Crude oil prices have been surging recently, and there is little sign that the momentum will be slowing down. Every time crude oil reaches these types of elevated levels, it seems that interest in alternative forms of energy also rise. Solar is one type of alternative energy that gets particular attention, and should be on investors' radar going into 2011. (To learn how the industry works and how to spot the winners before you buy in to the hype, read Spotlight On The Solar Industry.)
Solar energy was hit hard in 2010. While the S&P 500 (NYSE:SPY) rose 12% over the course of the year, the solar sector, as represented by the Claymore/MAC Global Solar Index ETF (NYSE:TAN), was down over 27%. The major concerns with solar centered on demand issues in Europe, specifically in Germany. The country accounts for a significant percentage of solar spending globally, and is expected to curtail its subsidies in 2011, likely due to the ongoing budget crisis in the EU.
With that said, here is a list of some the biggest players in the solar sector and their performance over the year. Some of these may end up being great bargains once the problems in Europe are in the rear view mirror:
|Trina Solar Ltd.||TSL||-18%|
|Suntech Power Holdings Ltd.||STP||-51%|
|First Solar, Inc.||FSLR||-3%|
|Solarfun Power Holdings||SOLF||+12%|
|JA Solar Holdings||JASO||+25%|
Of the stocks on the list, one of the more intriguing ones on the list is LDK Solar. Although shares of LDK were up 51% in 2010, the stock is still trading at the lower end of its range over the past three years. Back in September of 2007, the stock hit a high of $70, before operational and financial problems caused investors to abandon the stock in droves. Three years later, however, it appears that many of those hurdles have been largely overcome, especially with regards to debt concerns. In addition, LDK has a significant 10% market share in multi-crystalline wafers globally, which gives it an economy of scale advantage over competitors. Currently trading around $10.50, this may be an interesting stock that investors should keep an eye on for 2011.
Alternative energy is definitely a volatile sector, but the pay off can be worth it for investors willing to tolerate the risk. (For related reading, also see A Solar-Powered Home: Will It Pay Off?)
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