Considering investing in Solar Power companies? Here's an attempt to break down the market and to figure out what to look for.
Photo Voltaic cells are used to generate solar energy. While PV cells aren't exactly following Moore's law, their prices are going down and capacity (conversion efficiency) is increasing. There is but one source of energy and so the improvement is sought in the conversion efficiency of the PV chips to make it competitive with traditional forms of energy.
Some important factors to consider are....
1. Low cost of Production. e.g STP -Suntech Power. Manufacturing based in China.
2. High conversion Efficiency. Every company is striving for this. Sunpower (SPWR) at 22% is way ahead in the competition. Others are in the 15 - 18% frame. If SPWR has excellent patents then they have an excellent advantage long term.
3. A major challenge for this group is the polysilicon capacity. Polysilicon is used to manufacture PV Cells. Therefore its important for PV manufacturers to strike deals for a consistent polysilicon supply. Due to a major increase in demand over the last 2 years the price of polysilicon has gone up nearly 30% (contract pricing). MEMC Electronic materials (WFR) produces most of its own silicon feedstock and has recently inked a 10 year deal with STP.
4. Therefore company size and financial health is very important for ensuring supplies through contracts.
5. A company's base country will play a role as well. Germany and Japan offer the best incentives today to use Solar energy. STP has an excellent advantage as they have good visibility with Chinese government officials (see their website which talks about some visits and statements).
6. Most companies in this sector have triple digit revenue gains and so stock pricing is tough to decide. STP is the most profitable. They also have the lowest institutional investment (partly because its an ADR) and that leaves immense scope for a stock price increase.
Note: MEMC Electronic materials (WFR) is well positioned to take advantage of the polysilicon shortage. They produce most of their own Silicon feedstock.
Regards,
Ahu
Sunday, July 30, 2006
Long time!
Tue Jul 25, 2006 9:04 am
(I am posting this email a few days after I posted it on the yahoo group.)
Hope you are all doing well. I had taken a sabbatical after taking up the new job last October but the market has become enticing enough to start considering long term investing in bits and pieces.
Most Tech stocks are doing quite poorly and many of them are down dramatically from the beginning of the year (mostly well deserved). Seems like Oil and Mining stocks are doing the best all year. I do think thistrend will change in time.
I feel a lot of tech stocks currently make good long term buys. If you wouldlike to buy into a upscale restaurant chain that is growing at a steady pace, buy into RUTH. It is a Steak House and has been around since the 60's, but gone public only in the last year or two. It is below IPO price currently and I might be rusty but I don't see any factors standing out except a poor over all market. Yup, don't think Americans will stop eating steak any time soon :)
Anyway, at 18 bucks, I think it is a deal. Earnings are tomorrow and so you can choose to buy after earnings too.
I think the market can still fall a little more but right now might be a good time to buy stocks that you plan to hold for a while.
CKCM earnings are on Thursday and I do think it is a good buy long term at16.6. OVTI might see a traditional dip before earnings which will be in early Sept. Texas Instruments (mentioned strong chips sale for cell phones) and Cell phone companies have had strong earnings which bodes well for OVTI. Image capturing chips according to some analyst might be becoming acommodity but I feel OVTI has planned its diversification quite well, have good revenue growth and have a cheap P/E.
I will not be covering Oil / Mining stocks in general but the gains there have been dramatic for those who are interested.
Good luck!
Ahu
(I am posting this email a few days after I posted it on the yahoo group.)
Hope you are all doing well. I had taken a sabbatical after taking up the new job last October but the market has become enticing enough to start considering long term investing in bits and pieces.
Most Tech stocks are doing quite poorly and many of them are down dramatically from the beginning of the year (mostly well deserved). Seems like Oil and Mining stocks are doing the best all year. I do think thistrend will change in time.
I feel a lot of tech stocks currently make good long term buys. If you wouldlike to buy into a upscale restaurant chain that is growing at a steady pace, buy into RUTH. It is a Steak House and has been around since the 60's, but gone public only in the last year or two. It is below IPO price currently and I might be rusty but I don't see any factors standing out except a poor over all market. Yup, don't think Americans will stop eating steak any time soon :)
Anyway, at 18 bucks, I think it is a deal. Earnings are tomorrow and so you can choose to buy after earnings too.
I think the market can still fall a little more but right now might be a good time to buy stocks that you plan to hold for a while.
CKCM earnings are on Thursday and I do think it is a good buy long term at16.6. OVTI might see a traditional dip before earnings which will be in early Sept. Texas Instruments (mentioned strong chips sale for cell phones) and Cell phone companies have had strong earnings which bodes well for OVTI. Image capturing chips according to some analyst might be becoming acommodity but I feel OVTI has planned its diversification quite well, have good revenue growth and have a cheap P/E.
I will not be covering Oil / Mining stocks in general but the gains there have been dramatic for those who are interested.
Good luck!
Ahu
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