Alternative Energy?
I got a question a few days ago from a reader about why I don't own any alternative energy stocks:
"You have several up-and-comer stocks in various sectors, but one thing I was curious about is why you don't seem to be in any alternative energy plays (both of which have become "major policies" for both the U.S. as well as China), especially given all the recent hoopla over oil prices. Do you simply not like the sector in general? Or are you just unsure about the best way to play it? The reason I ask is because I am trying to find a "good play" in that group at the moment, and thought I would see if you had any ideas. The most commonly mentioned stocks in the category are STP, ESLR, DESC, IMCO, BLDP, PLUG, and CPST."
Well, the short answer is that I do like the sector in general, but haven't done a lot of research yet or otherwise found any particular companies that I like.
I have looked in the past at Ballard Power (BLDP), but they look like they're just as likely to go bankrupt as they are to find success. I haven't looked at any of those other ideas in great detail, but I commend you to the alternative energy thread of articles over at Seeking Alpha -- they have articles and commentary and conference call transcripts for several of those names from folks who certainly know more than I do about the sector. I've been looking there for some ideas myself.
The longer answer is that I do have some exposure to solar energy, at least, through my investment in MEMC Electronic Materials (WFR) and a smallish LEAPs position in Cypress Semiconductor (CY).
WFR I've written about a lot lately, but I like that they are exposed to the solar cell manufacturing industry in that they sell the silicon to those companies -- but thanks to their broad customer base they aren't subject to the whims of national subsidies in solar power to nearly the degree that the pure play solar companies are. I am a little nervous about what happens to solar power subsidies across Europe and in various US states if the oil shock of the last year wears off or oil prices drop significantly.
Cypress Semiconductor you may have heard mentioned over the past few months by a lot of market commentators, including Herb Greenberg, who I don't particularly endorse but who published what I thought was some solid analysis of this company.
CY is 80% owner of SunPower, a former division that they spun off last year and a manufacturer of solar cells. Thanks to the huge bull market in solar power recently SunPower has really rocketed up the charts ... but no one likes CY nearly as much. CY's shares of SPWR account for something like 75% of their market cap at this price, so if you think solar companies are going to continue growing then CY is a lower risk way to ride SPWR's success -- you get CY's semiconductor businesses, which seem to be in a bit of a turnaround (I hope), for a pittance. The former child is now almost exactly the same size as the parent.
This hasn't been entirely ignored, and CY has climbed a fair amount already, but I'm guessing that sometime between now and 2008 when my options expire CY will see a significant boost from either solar power expansion or from their own businesses.
In the meantime, I agree that the growth in alternative and renewable energy is an important trend -- but I haven't really figured out how to invest in it. This is almost like 2004, when anything with China in it's name doubled in price ... now anything associated with Solar or Hybrid or Alternative Energy is booming, in many cases without much regard for current earnings or even potential earnings.
I have taken a glance at Headwaters (HW), which is an established chemical and coal gasification/clean coal company that shows some real promise and has real earnings, but haven't taken a bite yet. If anyone has ideas for alternative energy companies I'd love to hear them ... especially if they're companies that don't depend entirely on government subsidies.
"You have several up-and-comer stocks in various sectors, but one thing I was curious about is why you don't seem to be in any alternative energy plays (both of which have become "major policies" for both the U.S. as well as China), especially given all the recent hoopla over oil prices. Do you simply not like the sector in general? Or are you just unsure about the best way to play it? The reason I ask is because I am trying to find a "good play" in that group at the moment, and thought I would see if you had any ideas. The most commonly mentioned stocks in the category are STP, ESLR, DESC, IMCO, BLDP, PLUG, and CPST."
Well, the short answer is that I do like the sector in general, but haven't done a lot of research yet or otherwise found any particular companies that I like.
I have looked in the past at Ballard Power (BLDP), but they look like they're just as likely to go bankrupt as they are to find success. I haven't looked at any of those other ideas in great detail, but I commend you to the alternative energy thread of articles over at Seeking Alpha -- they have articles and commentary and conference call transcripts for several of those names from folks who certainly know more than I do about the sector. I've been looking there for some ideas myself.
The longer answer is that I do have some exposure to solar energy, at least, through my investment in MEMC Electronic Materials (WFR) and a smallish LEAPs position in Cypress Semiconductor (CY).
WFR I've written about a lot lately, but I like that they are exposed to the solar cell manufacturing industry in that they sell the silicon to those companies -- but thanks to their broad customer base they aren't subject to the whims of national subsidies in solar power to nearly the degree that the pure play solar companies are. I am a little nervous about what happens to solar power subsidies across Europe and in various US states if the oil shock of the last year wears off or oil prices drop significantly.
Cypress Semiconductor you may have heard mentioned over the past few months by a lot of market commentators, including Herb Greenberg, who I don't particularly endorse but who published what I thought was some solid analysis of this company.
CY is 80% owner of SunPower, a former division that they spun off last year and a manufacturer of solar cells. Thanks to the huge bull market in solar power recently SunPower has really rocketed up the charts ... but no one likes CY nearly as much. CY's shares of SPWR account for something like 75% of their market cap at this price, so if you think solar companies are going to continue growing then CY is a lower risk way to ride SPWR's success -- you get CY's semiconductor businesses, which seem to be in a bit of a turnaround (I hope), for a pittance. The former child is now almost exactly the same size as the parent.
This hasn't been entirely ignored, and CY has climbed a fair amount already, but I'm guessing that sometime between now and 2008 when my options expire CY will see a significant boost from either solar power expansion or from their own businesses.
In the meantime, I agree that the growth in alternative and renewable energy is an important trend -- but I haven't really figured out how to invest in it. This is almost like 2004, when anything with China in it's name doubled in price ... now anything associated with Solar or Hybrid or Alternative Energy is booming, in many cases without much regard for current earnings or even potential earnings.
I have taken a glance at Headwaters (HW), which is an established chemical and coal gasification/clean coal company that shows some real promise and has real earnings, but haven't taken a bite yet. If anyone has ideas for alternative energy companies I'd love to hear them ... especially if they're companies that don't depend entirely on government subsidies.
This article posted by One Guy @ 2/23/2006 11:46:00 AM 0 comments
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