— by Mitchell Clark, B. Comm.
The alternative energy investment theme has really fallen by the wayside in this market, not because a lot of these companies don’t have a bright future, but because the stock market is still really in recovery mode. There aren’t any investment themes in a bear market — even a recovering bear market.
I’ll never forget the power and speed of wealth creation by a select few solar energy companies just a short time ago. Some of these companies created real fortunes and they still maintain rosy futures.
One company that was a real market darling in 2007 was First Solar Inc. (NASDAQ/FSLR). This large-cap manufacturer of solar modules is based in Tempe, Arizona, and the company still sells most of its product to Germany, where the adoption of solar energy is becoming widespread.
In its second quarter this year, the company generated record revenues of 525.9 million dollars, up from revenues of 418.2 million dollars generated in the first quarter of 2009 and up substantially from revenues of 267 million dollars generated in the comparable second quarter last year. Net income was 180.6 million dollars, or $2.11 per fully diluted share, up from net income of 69.7 million dollars, or $0.85 per fully diluted share, in the second quarter of 2008.
From the beginning of 2007, this stock went from approximately $30.00 a share to just over $300.00 per share in the second quarter of 2008. It was a 10-bagger in just over one year’s time. Not surprisingly, the stock fell quite hard when the broader market began to deteriorate later in 2008. As you know, the biggest winners usually become the biggest losers.
Since the November low set during the financial crisis last year, this stock has been trading in a wide range between $100.00 and $200.00 a share. Over the last several months, the stock has fallen from the $180.00 level to its current price of around $120.00, and now seems attractively valued.
Investors have gotten off the solar energy gravy train that was the hottest sector of the market in 2007. Accordingly, I think that this sector is now worth putting on your radar screen. First Solar looks to be in a downtrend right now, but this highly liquid stock could turn out to be a great trade one if it consolidates.