Big Oil Solar Play

Jeff Siegel

Written By Jeff Siegel

Posted May 2, 2011

A couple of years ago, Nick Hodge and I were invited to speak at an investment conference in Orlando.

Part of the deal was we would sit at a table in an exposition area and take questions from those in attendance.

Always more than happy to discuss opportunities in clean energy, we agreed.

Unfortunately, there weren’t a lot of believers at this particular conference…

Comprised mostly of desperate, get-rich-quick suckers who have probably been duped on more than one occasion by God-channeling televangelists and spray-tanned fast talkers who promise you can become a millionaire while working from home… the hostile response to actual peer-reviewed data and solid track records was overwhelming.

One guy actually screamed, “Solar’s bullshit!” He was mad as hell. Couldn’t figure out why though, because he wouldn’t elaborate.

In any event, this kind of irrational behavior is not new for us. But to be honest, I could care less.

If you don’t want to earn profit by investing in clean energy, it’s no skin off my back. But for those folks who think “solar’s bullshit,” there’s a multi-billion dollar oil and gas company that strongly disagrees.

A 40% Gain in One Day

Last week, Total S.A. — the world’s fifth largest publicly-traded integrated oil and gas company — ponied up $1.38 billion for a 60 percent stake in SunPower Corp. (NASDAQ: SPWRA).

The stock shot up 40 percent on the news.

And here’s the interesting part: Total paid a 46% premium for a piece of a company that’s actually less profitable than many of its peers.

But SunPower is an American solar company that’s already got a pretty solid piece of the U.S. market — a market which, over the past few years, has been seen as a potential goldmine for European energy companies.

Now it hasn’t been easy for SunPower to compete against all those aggressive Chinese manufacturers…

After all, Chinese solar players like Trina Solar, Suntech Power, and JA Solar get massive support from the government. Throw a ton of cheap labor on top of that and you’ve got the recipe for Chinese solar dominance.

But with Total S.A. on board now, the company can aggressively pursue technological improvements that’ll allow it to give some of those cheap Chinese solar manufacturers a run for their money.

In fact Total S.A. has agreed to provide as much as $1 billion of credit support over the next five years. This cash will allow SunPower to expand its manufacturing capacity and speed up the development of utility-scale solar power plants.

It’s my guess that Total S.A. has placed the importance of solar just a bit higher than the excrement of cattle.

Buy these Stocks on Short-term Weakness

Despite nearly every solar stock heading north last week after the news of the SunPower deal broke, many are still pretty reasonable if you’re looking for a long-term investment.

We continue to look for opportunities to pick up any number of solar or solar-related stocks on short-term weakness. The key players to watch include:

  • Trina Solar (NYSE: TSL)

  • Suntech Power (NYSE: STP)

  • JA Solar (NASDAQ: JASO)

  • First Solar (NASDAQ: FSLR)

  • Daqo New Energy (NYSE: DQ)

Also keep an eye on solar-related stocks, like Satcon Technology Corporation (NASDAQ: SATC), for instance.

Last week, SATC — which makes inverters for solar installations (among other things) — reported earnings. The company was severely punished for shrinking margins, a result of rising material costs and unpredictable European policies.

Panic-stricken investors sweat it out over this, pretty much ignoring the 320% revenue growth, the 400% increase in shipments, and the 28% increase in its backlog.

The company’s utility-scale projects are also looking to give the company a nice boost in the second half of the year.

Just a few weeks ago, Satcon was chosen to supply inverter equipment for a 15 MW solar project in California. That one’s being built for Pacific Gas & Electric.

Long story short: The stock briefly fell below $3.00 after earnings.  But this is easily a $5 stock if you don’t mind holding on to it for about a year.*

Also keep an eye on ReneSola (NYSE: SOL). The company took a brief hit last week after warning its average selling prices would fall on increases in inventory. The stock fell about ten percent on the news, but held strong above $8.

I’m cautiously optimistic, since it avoided breaking that $8 support level… So unless some catastrophic event unfolds and sends the entire sector into a tailspin, I don’t think it’s out of the question to see ReneSola trading around $12.00 in 12 months.

In the meantime, don’t underestimate solar. This is an industry that continues to deliver for Green Chip Stocks investors.

And it’s an industry that will continue to prove the naysayers wrong.

To a new way of life, and a new generation of wealth…

jeff signature

Jeff Siegel
Editor, Energy and Capital

*Full Disclosure: I personally picked up some shares of Satcon following earnings last week.


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