EBOOM CAPITAL: Is The President’s Call to Action a Buying Opportunity for Solar Stocks?

When the stock market was declining through mid and late 2008 and early 2009, great buying opportunities were everywhere. But who knew the bottom would be the first week of March 2009.

If you dallied a week, you missed 10% of the recovery. So nearly everybody missed the bottom.

During the recession, solar stocks were among the hardest hit sectors because demand for silicon wafers and other basic components of solar systems cratered.

The Claymore/MAC Global Solar Energy Index (TAN) fell twice as hard as the S&P 500 Index, but rebounded twice as high as the S&P 500 until June 15, 2009. After that the S&P 500 has gone sideways, while the TAN has bounced up and down and lately has fallen 25%.

This year’s bad news for solar sector includes the debt problems in Europe, which has driven Spain and Germany, the traditionally strongest solar markets, to reduce their government solar incentives.

So today, solar stocks remain in the dumps, notwithstanding some encouraging earnings growth and press releases about increasing efficiency and other technical improvements.

So, are things about to turn up for the solar stocks? Is this the new bottom for the best of these companies?

Consider this. What would happen if President Obama’s rhetoric (use the BP oil spill disaster as an opportunity to jolt Congress into action to pass clean energy legislation) gets some traction? Could this be a buying opportunity for solar stocks that, as the President would say, is too big to miss? 

Which solar stocks? Most of the publicly traded pure solar companies manufacture power generation systems and system components. Their biggest customers are the utilities that generate and sell electricity to the grid. If energy legislation improved the economics for these utilities, demand for systems and components would skyrocket.

The poster boy for this sector is Tempe, Arizona-based First Solar, Inc. (Nasdaq: FSLR). From November 2006 to today, First Solar shares are up more than 300%. However, they are trading down 42% in the past year, down 22% in 2010.

On April 28, First Solar reported strong revenue and net income sending its share price up $20 to $150 in one day. But the stock has been in the $110 range for the past two weeks and was trading early today at $106.

First Solar’s competitive advantage has been its advanced thin film photovoltaic technology and its operates in the components and systems segments. In the past year, it has jumped into the solar power project development business and become a pure play vertically integrated solar company. 

Here are two other names to check out:

• Merrimack, New Hampshire-based GT Solar International, Inc., (Nasdaq:SOLR) which provides the specialized manufacturing equipment and services essential for the production of photovoltaic wafers, cells, modules and polysilicon. Its principal products are directional solidification systems units, chemical vapor deposition reactors and related equipment.

• Trina Solar Limited (NYSE:TSL). Trina is an integrated solar-power products manufacturer based in China with a global distribution network covering Europe, North America and Asia. Trina sells products that utilise its own silicon ingots and wafers to distributors, wholesalers, power plant developers and operators and photovoltaic system integrators.

Learn more about Solar Power on eBoom’s Solar Energy Learning Page.