that I utilize whenlooking at individual stocks is their 50 day moving average and whetherthe current price is above (bullish) the 50 day average or below(bearish) the average. It is not the only way to look at stocks and maynot be the "best", but it always seems to give me an idea of which waya stock is heading in the short to medium term and when looking at aspecific market sector, what sort of condition that sector is in.

Atthat time, 3 of the 35 solar stocks I follow are ABOVE (Bullish) their50 day moving average. On the other hand 92% of the stocks (32 of 35)are BELOW (Bearish) their 50 day moving average. This clearly told methat the solar sector was deeply OVERSOLD and that while it could golower, it was probably due for at least a "technical" bounce.

Now

Atthe current time 34 of the 35 solar stocks I follow are ABOVE their 50day moving average and only one stock (DayStar Technologies – DSTI) istrading below it 50 day moving average. Even in this case, DSTI’sdecline was due to an announcement that it is basically running out ofcash and will need more financing.

This situation clearlytells me that the solar sector is approaching a condition of being veryOVERBOUGHT. It is possible that this is the dramatic of a HUGE new bullmarket for solar stocks, but as I said in the March article:

"Toput it a different way, I do not think ALL the bad news regarding thesolar sector is out yet and that there will be future negativesurprises, such as earnings disappointments (ENER earlier this week forexample), inventory write-offs, and possibly even bankruptcies. Thesolar sector will probably get carried UP when the general marketrallies, but since they will have to work out some additional problems;I do not think their rally will be sustainable".

However,I DO NOT feel that this is the case and I think there will be asignificant correction and the industry will have to digest further badnews that will be coming BEFORE it turns around and moves up in a moresustainable manner.

Numerous opportunities will come, butinvestor patience will be required to wait out this tough period andfor sector volatility to "settle" down. This is still an embryonicindustry and it is going through a painful retracement andconsolidation phase.

Rewards come to those investors who are patient and do not follow the crowd

Aspiringinvestors need to acquire and nurture patience. Historical data clearlyshows that more money is made MISSING the downside than catching theupside. As I read my e-mails from readers, I get the feeling thatpeople really want to buy solar stocks and ride them into a brightfuture. Many times I get the sense that they are afraid, that if theydelay, they will miss the chance to profit from the solar industriesbright future. This is NOT true. There will be plenty of time and manyadvances and declines in the future. Be patient, look for the strongeststocks and try not to get swept up in the crowd, because the crowd is always wrong.

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Announcing Today: Solar Energy is FREE!

The second in our “SolarInnovation Series” is a creative financial innovation that couldsweep the nation and literally make SOLAR ENERGY for all practical purposesFREE to the average homeowner.  It does NOT need a string of technicalbreakthroughs or new scientific discoveries all it needed is a littlebit of financial innovation – simple as that.

If making money byinvesting in energy efficiency improvements and solar systems for ourhomes is so obviously needed and is also a good investment. Why do sofew of us move forward and do it?

Well, that answer isvery simple. It cost too much since ALL the payment is UP FRONT. Thinkabout it, if we all had to buy our homes and cars with CASH up fronthow many of us would do it? Buying power from your local electric utilityis a simple, pay-as-you-go service. Solar, on the other hand, requirestens of thousands of dollars up front and a long-term commitment tosee a return on investment.

How about making SOLAR,pay-as-you-go-too?  What if you could get some benefits right awayand also not have to pay for 20+ years of power up front? Well, theCity of Berkeley, California is now pioneering what many experts believemay be just such a solution: Berkeley FIRST. Berkeley launchedthe program in November 2008. The initial pool of funding was made availableto property owners and sold out in less than ten minutes.

What exactly isBerkeley FIRST?

Berkeley FIRST (FinancingInitiative for Energy Efficiency Renewable and Solar Technology) allowsproperty owners to install solar systems and make energy efficiencyupgrades with no upfront cost.

Berkeley pays the upfrontcosts through the issuance of a municipal bond. The bonds are repaidfrom participating property owners’ property tax bills over 20 years.Participating property owners pay for only the costs of their energyproject and property tax expenses remain unchanged for those residentswho choose not to participate. 
 
The result is that solar and energy efficiency projects are paid forover a long period of time (like your home or your car), in bi-annualinstallments. The interest rate is fixed. Property owners do not needto access their own capital or credit. And if the owner sells the property,the repayment obligation transfers along with the property itself. 
 
How did this come about?

Berkeley FIRST is simplya new twist on a common method of financing improvements in communities(Mello-Roos Community Facilities Act of 1982). California, like moststates, has long provided cities and counties with the power to payfor certain projects such as sewers, parks, and the undergrounding ofutilities by passing the cost directly on to the property owners thatdirectly benefit from the project.

HistoricalBackground

In 1978 Californians enacted Proposition13, which limited the ability of local public

agencies to increase property taxesbased on a property’s assessed value. In 1982, the

Mello-Roos Community Facilities Actwas created to provide an alternate method of financing needed improvementsand services. Todo this, the city creates a "land-secured" financing districtthat includes the properties that would receive a benefit from the project.It then sells bonds to cover project costs and the property owners whoreceive a benefit who pay back the costs through an addition to theirproperty tax bill. 

ProgramDetails – Straight Forward and Simple 
 
1. The Berkeley FIRST program is entirely voluntary. You only pay additional

property taxes forthe cost of your individual project, no other taxpayers taxes are affected. 

2. The City has a privatefinancial partner to handle the financing and bond purchase

for the numerous smallprojects instead of the usual one large expensive project. 
 
3. Residents apply to the program online through a dedicated BerkeleyFIRST

website. Assuming theyare not late on taxes or in foreclosure, each applicant receives a reservationfor funding. They have nine months to install their solar system andreturn to the website to request payment. 
 
4. After signing forms and providing documentation, a check is issuedto the property

owner. A tax lien isplaced on the property and a small bond is sold to provide the fundingnecessary to pay for the project. 

Typical InstallationNumbers

To illustrate thisinnovation clearly I decided to put some numbers to an actual exampleso that you can see the actual cash flows and how it is, in reality,FREE. 
 

Illustration InstallationAssumptions:

  1. 3 kilowatt residential system (3 KW)

  2. Cost:  $19,500 , after all California grants plus an city administration fee

  3. Annual Financing Payment: $2,000 for 20 years added to property taxes

  4. Annual Savings: $640 first year, escalated at 5% per year

  5. Other benefits and costs: federal 30% tax credit in first year and equipment (inverter) replacement cost ($1,200) in year 12.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annual

 

Tax Savings

 

Net

Federal

 

After tax

Cummulative

 

Annual Savings

Finance    Cost

on Loan

 

Cost

Tax Credit

 

Cash Flow

Cash Flow

 

640.00

 

2000.00

 

570.00

 

1430

5,850

 

4420.00

4420.00

 

672.00

 

2000.00

 

579.00

 

1430.00

 

 

-758.00

3662.00

 

705.60

 

2000.00

 

570.00

 

1430.00

 

 

-724.40

2937.60

 

740.88

 

2000.00

 

570.00

 

1430.00

 

 

-689.12

2248.48

 

777.92

 

2000.00

 

570.00

 

1430.00

 

 

-652.08

1596.40

 

816.82

 

2000.00

 

570.00

 

1430.00

 

 

-613.18

983.22

 

857.66

 

2000.00

 

570.00

 

1430.00

 

 

-572.34

410.89

 

900.54

 

2000.00

 

570.00

 

1430.00

 

 

-529.46

-118.57

 

945.57

 

2000.00

 

570.00

 

1430.00

 

 

-484.43

-603.00

 

992.85

 

2000.00

 

570.00

 

1430.00

 

 

-437.15

-1040.15

 

1042.49

 

2000.00

 

570.00

 

1430.00

 

 

-387.51

-1427.66

 

1094.62

 

2000.00

 

570.00

 

1430.00

-1200

 

-1535.38

-2963.04

 

1149.35

 

2000.00

 

570.00

 

1430.00

 

 

-280.65

-3243.69

 

1206.82

 

2000.00

 

570.00

 

1430.00

 

 

-223.18

-3466.88

 

1267.16

 

2000.00

 

570.00

 

1430.00

 

 

-162.84

-3629.72

 

1330.51

 

2000.00

 

570.00

 

1430.00

 

 

-99.49

-3729.21

 

1397.04

 

2000.00

 

570.00

 

1430.00

 

 

-32.96

-3762.17

 

1466.89

 

2000.00

 

570.00

 

1430.00

 

 

36.89

-3725.27

 

1540.24

 

2000.00

 

570.00

 

1430.00

 

 

110.24

-3615.04

 

1617.25

 

2000.00

 

570.00

 

1430.00

 

 

187.25

-3427.79

 

1698.11

 

 

 

 

 

 

 

 

1698.11

-1729.68

 

1783.02

 

 

 

 

 

 

 

 

1783.02

53.34

 

1872.17

 

 

 

 

 

 

 

 

1872.17

1925.50

 

1965.78

 

 

 

 

 

 

 

 

1965.78

3891.28

 

2064.06

 

 

 

 

 

 

 

 

2064.06

5955.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Cost per month = $12.32 over first 20 years

 

 

 

 

 

Average Benefit per month = $26.77 over first 25 years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Increase in home value = $ 21,154.00 or $88.15 per month over first 20 years

 

Note: This 20 to 1 ratio is based on annual energy savings was estimated by the Appraisal Journal in

 

1998 and is cited by Wells Fargo Bank.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see fromthe example the system for all practical purposes is “free”. In fact, the actual cash flow is positive until roughly year 7, butthe actual value added to the house increases from the first year andeach subsequent year as the saving increase.

So once a system hasbeen put in place the homeowner is basically getting “free” solarenergy, helping the planet, setting a great example for their kids andincreasing the value of their primary asset all at the same time. 

Berkeley was FIRST,but other communities and cities in CA are following their lead. SanFrancisco and San Diego are putting in place much bigger programs. I feel that once people realize the actual numbers involved it couldliterally sweep the country.  UC Berkeley did a study that projectedthat if this program was rolled out nationwide it would create up to$280 Billion in renewable energy and energy efficiency investment intoour economy and dramatically reduce CO2 exactly when our nation needsto stimulate the economy and reduce our carbon footprint. 

Have a SUNNY EarthDay!

——————————————————————————————————————————————

Mr. Lynch has worked, for 32years as an independent analyst and investor in small emerging technologycompanies. He has been actively involved in following developments inthe renewable energy sector since 1977 and is regarded as an expertin this field. He was the contributing editor for the past 17 yearsto the Photovoltaic Insider Report, the leading publication in Photovoltaicsindustry that was directed at industrial subscribers, such as majorenergy companies, utilities and governments around the world. He iscurrently a consultant to a number of technology and solar related companies.He can be reached via e-mail at: solarjpl@aol.com. Please visit his website: www.sunseries.net  for the promotion of solar energy.

 

 

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