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Monday, November 24, 2008

The Market and Solar Stocks-Renewable and Solar Energy Perspectives with J. Peter Lynch

The Market and Solar Stocks-Renewable and Solar Energy Perspectives with J. Peter Lynch

By Peter Lynch Exclusively for
New York, Point Roberts WA, Solar Energy Perspectives with J. Peter Lynch First of all, the market has simply put, been terrible. This is certainly shaping up to be a year for the record books. In fact, as of the close Friday (8-21-08) the Dow Jones is having the SECOND WORST year in its history, with 1931 being the worst year with a yearly loss of -52.67%. The numbers below reflect the performance of the three main market indexes since June 1 2008.
DJIA Dow Jones Industrials -36.3SPX Standard and Poor’s 500 -42.9NASD NASDAQ -45.1 As to my opinion of this general market situation, I think it is either the beginning of very bad times or a generational buying opportunity in the market.

There is really no way to tell for sure, but based upon my experience in the market over the past 30 years and the opinions of numerous others that I respect, I believe we are very close to a great buying opportunity. It is impossible to ever “catch” the exact bottom, but I do feel that most of potential future bad times have already been incorporated into current stock prices by the market. Therefore, barring a financial Armageddon, I think that prices will be significantly higher in 6 months than they are now.

Regarding my opinion on solar stocks, the numbers below reflect the performance of solar stocks since June 1 2008. Obviously there has been a near total collapse of the average stock which was brought on by a combination of: sky high P/E multiples, an insanely volatile general stock market and dire predictions of future industry progress.

Symbol Name Performance %AKNS Akeena Solar, Inc. -73.9ASTI Ascent Solar Technologies, Inc. -77.9CSIQ Canadian Solar Inc. -89.8CSUN China Sunergy Company Ltd. -87.1DSTI DayStar Technologies Inc. -78.1EMKR EMCORE Corporation -85.6ENER Energy Conversion Devices Inc -66.9ESLR Evergreen Solar, Inc. -77.4FSLR First Solar, Inc. -65.3JASO JA Solar Holdings Co., Ltd -90.1LDK LDK Solar Company Ltd. -76.1RSOL Real Goods Solar, Inc. -44.6SOL ReneSola, Ltd. (United Kingdom) ADR -90.6SOLF Solarfun Power Holdings Co. -85.8SOLR GT Solar International Inc -83.38SPIR Spire Corporation -77.1SPWRA Sunpower Corporation -74.8STP Suntech Power Holdings (China) ADR -85.8TSL Trina Solar Limited -85.9WFR MEMC Electronic Materials, Inc. -83.4YGE Yingli Green Energy Holding Company Limited (China) ADR -86 Average Loss = -79.31%I agree that solar P/E’s and expectations were FAR too optimistic and missed a number of rather obvious problems that were rapidly approaching (i.e. coming silicon over supply), however, at this time I believe that current expectations have moved equally to the opposite extreme with FAR too much pessimism.A great degree (a vast majority in my opinion) of this current activity in the market and in solar stocks is principally driven by FEAR. People are afraid NOT to sell because stocks are going to ZERO and people are afraid to buy because stocks are going to ZERO. Obviously BOTH cannot be correct. But the point is that the market is currently in the phase of market dynamics that is totally dominated by emotions. These emotions are rampant and further fueled by the silly people in the media jumping on every tidbit of information and trying to draw a conclusion from each of them (which is impossible), thereby helping, in a way, to compound and extend the panic underlying this this crisis.With this said is there a way to look at solar stocks today and try to “pick” the ones that have the most potential? Once again, it is impossible to accurately determine which will be the winners and which will be the losers. However I think that there are at least three of areas an investor should look at that I would consider to be critically important. If a company possesses ALL three of these characteristics it would have much higher probability that it will 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 down with the general market. However, the better stocks generally drop last and come back (when the tide changes positive) first. These stocks will also most likely be the ones with the most cash (best financial shape) therefore with the best future prospects. As a result, an investor should look for the solar stocks with the highest relative strength compared to the general market - they will be the early leaders in the next market stage.Third: PRODUCT DIFFERENTIATION. With a new industry like solar the longer term leaders are generally the companies with some form of competitive advantage or product differentiation. Remember these companies may have innovative products, but they must also pass the first two hurdles (cash and relative strength) in order to warrant further consideration as an investment. Five examples of this (not necessarily “official” recommendations) are listed below with their respective “differentiator” to give you a better idea of what I am referring to: First Solar (FSLR) – low cost market leader in the thin film sector SunPower (SPWRA) - highest efficiency product, therefore potential leader in the space constrained residential market segment. Energy Conversion Devices (ENER) – unique product, with high margins in the flexible PV market segment. SunTech (STP) – low cost producer in the crystalline PV market segment. Emcore (EMKR) – one of only two producers of very high efficiency PV cells for the Concentrating PV (CPV) market segment.Remember that even though this MAY BE a generational buying opportunity in the general market and the solar sector you should always consider this as higher risk money and money that you can afford to potential lose and also be money that you can be patient with and allow the situation to work itself out over time.

Mr. Lynch has worked, for 31 years as an independent analyst and investor in 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 was the contributing editor for the past 17 years to the Photovoltaic Insider Report, the leading publication in Photovoltaics industry that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. He can be reached via e-mail at: or at his new website:

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1 comment:

Anonymous said...

Any way you slice this, our economy is in very dark and disturbing times. We are standing on the edge of an abyss with one foot half way already down into it. It seems like as a nation we are running around like chickens with our heads cut off. Everyone knows we are in deep despair but no one seems to be able to agree on what to do about it. So much attention has been given to the mortgage crisis that little attention or credit for what the high cost of fuel this past year has played in our downward spiral. That one single factor caused families to break the budget at the pump alone. Consumer goods in every capacity from production to shipping passed the increased costs on to us. (and most products now cost more and come in smaller packages) Electric companies sought and were granted huge price increases. We cut back, quit going out to eat as much or at all, quit spending on frills and even necessities, that sadly resulted in even more jobs being lost. It has been a real catch-22 in the economy. Record jobs and homes are being lost still. Unemployment is climbing every day. While most of the public seem to be doing the happy dance around the pumps, and reporters are reporting the happy dance, little is being reported about OPEC's plans to keep cutting production and they will until they get prices back up where they want them to be. The average family is so far behind they will never get caught up. Jeff Wilson has an interesting book just out called The Manhattan Project of 2009. I heard him on a radio talk show interview and he blew me out of the water. I got his book on Amazon. I think we are going about this whole thing wrong. WE keep spending billions on bailouts and stimulus checks. Why not invest in creating improved grids, infrastructures, and creating millions of badly needed new green collar jobs? The last stimulus package cost us 168 BILLION and did NOTHING to stimulate our economy. That would have gone a long way toward starting up alternative energy projects and creating new jobs. Check out what they are doing in California.Check out this link to read the news. This is so exciting for those who realize the importance of seeing out country transfrom away from fossil fuels and to cleaner, cheaper electric cars. I read about this in Jeff Wilson's book The Manhattan Project of 2009. I am thrilled and surpriesed to see it taking place so soon. Go The Manhattan Project of 2009, Go Jeff Wilson for writing this enlightening book, Go California, Go Arnold, and GO BETTER PLACE...IT IS ENCOURAGING TO SEE THERE ARE THOSE OUT THERE WHO ACTUALLY GET IT. HOPEFULLY WASHINGTON WILL FOLLOW SUITE SOON! Link to news story below or simply type electric car infrastructure california or Better Place into search engine. weblog/2008/11/better-place-gl.html