Cabot Editor Timothy Lutts on

Reprinted from MarketWatch:

Here comes the sun: Energy spike heating up solar shares

By Timothy Lutts, Cabot Market Letter, October 17, 2007

SALEM, Mass. (Cabot)—It’s October in Salem, Mass., famously known as the “Witch
City,” which means tourists are everywhere, clogging the downtown
streets in a process that culminates in a massive traffic jam on the
night of Oct. 31.

Most Salem residents tolerate this annual incursion, knowing that in
November, these folks will be gone, while the dollars they’ve spent in
our hotels, restaurants and gift shops remain behind. To me, living and
working on the edge of town, it hardly matters.

October to me means getting ready for winter. I’ve already done my fall
pruning and replenished the woodpile in the garage, and this past
weekend I tackled the storm windows—a task that, though tedious,
will pay off in spades in the months ahead.
Why? Because the price of
oil is going through the roof! And if you heat with gas instead, you
won’t fare much better.
The roots of this
long-trend trend are numerous, and include the increased appetite of
China and other developing nations for energy of all sorts, the
increasing cost of procuring oil and gas from less accessible
locations, and the increased demand for energy sources that pollute
less. Yesterday’s spike in energy prices was credited to friction
between Turkey and Iran!
So, while I was buttoning
up my house for the winter, I was also thinking about investments that
benefit from the long upward trend in the price of energy, particularly
my favorites… the solar power companies.
The fact is, the solar
energy that hits the earth in one minute is sufficient to supply all
our energy demands for an entire year; the trick is harnessing that
energy. An increasing number of public companies are doing it, however,
and as the technology improves rapidly in this industry, and economies
of scale kick in, the cost per watt continues to fall.
In some sunny locations,
the cost of solar is nearing parity with the cost of traditional
fossil-fuel electricity. And it’s pollution-free!
There are over a dozen young stocks to choose from in this space, but the leaders today are First Solar  (FSLR), JA Solar (JASO), SunPower (SPWR) and Yingli Green Energy (YGE).

These are growth investments of the first order. Every one of them is
growing revenues at a triple-digit rate. (That’s proven to be one of
our most successful stock-picking criteria through the years.) Every
one of them is a profitable company. And every one is being accumulated
by institutional investors who want to get their foot in the door of
the next big thing.
Admittedly, these stocks
are expensive when looked at from a static valuation perspective. But
when you consider the growth potential, these valuations make sense.
Chart of FSLR
First Solar, based in Phoenix, is the leading provider of
third-generation “thin-film” solar cells, which means it’s far less
dependent on increasingly expensive silicon for its products.
SunPower, based in San
Jose, Calif., makes an aesthetically attractive all-black solar cell
for both residential and commercial installations and is building new
manufacturing plants in Malaysia to increase capacity.
JA Solar, nominally from
the Cayman Islands but actually operating in China, is a specialist. It
makes solar cells, but then sells them to other manufacturers who
incorporate them into finished power-generating products.
Yingli Green Energy, also
in China, is vertically integrated, and produces complete systems for
home, business and industry.
All four have strong
charts today and all four are recommended for growth-oriented investors
who know how to manage risk.

found in The Guru’s Corner is subject to the terms and conditions found
in the Disclaimer and does not represent a recommendation of investment
advice. Investors should seek the advice of a qualified investment
professional prior to making any investment decisions. 
End of Story

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