Solar Stocks have made their investors suicidal with drops of of 80-90% from the top common even amongst the biggest solar companies. A number of solar companies like Q-Cells, Solar Millenium, Solon which used to be amongst the 10 biggest ones have gone bankrupt. In fact most of the German solar companies have either gone bankrupt or are on the verge of doing so. It is quite sad given that Germany remains the biggest supporter of solar energy and one of the key reasons for the success of the solar industry . The massive reduction in cost of crystalline silicon technology has put other solar technologies like thin film and solar thermal on the deathbed . First Solar the thin film solar panel leader loses 10% of its market value every day. Read my post on 7 reasons why First Solar could die to see the causes. Coupled with the drastic cost reduction in solar costs by companies like GCL,Trina Solar has also come massive oversupply. This has made the prices of solar panels go down faster than costs which means that even the lowest cost integrated Chinese solar companies like Yingli, Jinko are also facing losses.
Solar Stocks are again touching their all time low on news of US imposing duties on imports of the $ 3 billion of Chinese solar panel imports . This could herald retaliatory tariffs by the Chinese government which could further harm the already teetering solar companies . However the time may have come to buy solar stocks
1) Sentiment for buying solar stocks is at an all time low. There hardly remains a buy side or sell side investor recommending solar stocks
2) Bankruptcies amongst solar companies has started to accelerate with the weakest hands giving up. Now nobody is willing to buy the 2nd hand solar equipment which means that capacity is getting completely destroyed
3) Capacity reduction is starting to happen with the biggest solar companies like First Solar and LDK firing 20-40% of their workforces. Sunpower is idling its oldest solar cell Fab.
4) Valuations are quite pathetic with 0.1-0.2 times sales and similar low levels of other financial ratios like P/B . Given that most companies are in losses it does not make sense to consider P/E right now
5) Conglomerates are now existing these industry with companies like Samsung, Hyundai getting out or putting on hold their expansion plans.
6) Solar Grid Parity is here and Demand keeps on increasing by astounding rates each year. In countries like Italy, Hawaii , Brazil grid parity with retail electricity prices is already here . It will take time for the infrastructure to sell the solar panels in these new markets.
Companies like Trina Solar , GCL which have decent balance sheets and the lowest costs are going to survive and thrive. It might be a good time to start accumulating given these above factors.
There are only 2 Solar Energy ETFs in the Market right now – TAN and KWT.Note buying solar ETF provides a less risky way of investing in solar energy as some stocks can dramatically underperform in this fast growing industry.However Solar ETFs will on the other hand perform much worse than the best performing stocks in the solar universe.This is because their holdings are also concentrated on some of the lesser quality companies.KWT and TAN are better investments for the less informed and less sophisticated investors.Amongst the 2 ETFs,KWT is the better option than TAN for a number of reasons which are described below.