Solar stocks have had an interesting history the last two years. Take First Solar Inc. (FSLR) for instance. From January 2007 to April 2008, the stock boomed more than 900% as demand for renewable energy prices surged along with rising oil prices. However, this growth did come to an end as with most rapid-growth stories and the stock fell from over $300 a share to just $140.
Recently, Forbes explained what happened in an article entitled “The Great Solar Shakeout.” Here’s what they had to say, “Hidden behind these glowing [compounded annual growth rates] CAGRs is a mass of shadows, including the prospect of diminishing government subsidies, an oversupply of modules, rising materials costs and the freeze among credit markets. Combined, these factors help explain why solar stocks over the past 52 weeks and even in October, took a steeper dive than the Nasdaq Composite.”
Even though short-term problems have depressed stock prices, the long-term future for the industry remains strong. The silicon-based solar market is still projected to grow 38% annually through 2013, growing from a 550 MW market to a 2.8 gigawatt market. Future growth will be helped by the federal government’s provision of an eight year extension of solar energy tax incentives and continuing support. This measure should give the solar industry much-needed stability.
Although it’s not clear if this is the bottom, it is important to begin researching the excellent opportunities out there. We recommend taking a look at First Solar Inc. (FSLR) and SunPower Corp. (SPWRA) for the domestic market, and LDK Solar (LDK) and Suntech Power Holdings Co. Ltd. (STP) for China. Another trading vehicle to consider is Claymore/MAC Global Solar Energy (TAN), which is an ETF of more than 60 different companies, offering better diversification.
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