NEW YORK (TheStreet) -- The sun shone quite brightly on solar stocks over the past six months, coming after a somewhat cloudy start to the year. Joseph Berwind, author of Investing in Solar Stocks, expects the fair weather to continue for the group next year as margins expand and demand for solar products increases.
Berwind recently chatted with
about his favorite solar names.
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Why is now a good time to invest in solar stocks?
The group is doing well on a fundamental basis. Arguably they are cheap and they have room to rise from here, with 2011 looking as good at 2010 -- which has been a record year for solar stocks.
One stock you like is Renewable Energy Corp. (RNWEF.PK) . Why do you like this one?
I like REC for a variety of reasons. I believe currently that the theme among institutional investors in the space is to look at those companies that have not done as well as some of the best performers. REC has been improving their margins, which will translate into improving returns, and they are fixing their business in ways that will translate into good returns throughout this year and the remainder of next.
You are also big on Satcon Technology (SATC) . What is special about this stock?
Satcon is an outstanding opportunity outside of solar modules. Satcon makes medium-to-large inverters, which are key to every solar system's development program. They make the device that turns sun energy into usable energy, from DC to AC. Their large-scale inverters are the preferred ones for utility-scale projects like those that begin to ramp in 2011. The company has recently changed management and has been doing much to reorganize themselves and their returns, and their sales are beginning to pick up.
People love to hate First Solar. The company has a very low-cost technology. It has grown to be one of the largest solar companies in the space. The company has been competing with its thin-film technology against the vast majority of the market, which is crystalline and silicon technology. And so it has had to lower its prices even further as crystalline and silicon module prices began to fall. They are stabilizing right now, and in some cases even increasing on the spot market a little bit. That will allow First Solar to take a breather. We believe that First Solar will be able to translate these stabilized prices into higher volumes for the remainder of this year and next. As a result, it's more likely to become a $200 stock than a $100 stock.
You are also a big fan of the Chinese player Yingli Energy (YGE) . Can you tell me about this one?
Yingli has been on a very long and intense capital investment program, causing it to have lower margins as a result of its unabsorbed expenses. They are coming to the end of that road and so they will see better volumes, better cost absorption and in turn much better returns than they have seen in the last year. Yingli has an excellent opportunity to improve its standing among solar stocks, resulting in a higher share price.
Reported by Gregg Greenberg in New York
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