We constantly hear the stress on corporations going green, while we develop alternative sources of energy - not only for conserving energy, but also for fighting global warming. Galloping world prices for crude oil have also been responsible for increasing attention on finding renewable sources of energy.
As petrol prices and oil company profits have risen remarkably with expectations of further growth, non-economical renewable resources are expected to become economical. Until this point, many of them could not be developed because of prohibitive costs. However, with a greater emphasis on development, especially with Google’s RE < C effort, cost-effective renewable times may be just around the corner.
Solar energy is one of the most prominent alternative sources of energy. Many countries have been toying with the idea of its development. Unfortunately, its share in the overall energy sector is a measly 0.1 percent. According to statistics, solar power has recorded a growth of 22% during the last 10 years, with 35% having been recorded during the last 5 years alone. Although the growth rates are strong, keep in mind that the real numbers are still quite small.
Prominent Solar Energy Stocks
With the spectacular growth of solar energy demand, there have been rising expectations, reflecting extremely high valuations of solar energy stocks. First Solar (FSLR) has experienced a valuation of more than 182. Some of the most prominent solar energy companies in terms of market popularity are:
* First Solar (FSLR)
* SunPower Corporation (STP)
* Suntech Power Holding Ltd. (LTP)
* JA Solar (JASO)
* Solar Enertech Corp (SOEN)
* Nano Solar
* Miasole
* China Sunergy (CSUN)
* LDK Solar (LDK)
* Solarfun (SOLF)
In addition to these popular companies, there are a large number of smaller players which are still under the development stage. Most of these are young companies. However, keep in mind that even First Solar was founded only in November of 2006.
On The Thresholds of High Tech Bubble
To many critics, investing in solar stocks is just like investing in high tech stocks – right before the bust. For some investors, there is too much hype associated with these stocks, meaning that the speculation has already been discounted into the pricing. Indeed, many investors remain critical regarding the industry’s ability to produce cost-effective and viable solar energy. Costs associated with these are extremely high and therefore, it is very difficult to be profitable.
These concerns are also confirmed with the behavior of equity prices. Many solar stocks like Solarfun and First Solar rose exponentially during 2007 alone. After all time highs, most of these stocks have fallen by as much as 50% recently. These stocks are extremely volatile and may not be suitable for the majority of investors. In addition, many of these companies are based in China, making it difficult to evaluate the financial transparency of their performance.
The Bright Side
However, not all elements are gloomy with solar stocks. Solar companies do indeed have bright guidance. They are backed by their national governments, and in some countries, there is plenty of sunshine available - ready for exploitation. Indeed, with the continuously rising oil prices, coupled with the inherent limit of these natural resources, we will need to eventually switch over to renewable energy – meaning solar companies are poised for the opportunity.
Solar Energy Investment Options
Investment in solar companies can be risky, though lucrative, classifying them with very high risk-to-reward ratios. Investors considering solar energy stocks should pay close attention to their PEG ratios.
Another lucrative option can be solar ETFs, such as the PowerShares WilderHill Clean Energy Portfolio (PBW). Without having to conduct extensive research, you can enjoy the benefits of full diversification, especially with low weights for each company.
Moreover, some major large cap companies like GE are spending heavily in solar power, even though it is still a fraction of their total investments. If you are risk-adverse, you may want to consider investing in a large cap company exploring renewable energy.
MfG
Juju