TSL) and Yingli Green Energy ( YGE) for module market bets, and as far as the wafer market, thinks ReneSola's ( SOL) lack of exposure to the spot market makes it a better bet than LDK at that point of the supply chain. With that said, here are some of the key debates reverberating in the markets as solar stocks finally feel a little love from the investors who, at least of late, seemed to have left the sector for dead....
Inherent in the recent weakness in the solar sector and solar stocks, particularly the Chinese solar stocks, are trading multiples as low as five times earnings. Some of the tier 1 solar companies bailed water for all of 2010, such as Trina Solar ( TSL). The solar sector had its best demand year ever in 2010 and Trina Solar continued to prove its low-cost leadership among the vertically integrated Chinese module makers. Yet Trina Solar shares ended 2010 down by more than 20%. SOLAR DEBATE #2: Tier 1 vs. Tier 2
One of the prevailing bullish calls for solar stocks in 2011 is to focus on the so-called tier 1 players, who are already the most vertically integrated and low-cost -- and, as such, are defensive plays in what may be an oversupplied market. As Collins Stewart analyst Dan Ries noted in a recent sector outlook, there's general sector overcapacity that has to be distinguished from the sold-out capacity of a few top players. If this "all capacity is not created equal" argument was inherent in the rallies in Trina Solar and Yingli Green Energy ( YGE) shares on Monday, it was far from the only bet being placed by solar investors. In fact, the gains made by Trina and Yingli of just a little more than 2% were among the smallest gains on a huge day for solar. Several of the so-called tier 2 players that are expected to feel the overcapacity squeeze skyrocketed on Monday while the tier-1 low-cost leaders made modest gains. Jinko Solar ( JKS) was up 8.7%, with only SunPower and LDK shares performing better on Monday. Solarfun Power ( SOLF) shares were up 7%.
Eric Rosenbaum. >To follow the writer on Twitter, go to Eric Rosenbaum. >To submit a news tip, send an email to: email@example.com.