MEMC Electronic Is Looking to Shine
This article originally ran on RealMoney at 11:06 a.m. EDT; it's being republished as a bonus for TheStreet.com readers.
Many market participants dread the inevitable market corrections that we suffer periodically, but if you have been building some cash reserves, they can provide some great opportunities. When the market is running like it did this past fall we often find ourselves struggling to buy stocks that have run up too much and too quickly.
When the market is undergoing a correction we can begin to stalk some of our favorites that we might have missed earlier. My main task during times of market struggle is to look for those stocks that are going to outperform once things improve.
During the most recent downturn I had an opportunity to look very hard at solar energy stocks. The group became very active a few months ago and a number of stocks in the group -- such as First Solar (FSLR), Trina Solar (TSL), Daystar Technologies (DSTI) and Ascent Solar (ASTI) -- made big moves but have pulled back with the broader market in recent weeks.This group looks like one that has the potential to regain its momentum in a better market, particularly if oil and energy prices stay strong, which doesn't seem that unlikely. So what stocks do I pursue in the group? Do I want to buy the ones that have corrected the most or the ones that have held up well? Typically the ones that hold up best tend to lead when conditions are better. They have some underlying demand, and those folks are generally willing to pay up more aggressively when conditions improve. In a sector like solar energy, I prefer a stock that has particular broad exposure to the industry rather than one that is focused on a more narrow niche. That way I can avoid specific issues that may not be indicative of the group as a whole. So what is the best way to gain broad exposure to solar energy without buying a dozen stocks? There are a couple of exchange-traded funds that may make for good plays and that I will track in my ETF Shark Alerts Newsletter, but the one thing virtually all solar energy companies have in common is that they use something called polysilicon to manufacture solar cells. There are some companies developing alternative approaches to producing solar cells, but it is limited and it's estimated that it will constitute only 20% of the market four to five years from now. For now, polysilicon will remain the key ingredient for solar cell manufacturers, and the key here is that there is a major shortage of the material. DigiTimes estimates that the shortage of the substance will likely triple in the next few years and will persist beyond 2010.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV