NEW YORK (
) -- Has the time finally arrived for wind to blow by solar as an investment theme?
The first quarter 2010 is expected to be a record quarter for the solar sector, and solar companies are ramping up capacity as if all the world were a desert awaiting the arrival of solar panels.
Nevertheless, JPMorgan Chase was out with a report on Tuesday signaling its thematic shift away from solar as the smart renewable energy investment for its clients over the next few years.
JPMorgan initiated coverage of U.S. pure-play wind company
with an overweight rating.
At the same time, JPMorgan downgraded shares of a triumvirate of U.S. solar companies --
Energy Conversion Devices
JPMorgan says that institutional investors have tired of solar companies -- a lot of work for uncertain rewards, especially at a time when the critical market of Europe is itself signaling a shift away from hefty support levels for photovoltaic projects.
In the U.S. specifically, there are several reasons supporting wind as a more logical investment play. U.S. utilities are not all located in California, Nevada and Arizona.
Natural gas prices have not spiked to the level at which "smart" investors five years ago predicted the economics of renewable would become clear.
Wind remains much cheaper than solar, and for much of the U.S. utility market, wind remains a more logical choice than solar to drive their renewable energy generation, a point that JPMorgan's renewable energy analyst Christopher Blansett made this week in his research report swapping solar for wind.
Granted, just when the right moment to enter wind as an investment arrives -- if you believe in the wind theme -- is still unclear. The JPMorgan analyst noted that he expects Broadwind shares to bottom in the first quarter of 2010.
In fact, that bottoming may have been taking place on Friday, as Broadwind released a pretty ugly fourth quarter earnings report and shares fell 20%. Broadwind management also guided to a bottoming in the first half of 2010.
The eternal question in investing is whether the damage will get worse before it gets better, or whether investors who wait to long to call a bottom will miss the rally.