What’s that saying, buy stocks when they’re most hated or there’s blood in the streets? If you have a long term horizon, it just might be time to look at some hated solar stocks.
The solar sector is certainly hated and bloodied. And for good reason, natural gas is abundant and cheap, so who needs solar. And then all of Europe is in a financial crisis with unemployment surging and austerity plans in the works. So Spain, Italy and Germany don’t have the money to pay solar subsidies and support the solar sector. Then there’s China, whose own solar companies are flooding the market and driving down prices. American solar companies are claiming that Chinese solar companies have received illegal government subsidies and are dumping their products to drive them out of business, essentially.
All bad news for solar stocks like Sun Power (SPWR) and First Solar (FSLR), with Sun Power trading for under $4 a share and First Solar around $15. Both stocks are at or near their 52 week lows and no where near their all time highs of close to $300 a share for First Solar and over $100 a share for Sun Power.
But there is some good news.
Warren Buffett is bought up entire solar farm powered by the sun and created by First Solar. Buffett’s MidAmerican Energy Holdings paid paying $2 billion for the Topaz Solar Farm project from First Solar.
Green Light Capital’s David Einhorn, who made piles of money shorting First Solar, is NO LONGER SHORT the solar stock. Yeah for First Solar! That’s certainly a monkey off their back.
Apple, which is building a gigantic new facility to power their new cloud program for Apple’s millions of users, is using Sun Power to create a solar farm in North Carolina, near its core data center
And then there’s the risk of nuclear as evidenced by the tsunami in Japan and the ensuing disaster at the Fukushima nuclear plant. Who wants to build a new nuclear power plant after that. There must be other safer alternative energy sources, right?
So why not using the power of the Sun? And it’s free.
But what about the bankruptcy of Solyndra? The government loaned Solyndra $527 million only to see that money go up in smoke. Solar is still in the early stages of its development, and when you have cheap natural gas why would you want to risk using solar.
Well, Total, the fifth largest oil and gas company in the world sees a future in solar. They bought 65% of Sun Power.
And over in the oil rich Middle East, they too are building solar farms because they know oil won’t flow forever. The Middle East and North Africa have plenty of sunshine, unlike cloudy Germany, and they also have plenty of cash to fund the solar farms. But they to know that oil will one day run out, and so they are looking to solar as the solution to the post-petrol era.
If you have a long term view, solar stocks will one day rise again, just not sure when that is, though. For now, with earnings season around the corner for Sun Power and First Solar, the Wall Street Journal as the details.
Update: First Solar’s second-quarter earnings climbed 82% as the company posted better-than-expected revenue. Shares surged 19% to $17.65 after hours as results topped analyst expectations by a wide margin and as the company raised its full-year guidance. (WSJ)