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The Future of Material and Green Technology - Growth Storys



September 17, 2010 – Comments (0) | RELATED TICKERS: FSLR , AXTI , MCPIQ

In this post I will highlight some of my current top industry picks for the Materials and Green Technology industry.  I see these sectors growing substainially in the next 3 to 5 years as we pull out of the recession and look toward the future.  The companies I cover in this post focus more on the back end of the "Green" Revolution (which is with out a doubt in the process of becoming a main stream idea).  These materials and technologies will be vital to driving both the United States, Europes, and Chinas future Energy, Materials, and Technology industries.  

FSLR – FirstSolar – I will start with one that most people have heard of by maybe don’t know a great deal about.  FirstSolar is the lowest cost Solar Cell Producer on a $ per Watt basis which provides them with the highest allowable margins in the solar sector.  This high margin is sustainable for at least the immediate future (3 - 5 years) as it is based on a technology/patent advantage.  Most people may not realize it but there are several types of solar cells, some being more “off the shelf” and some that are more design and technology based that are usually protected via patents.  FirstSolar is one of the design and technology based producers, and they currently have the best low cost design and technology in the sector.   

As the overall market for solar grows, which is projected at upwards of 30% per year for the next two to three years.  FirstSolar will be the largest to benefactor of this growth in the solar industry due to its technology and cost advantage.  FirstSolar's production capacity will increase from $1.4 GW to $2.2 GW from the end of 2010 to the beginning of 2012 (a 57% increase over 2 years). 

To help drive the increased adoption of their solar cells and expand their business, FirstSolar has added a Systems Business (EPC, O&M, Construction) within the last year which positions themselves as a leading design, engineering, services and delivery company in the solar projects business (similar to a Flour or Jacobs in the Oil and Gas Business).   I am a buyer around $125 a share, hopefully we get a dip off of 3 month highs of $140 a bit and it will be a good buy.  If you bought it over the summer around $110 good move, I almost pulled the trigger but let it slip away awaiting a break below $100.  I won’t let that happen again. 

AXTI -  AXT Inc. – The next in my lineup of growth stocks is a smaller semiconductor substrate company.  AXT Inc. is a Designer and Manufacturer of high quality semiconductor substrates used in several technology applications, including LED Lighting, Fiber Optics, Satellite Communication, Solar Cell Technology, and other emerging technology applications.  All semiconductors are made via patented technology.   

AXT’s sales are generated globally including North America, Europe, China, and Japan, which puts them close to all key electronics and technology manufacturers around the world.  They experienced 77% sales growth from first six months in 2009 compared to 2010, while increasing their margins from 11% to 36.5%.  Sales growth should continue at more moderate levels in the future (20-30% per year), as their market share increases, and the markets they operate continue to grow at 11% per year. 

Looking to pick AXTI up in the low to mid $5 range if I can, it seems to have stalled out a bit, but I expect that once they report another strong quarter, which I expect them to do, then the stock will take off again.  Get in before October 25th earnings.    


MCP – Molycorp Minerals and LYSCF.PK - Lynas Corp – This sector one has been in the public eye a lot as of late, due to discussions around Rare Earth Elements.  Molycorp is currently in the process of modernizing and expanding their Mountain View California Rare Earth manufacturing facility.  Once completed this will be the only US manufacturing facility of Rare Earth Minerals.  Currently a majority of the world’s supply of Rare Earth Minerals are mined in China, which posses National Security issues, as Rare Earths are essential to several technologies in the Defense Industry, Water Treatment Industry, and several Green Technologies including Hybrid Electric Vehicles.   Mining will not commence at the Mountain View Califonia site until mid to late 2011, possibly slip to 2012, so it is still unseen what type of operational profitability will be achieved, but from current Rare Earth commodity prices on increase due to the inability of world supply of keeping up with world demand.  

Molycorp’s main competitor outside of Chinese producers will no doubt be Lynas Corp, which is an Australian manufacturer of Rare Earths.  Lynas is in the same situation when it comes to completing construction of a processing plant at their site, Mount Weld.  They are way ahead of schedule of Molycorp with processing commencing in very early 2011.  For this reason and the fact that Lynas has contracts in line to sell at least $500M per year already in line to supply their products, I like Lynas Corp better then Molycorp. 

Although I would be a buyer of both at the right price.  Looking to pick up Lynas Corp at around $1.05 and Molycorp at around $18.75.  The sector is really hot right now so you might want to wait a bit if you can for a good entry, as either of them won’t make any serious revenues until Q1 or Q2 of 2011.

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