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Solar Stocks Still Burning Bright

17 January 2014 in Trading Ideas

Nothing against Tesla and its hard-charging stock performance over the past 10 months, but it’s really solar power that seems to be carrying the water for cleantech investors.

Tesla, after all, appears to be fashioning itself as the Apple of electric cars – the undisputed leader in mindshare and stock performance – even if investors are still less than certain about how the overall industry is doing, or how its rivals will translate their labor into a rising bottom line.

Solar power investors, however, have recently been enjoying something close to a throw-a-dart effect, with what appears to be a secular industry turnaround providing a lift to most of the industry’s significant players.

The Cleantech Everywhere motif has increased 109.7% over the past 12 months – but even that return pales in comparison to the portfolio’s solar segment, which has skyrocketed 139.2% over the same period. The S&P 500 has risen 27.5% in the past 12 months.

(In the past month, the Cleantech motif has gained 9.8%. The S&P 500 is up 3.6%).

cleantech everywhere motifAs CNBC.com recently reported, the industry’s revival has resulted from several factors: an increase in solar capacity, lower photovoltaic costs and the extension of tax credits for renewable energy.1

The result has meant that solar isn’t so much competing with oil and gas as carving out its own electricity-generating niche. Richard Hastings, a macro strategist at Global Hunter Securities, told CNBC.com that solar power “has the ability to create very local opportunities…where you don’t have to be interconnected to a whole bunch of infrastructure like crude.”

According to the Energy Information Administration, renewable power for electric generation (which includes solar and wind) rose 23% over the last year, becoming the second-biggest source for new generator capacity.

Meanwhile, natural gas, which is quickly becoming the dominant source for generating electricity, has begun to plateau – not to mention its long-term low price levels as supply began to boom.

Solar power investors, on the other hand, have seen that surging demand from a smaller base — and the partial subsidization of costs — can result in a top-performing investment opportunity. However, investors in these niche industries, with short track records, should play close attention for any signals that could indicate a change in forecast.

1Javier E. David, “A day in the sun: Solar’s revival sends stocks on a tear,” cnbc.com, Jan. 13, 2014, http://www.cnbc.com/id/101326921.