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kirkydu (96.01)

TAN a SCREAMING buy!!!

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November 21, 2011 – Comments (8) | RELATED TICKERS: TAN

I have been talking about solar more and more as prices go lower and lower.  Not just the stock prices mind you, but the cost of installing solar. 

According to GE and other industry followers and sources, the massive advancements in solar electricity generation will place it on par with natural gas fired electricity by mid decade.  Already, costs for commercial installation of solar are down 60% the past five years.  The plunge in costs this year has been over 30% alone.  That drop in costs has directly caused many companies to become non-profitable as there is too much supply short term in the face of market and political volatility.  As companies merge, disappear and become stronger, this volatility is the buy fear opportunity, maybe of a lifetime.

I've written more extensively about solar in two other places.  The nascent fool blogs network beta:

http://blogs.fool.com/blogs/2011/11/01/galp-gets-tan/

And on Market Watch:

http://blogs.marketwatch.com/great-columnist/2011/10/19/meet-galp-then-get-some-sun/

For those who bother to actually learn the industry, what you are finding is that the massive consolidation in solar companies as a handful go bust, is likely to be followed by a M&A binge.  Already in Q3 large companies began to scoop up affordable companies with strategic advantages for them, and venture capital and private equity began to ramp investments.  

http://www.pv-tech.org/news/solar_ma_activity_in_q3_signals_start_of_industry_consolidation_says_mercom

http://www.electroiq.com/articles/pvw/2011/10/solar-vc-rising-manda-blazing-in-3q11.html

The growth of solar can no longer be denied by zealots of other ideas.  We are seeing growth rates of 35% as far as the eye can see.  Big companies are jumping on board.  So are the very wealthy.  Do your research, but you should probably find a way to buy in too.  I like TAN and some non-pure plays.

Kirk

My clients at Bluemound Asset Management, LLC and I own TAN.


 

8 Comments – Post Your Own

#1) On November 21, 2011 at 12:08 PM, MegaShort (99.96) wrote:

I think it's rather odd for you to buy and promote an ETF.  In my opinion, the point of full-time asset management is doing the research necessary to own individual stocks.

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#2) On November 21, 2011 at 12:43 PM, Tradersinfo (< 20) wrote:

Solar investors are screaming-in pain, that is. Where will the supposed 35% growth be coming from if all developed economies are entering a policy-recession? Government austerity is killing the green industry. There will only be profit growth after the 2013 fiscal year at the earliest. The median EPS estimate for Canadian Solar paints a picture that is typical of the photovoltaic semiconductor industry:

2012 FY $-0.20

2013 FY $-0.60

Growth? I don't see any there.

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#3) On November 21, 2011 at 12:54 PM, kirkydu (96.01) wrote:

Mega

If you read my articles you would have your answer.

Trader

This is a long term investment no doubt.  However, solar installations are soaring contrary to your statement as large companies continue down that path, i.e. Walmart in California, Google, etc...  

As the industry finishes consolidating sometime in the next few quarters or so, these entry prices will disappear and in five years will be a distant memory evoking discussions about what could have been.

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#4) On November 21, 2011 at 1:26 PM, MegaShort (99.96) wrote:

I see in a previous article you said this:

"Selecting the individual companies which might capitalize will be difficult.  I am using TAN to gain broad market exposure, and plan to use options to invest in several companies with bright outlooks (WFR, AMAT) or huge potential upsides (still researching)."

I appreciate the difficulty of detailed financial and technical analysis in the solar sector.  But I don't think you need to gain exposure before you do this analysis.  There is junk in every sector that you don't want exposure to.

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#5) On November 21, 2011 at 1:29 PM, buffalonate (96.32) wrote:

Investing in smallcap solar companies is a horrible idea.  The profit margins are razor thin or do not exist at all.  The other problem is competition.  When General Electric determined that they have an economically competitive thin film solar product I concluded that it was game over for the small players.  It takes huge amounts of money to develop these technologies and the smaller players do not have the money to compete. 

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#6) On November 21, 2011 at 2:30 PM, kirkydu (96.01) wrote:

BUFF

Interesting you should mention GE.  Read this:

http://blogs.marketwatch.com/great-columnist/

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#7) On November 23, 2011 at 10:18 AM, tekennedy (59.95) wrote:

Morningstar recently had a good article on the industry:

http://news.morningstar.com/articlenet/article.aspx?id=446982&pgid=stockarticle

I'm curious if/when solar costs will become price competitive without subsidies.  A wave of consolidation may actually get the industry there sooner as more proprietary technology ends up in each company's hands and more economies of scale lower costs.  I agree with TAN as a good choice for industry exposure as it is a gamble who will win in the end.  I like AMAT personally as they a) will survive and b) will benefit no matter which individual solar stocks win as they provide the machines to make the solar panels (as long as crystaline silicone is cost competitive).

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#8) On November 23, 2011 at 10:46 AM, kirkydu (96.01) wrote:

I own AMAT because it is a double play on semis and solar.

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