Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

An Energy Comeback Story No One is Watching

Commodities / Renewable Energy Mar 08, 2010 - 01:01 PM GMT

By: Q1_Publishing

Commodities

Best Financial Markets Analysis ArticleThe world is about to change forever.

The International Energy Agency predicts China will surpass the United States as the world’s largest energy consumer shortly after 2010.


U.S. consumers are already starting to see the impact. In the midst of an anemic recovery, oil is above $80 a barrel, the national average gasoline price is $2.57 a gallon, and natural gas prices are still more than double what they were for decades.

There will be corrections, but energy prices are going higher and contrarian investors should be spotting a sizeable opportunity in the most beaten up, out of favor energy sector in the world.

Grey Skies Cloud Solar Industry’s Future

The world has returned its focus to developing all sorts of new energy technologies. Nuclear is back on the table. Geothermal projects are under construction all around the world. Wind-based power ventures are getting the financing they lost back during the credit crunch. But the real opportunity when it comes to alternative energy is shaping up to solar.

Now, long-time readers know your editor has been a solar bear for years. The upfront cash outlays are large. The payback periods (the time it takes for the initial investment to be fully recouped) are as long as 20 years.

Basically, the economics of solar are terrible.

Of course, we realize questionable economics aren’t going to stop a politically-favored industry from prospering. But any industry that relies on funding from cash-strapped governments just isn’t something your editor would be willing to seriously consider investing in.

That, however, is starting to change.

When the Going Gets Tough…

The last few weeks have not been good for “buy and hopers” of solar stocks. Probably the worst-performing of them all has been Energy Conversion Devices (NASDAQ:ENER).

A few weeks ago the 50 year-old Michigan-based solar panel manufacturer released its latest earnings and the results were not good.

Analysts were expecting a 43 cent per share loss in the second quarter. The company posted a loss of 92 cents per share.
More importantly, the company said it was running at about 50% of capacity in the second quarter and would be cutting capacity utilization to 25% in the third quarter.

The only thing that has fallen faster than demand for solar panels is demand for solar stocks.
The earnings-induced sell off pushed ENER shares down to a 6-year low. The decline capped off a decline from a 2007 high of more than $80 a share to less than $8 today – a decline of more than 90%.

On top of that, almost none of Wall Street’s perpetually optimistic analysts are willing to stand behind ENER during these tough times. Since last August analysts at JP Morgan, Citigroup, and Piper Jaffray have all downgraded the shares. The ratings even include the extremely rare “sell” ratings.

No one wants solar right now and that’s why, for the first time in years, we’re getting interested in solar.

Everything that Could Go Wrong has Gone Wrong

Just look at what the solar industry has gone through over the past few months.

Germany, a country with a government that has proudly subsidized the solar industry for years, recently announced subsidies could be getting cut. Draft legislation was recently introduced to cut subsidies for rooftop panels and solar farms by 15%.

In an industry dependent on subsidies, any cut is going to have a noticeable impact.

Also, the entire industry is facing tough times. The prices solar manufacturers have fallen sharply across the industry. In ENER’s case, UBS noted the average price per solar module fell by 10% to $2.10 per watt. And that’s still 10% higher than the rest of the industry.

As the last earnings season has shown, practically any company that doesn’t have a big presence in the Chinese market, where the command-and-control economy has commanded solar to be a winner, has been getting hammered.

Finally, in the United States, funds from the stimulus package earmarked for solar projects have been tied up in red tape and the federal bureaucracy. Also, with 49 of the 50 states facing budget deficits, there isn’t much extra cash to hand over to solar companies.

And when it comes to installing a cap-and-trade scheme, a system designed to take money from the energy consumers and give it to alternative energy companies, prospects for implementing it are continually getting pushed back.

Avoid the High Costs of Conforming

Everything that can go wrong for solar has gone wrong. And, if judging by the price declines of the top solar stocks is any indication, solar investors have sold out and moved on.

That’s all why solar is actually looking more attractive than ever. Not because the industry’s prospects for are great, but because they’re so poor.

Remember, buying something that no one wants is the toughest move an investor will ever have to make. Yet, as contrarian investors know, when a stock is so hated that no one is willing to buy it, the risk is lowest and the potential reward is the greatest. Not all of them will work out, but with the highly attractive risk/reward dynamics, less than have of them have to work out to become a very successful investor.

John Maynard Keynes wrote:

Knowing that our individual judgment is worthless, we endeavor to fall back on the judgment of the rest of the world which is perhaps better informed. That is, we endeavor to conform with the behavior of the majority or the average.

Right now, we’ve found a stock that’s absolutely despised. We’re seeing a situation where nearly everything that could go wrong has gone wrong, share prices have declined significantly, and almost no one is willing to buy now.

For contrarians who see that most everyone is conforming to the crowd and getting out of solar, it could be the right time to buy.

China is on the verge of becoming the world’s largest energy consumer, energy prices are going higher over the long run, and solar could be in for another strong run. If so, solar would be the energy comeback story that no one is paying attention to right now. And in future editions of our free e-letter, the Prosperity Dispatch, where we constantly look for out of favor stocks, solar is definitely something we will be looking at to see how to take full advantage.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Disclosure: Author currently holds a long position in Silvercorp Metals (SVM), physical silver, and no position in any of the other companies mentioned.

Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.

© 2010 Copyright Q1 Publishing - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules