Oil prices have recovered, climbing over $60 a barrel, the recent stock market rally has lured many investors back off the sidelines, and President Barack Obama’s clean energy agenda has breathed some life back into the browbeaten sector.

Now, solar energy stocks – some that lost more than two-thirds of their value last year – have come roaring back.

After topping $300 a share last spring, shares of First Solar Inc. (Nasdaq: FSLR) plummeted to just $85.28 a share in November. But since then the company has bounced back, soaring 125% to Friday’s close of $191.72 a share.  Shares of Trina Solar Ltd. (NYSE: TSL) hit $52 last summer before bottoming out at $5.61 in November. That stock is up more than 260% since Nov. 21.

Global economic growth is far from guaranteed at this early stage, but there’s good reason to believe that when a recovery does get underway, solar stocks will be shooting for the moon.

California’s Gold Standard

While many other solar energy companies have collapsed under the weight of the economic downturn, a small upstart out of California has managed to greatly expand its business.

That company is BrightSource Energy, which last week agreed to what the company’s Chief Executive Officer, John Woolard, called the “the largest solar deal in the world.”

Pacific Gas and Electric Co. agreed to purchase 1,310 megawatts (MW) of solar thermal power from BrightSource Energy for a sum that analysts’ believe tops $3 billion.

BrightSource had already agreed to transmit 900 MW of solar power to PG&E in a deal that analysts valued at $2 billion to $3 billion. The terms of the new deal, which expands upon the original 900MW agreement, will build on top of that figure.

BrightSource plans to build seven solar power plants in the Mojave desert of California that will use mirrors to direct sunlight onto a group of centralized water towers to create steam that will, in turn, power turbines. PG&E estimates that the amount of energy produced by the plants will be sufficient enough to power 530,000 homes.

Earlier this year, BrightSource signed a similar 1,300 MW agreement with Southern California Edison Co. – an indication that, despite economic hardship, the solar energy business is still hot.

But a lot of BrightSource’s recent activity has to do with California’s newly adopted state energy policy. In 2006, California passed a law that required electrical utilities to get 20% of their power from renewable sources by 2010.

However, on November 17, 2008, California Gov. Arnold Schwarzenegger took the state’s green energy mandate further by signing Executive Order S-14-08, which requires that utilities generate 33% of their power through renewable sources by 2020.

Indeed, the state of California has led the country in adopting renewable sources of energy, particularly solar.

Renewable energy accounts for 13.5% of the state’s energy consumption, and for the past three years, the California Energy Commission has been managing $400 million targeted for solar on new residential building construction. That includes an ambitious “Million Solar Roof” initiative that will create 3,000 megawatts of installed photovoltaic capacity by 2018.

But California is more than an energy pioneer. It’s an early indication of where U.S. energy policy is headed.

If President Barack Obama’s administration has its way, mandates similar to those issued in California will be employed across the country over the next 10 years. In fact, they already are.

Solar Shift

Obama announced Tuesday that he is making California’s standard for vehicle fuel efficiency and greenhouse gas emissions the new national standard.

Under Obama’s new proposals, vehicles would be 30% cleaner and more fuel efficient by 2016. And that’s just the beginning.

The President’s budget incorporated $646 billion in revenue from capping global-warming pollution, while allocating $150 billion to renewable energy investment over the next 10 years, making his green-funding initiative the largest such effort in U.S. history.

Among other things, Obama’s recent stimulus package provides a tax credit of up to 30% for home solar installations.

The Obama administration also advocates a policy that would require 25% of U.S. electricity demand be met by renewable energy by 2025. The President has the support of the Democrat-led Congress. U.S. Sen. Jeff Bingaman, (D – N.M.), Chair of the Senate Energy and Natural Resources Committee, is working on legislation that aims to make 20% of U.S. energy demand renewable by 2021.

While a renewable energy policy was largely neglected by the administration of George W. Bush, Obama’s effort can hardly be described as partisan. It is more representative of a shift in political ideology that arose when gas prices soared above $4 per gallon last summer.

A recent Gallup Poll showed that the majority of Americans support higher fuel efficiency standards such as those Obama announced Tuesday. In March, 80% of Americans said they favored higher fuel efficiency standards for automobiles.

Currently, just 28 states have renewable energy goals, but with the Obama administration’s effort and a shift in public opinion, it won’t be long before all 50 are enacting their alternative energy mandates.

According to a study by Allianz Global Investors, 78% of investors think green technology could be the “next great American industry,” and 97% of investors believe the development of alternative fuel sources will remain important even if oil prices remain relatively low.

And statistics bear that out. Venture capitalists invested $4.1 billion in alternative energy projects in 2008 – a 54% increase from the year prior, according to a report by PricewaterhousCoopers. What’s more, 45% of that money went to solar projects, compared to 23% in 2007.

“Alternative energy’s rise isn’t going to be smooth, but it’s going to be one of the great new growth industries,” Steven Berexa, managing director of research for RCM Informed, an Allianz subsidiary, told Kiplinger’s Personal Finance magazine.

A Global Industry

In addition to the United States, solar energy is gaining traction around the world.

After subsidizing 2,400 MW of solar projects last year, the Spanish government will subsidize an additional 500 MW this year. Japan aims to create more than 100,000 new jobs in its solar industry as part of an effort to jumpstart its flailing economy. Proposals for solar energy plants are also being considered in the Middle East and northern Africa.

Even BrightSource’s Woolard has attributed some of his company’s success to its overseas operations.

“PG&E looked hard at what we’d done,” Woolard told The San Francisco Chronicle. “They looked at the results from our plant in Israel, and that built a lot of confidence that we were meeting milestones and delivering.”

Most recently, Australia announced plans to build a solar power station that will rival BrightSource’s Southern California operation. The network is expected to produce about 1,000 MW of energy, but won’t be operational until at least 2015.

“We don’t want to be clean energy followers worldwide, we want to be clean energy leaders worldwide,” Prime Minister Kevin Rudd told the Financial Times.

The Australian government hopes renewable energy will account for 20% of the country’s power grid by 2020. Rudd said the government intends to spend about $1 billion (A$1.4 billion) of the $3.6 billion (A$4.7 billion) it has pledged to clean energy initiatives over the next decade.

Like in the United States, the Australian government hopes its alternative energy initiative will be a catalyst for private investment. John Connor, head of the Sydney-based Climate Institute, told the FT that Australia’s clean energy plan will drive an estimated $15.5 billion (A$20 billion) in private investment.

Another country with an ambitious solar agenda is China. A country with notoriously high greenhouse gas emissions, China installed about 50MW of solar capacity last year, more than double the 20 MW in 2007, Renewable Energy World reported.

Beijing plans to expand the installed capacity to 1,800 MW by 2020, as the demand for new solar modules in China could be as high as 232 MW each year from now until 2012.

China is also a good place to find promising solar companies. LDK Solar Co. Ltd. (NYSE ADR: LDK), Yingli Green Energy Holding Co. Ltd. (NYSE ADR:YGE), and JA Solar Holdings Co. Ltd. (NYSE ADR: JASO) have all been beaten down by the market, but could post a strong rebound when China’s solar initiative takes full flight.

Many analysts also like the aforementioned First Solar and Trina Solar Ltd., which stand a better shot of withstanding the recession because of their size and experience.

[Editor’s Note: Money Morning Investment Director Keith Fitz-Gerald is the editor of the new Geiger Index trading service. As the whipsaw trading patterns investors have endured this year have shown, the ongoing global financial crisis has changed the investment game forever.

Uncertainty is now the norm and that new reality alone has created a whole set of new rules that will help determine who profits and who loses. Investors who ignore this “New Reality”will struggle, and will find their financial forays to be frustrating and unrewarding. But investors who embrace this change will not only survive – they will thrive. With the Geiger Index, Fitz-Gerald has already isolated these new rules and has unlocked the key to what he refers to as “Golden Age of Wealth Creation” The Geiger Index system allows Fitz-Gerald to predict the price movements of broad indexes, or of individual stocks, with a high degree of certainty. And it’s particularly well suited to the kind of market we’re all facing right now. Check out our latest report on these new rules, and on this new market environment.

Source: Is the Dark Cloud Over Solar Energy Beginning to Break?

Since then, however, concerns of oversupply have whacked solar stocks. This prompted Goldman Sachs (NYSE:GS) to downgrade several solar companies to a “sell”.

J. Cristoph Amberger says the current financial crisis will hurt investment in solar power. He recommends investors sell their positions while they still can.

This from Today’s Financial News:

Two key solar stocks are being hit hard in early indications. First Solar, Inc. (NASDAQ: FSLR) had already cut its 52-week high of $317.00 by more than half. Trading below $140 today (down 10%-plus), it’s still twenty bucks above its 52-week low of $124.96.

SunPower Corporation (NASDAQ: SPWRA), too, has been decimated. (In fact, “decimated” — meaning a violent elimination of a tenth! — seems too tame a term to describe what’s happened!) The stock is worth just a third of its 52-week high of $164.49, trading just above its 52-week low of $52 right now.

My own recent recommendation of Yingli Green Energy (NYSE:YGE) is down to $7.59 (-10.50% just today) for a total loss of -55.58%.

I do not believe the stock will double any time soon for us to break even on it. Goldman Sachs’ change of direction tell me we’re in for a sea change in the attitude toward solar companies in general, beyond the upheaval in the current market.

My original call on Yingli — which we had covered since its IPO back in the Taipan days — was motivated by expectations that Obama will win the election, unleashing a tidal flow of speculative money into “politically correct” investments. A flow triggered by the expectations of a Federal gravy train of subsidies that could make up for the economic shortcomings of solar energy.

That money may still be coming. But overall, I believe recent fascination with solar is a Prosperity Phenomenon. It’s the equivalent of a Levenger catalog (”Tools for Serious Readers”) or an Eagle Scout project marking storm drains in prosperous suburban neighborhoods with “Don’t Dump” stencils. (I did that last Saturday!)

Large-scale adoption of solar technology by consumers represents a huge investment. And currently, it doesn’t look like there will be excess play money lying around anywhere… or credit being extended.

Plus, there’s talk of a huge solar over-supply by 2010.

My recommendation: Solar technology is the new bio-ethanol. Sell while you still get money for your shares.

Source: The Death of Solar? Yet Another Bubble Has Popped!

Justice gave six reasons why China is a buy now. These included the recent correction in crude oil prices, China’s high level of personal savings and the country’s massive foreign reserves.

Today’s Financial News editor J. Christoph Amberger says Justice is wrong about China. The Shanghai and Shenzhen stock exchanges have plummeted since the opening of the Beijing games. J. Christoph says China now looks more like Japan in the ’90s than a strong buying opportunity…

Olympic medal counts look different to Americans than they look to the rest of the world. In the US, all medals count equally. The team with the most gold, silver, and bronze medals “wins” in the standings. Elsewhere, it’s just the number of gold medals that determines who leads the pack. Which may explain why China feels its superiority complex validated with 17 gold medals (vs. the United States’ 10)… while Americans really couldn’t care less about leading with 29 (vs. 27) total medals.

Still, for a country that just put on the most expensive halftime show ever, with lip-syncing girls, computer-generated fireworks, and thousands of young men in light-studded green “fruit suits” (as my teenage son called their skintight garbs), the stock market is sure looking like the last flea-bitten chihuahua in the pantry of a Korean short-order cook.

If China is leading in the medals count, the fruit-suit optimism isn’t filtering through to investors. Both the Shanghai and Shenzhen Stock Exchange have simply plummeted since the August 8 side show. On Wednesday, the Shanghai Stock Exchange closed at 2,470 points, falling 135 points to close at a 20 month low after touching an even lower intra-day low of 2,372. The Shenzhen exchange slumped more than 6% to close at 698 points.

Shanghai set an all-time record last October at 6,092. That’s a drop of 3,720 points in ten months – a loss of 61% at today’s lows.

The last time I saw an index plummet like this was 1990, after Tokyo’s Nikkei had posted a record high at 38,912. The only difference: It took the Nikkei fully five years, until April 1995, to fall by this amount. China managed this in just 10 months.

There are now accusations that the government of causing the problem by misleading traders. (I’m glad this very Western tradition has finally made it to China…)

But here’s the odd part: There are some Western stock gurus who are not worried. In fact, one just came up with six reasons to buy China.

Let me summarize:

Reason to Buy China #1: The Silly Season Is Over. Now that the frenzy has subsided, real values are starting to show up again. The hot money has burned itself out, providing opportunities for those who see longer-term value and aren’t out to just flip a quick buck.

Reason to Buy China #2: Oil Is Coming Down. With oil backing off, China and India can breathe a little easier. The fear that high-priced oil might kill the Asian miracle is lifting. That gives them more time to tap alternative energy solutions and build economic strength at home.

Reason to Buy China #3: The Locals Are Optimistic. A recent survey from the Pew Research Center shows that most Chinese feel positive about where their country is headed. According to the survey, 86% are “content with the country’s direction.” (That’s up from just 25% six years ago.)

Reason to Buy China #4: The Growth Is Still There. China moves up the quality food chain. As China gets better at enforcing intellectual property laws, its high-tech skills will only increase… and profit margins, too.

Reason to Buy China #5: Personal Savings and Domestic Demand. Perhaps even more impressive than China’s long-term growth rate is the personal savings rate.

Reason to Buy China #6: Huge Foreign Reserves. China has somewhere between $2.3 trillion and $2.4 trillion in excess reserves.

Let me respond why I am hesitant to wear that fruit suit of optimism:

1) The “silly season” is over. If China managed to double and double again in two years on that supposedly “bad” hot money… where is the money coming from that will power the Shanghai to recover even 20%? Japan’s Nikkei has a cautionary tale to tell about markets that see the hot money born out. For the Nikkei, that meant a low of 7,831 in April 2003 – 80% below the record high. For the Shanghai, that would mean a level of 1,218 – another 50% drop. (Given the accelerated failure rate the Chinese, we could see this level within the next 16 months!)

2) Oil may be coming down, relieving some pressure on wafer-thin Chinese margins. But labor cost – China’s biggest competitive edge – is going up. So are environmental regulations… healthcare cost (they say breathing the air in Chinese cities is the equivalent of smoking 3 packs of cigarettes a day)… and unemployment.

3) Local optimism. May I point out that the people are fickle. Consumer confidence is the least reliable indicator of an economy’s health. More importantly: investors are chafing with just over 60%  losses under their belts… and more to come!

4) Growth will be there as long as Americans and Europeans place orders. Recession, anyone? Some analysts like to argue that the Asian economies have “decoupled” from the West. Someone must have forgotten to tell Japan…

5) Personal savings and domestic demand. The latter may be there… and is usually a prelude to the destruction of the former. Plus, those personal savings have taken a beating since Chinese citizens transferred their renminbis from their passport savings to their stock brokers by the billion each week last year. Add in inflation and tally it all up once you account for two months of forced idling of factories and work forces, and an overall low average income of just $2,025 a year (in 2006)… and those personal savings factor in far less than you might think.

6) Huge foreign reserves may be more than made up by huge non-performing and “special interest” loans… a looming real estate crash… and of course the potential for the predicted devaluation of these reserves, most of which are kept in dollars. (May I also point out that Japan’s incredible foreign reserves did not help it one bit from 1990 to 2005.)

In short: China is a potential train wreck in the making! Analysts who predict Armageddon for America based on a 20% drop in the Dow and discount a 60% drop in the Shanghai Stock Exchange may just have sand in their slide rules. Those who buy wholesome into official Chinese numbers and believe the U.S. government manipulates GDP numbers may not do their readers a favor.

The big Chinese companies that trade as ADRs, such as China Life Insurance Company Ltd. (NYSE:LFC), China Petroleum & Chemical Corp. (NYSE:SNP), and China Telecom Corporation Limited (NYSE:CHA) have declined at a far less precipitous clip than their home markets.

Chinese solar stocks such as LDK Solar Co. (NYSE:LDK), China Sunergy Co. (NASDAQ:CSUN), and ReneSola Ltd. (NYSE:SOL) have actually risen in price as the Shanghai Exchange collapsed. Then again, they move with their global industries… not with China.

But while I am getting more bearish on China’s medium- to long-term prospects by the day, I think there are a small number of Darn Good Stocks you can make some serious money with.

P.S. J. Christoph says Today’s Financial News’ new trading service, Hot Stock Confidential, is currently pursuing a small company with key technology set to profit from big demand in China. This keystone technology will reach deep into China’s interior – tapping into its rural market and creating wealth on a scale like never before. It has been earning between $80-$100 million a year on total revenues of $450-$550 million in revenue.

The company has just come back up from a bit of a dip, and is charging forward with gains of 8% in a day. Hot Stock Confidential is already up 20% over the recommended entry price. But you still can buy it for less than five bucks. Read on here for more more details on how to profit from this China success story.

Worley Parsons says it wants to build 34 250-megawatt power stations in Australia by 2020. Now that is real vision! The goal is to provide alternative power to industrial customers in WA, who are currently vulnerable to any disruptions from the natural terminal at Varanus.

Australia is the buckle on the global sun belt

Source: Worley Parsons

As you can see from the image above (taken from Worley’s presentation to investors on its plan) Australia is in the world’s “Sun Belt.” As we’ve said in this space before, getting more energy from sun is one of the key challenges of Peak Oil.

By the way, our technical analyst Gabriel Andre, who has studied energy and engineering (along with currencies and trading) tells us that the X axis is the longitude (in degrees West and in degrees East from Greenwich meridian, while the Y axis is the latitude (in degrees North and South from the Equator). For the data in colours, what you see is solar radiation per annum, in KW/H per M2, which is the total amount of beam radiation that you receive from the sun on a particular area.

Got that?

One more note on this. Worley Parsons wants to use solar thermal technology, not solar panels. It’s a subject we’ve covered in the Australian Small Cap Investigator (although the best Aussie company at it is now doing business in America and is not publicly listed). It’s part of the “portfolio of energy experiments” we’ll need to produce energy in the future.

The trouble with silicon based photovoltaic panels is that there’s a limit to how much of the sun’s light they can convert into electricity. Experiments in thin film solar panels and in materials science (a kind of artificial photosynthesis that converts more light into energy) are designed to improve the efficiencies of photovoltaics. But progress is slow.

Solar thermal produces electricity, but uses sunlight to produce heat, which then produces electricity. Solar thermal concentrates the sun’s rays to superheat a fluid, which is then used to drive a turbine to produce electricity. The nice thing about it is that the superheated fluid can be stored, which means a solar thermal power station can operate at night, when the sun is not shining. It’s a great idea, and great to see Worley Parsons moving on it.

P.S. Solar investors may also want to check out J. Christoph Amberger’s ReneSola (NYSE:SOL) recommendation. He says strong quarterly earnings for Chinese solar maker LDK Solar (NYSE:LDK) indicate an immenent run-up for ReneSola…

Source: Worley Parsons (ASX: WOR) Announces Pilbara Solar Energy Project

“By facilitating the growth of one of the solar industry’s leading developers, this investment gives us immediate access to attractive solar markets in Europe and the United States and will form an important part of GE’s broader strategy to become a major player in solar power,” Alex Urquhart, President and CEO of GE Energy Financial Services, said in a statement. “GE has all the right ingredients to succeed in solar: capital, technology, research and ecomagination.”

Ecomagination is GE’s in-house term for its program to help customers meet their energy needs through cleaner technologies such as solar and wind power. The company recently announced that its alternative energy investments had crossed the $4 billion threshold.

Fotowatio owns and operates solar-power installations in Spain, Italy and the United States, which will amount to approximately 960 megawatts when all projects currently under development are completed.

Countries around the world are setting aggressive renewable energy targets in hopes of reducing both environmental damage and overdependence on fossil fuels. The European Union has set a 20% target for that portion of EU energy consumption to come from renewable sources by 2020.

The International Energy Agency (IEA) projects that $45 trillion will be spent on clean technology development over the next 20 years.

And solar power is one of the fastest growing sources of alternative energy, as technological advances make solar panels thinner and more energy-efficient. To get in on the global commitment to alternative energy, here are some investments to consider.

First Solar Inc.’s (FSLR) reliance on low cost thin-film cells has helped the Phoenix-based solar module manufacturer to produce solar cells for a lower cost than its rivals. According to MarketWatch data, the average rating for this stock is “overweight” with a price target of $350. First Solar shares have traded in a range from $74.77 – $317.00 over the past 12 months and closed at $XXX.XX on Friday.

LDK Solar Company Ltd. (LDK) is a manufacturer of multicrystalline solar wafers, used to produce solar cells. This China-based firm has been hard hit this year, with a share price down over 30% year-to-date. But LDK Solar has several lucrative projects in the pipeline that could turn things around as it puts the finishing touches on a brand-new silicon plant with a 1,000-ton production capacity. Another plant with a production capacity of 15,000 tons per year is set to come online some time next year. LDK Solar shares closed at $XX.XX on Friday.

If you prefer the built-in diversification that mutual-fund-type investments offer, consider an exchange-traded fund (ETFs) that focuses on such “clean” technologies as solar and wind power. One of the top ETF names in this category is PowerShares WilderHill Clean Energy Fund (PBW). This ETF has also been battered, but if you have a long-term investment horizon and believe global governments will honor their pledge to clean energy investments, now might be the time to buy.

Source: GE Strengthens Its Commitment to Alternative Energy with a $230 Million Solar Power Investment

About two weeks ago, Cash McDash and I talked short opportunities and solar stocks. (You can see that piece here if you missed it.)

One of the companies Cash saw good things for was GT Solar International, a new issue set to debut with the ticker SOLR.

Cash was excited about the IPO, but he was also wary (as good traders often are). When we last talked on July 15, he urged readers not to jump the gun on SOLR as soon as it hit the Street, but instead to be patient and watch and wait. In our July 15th chat, he had this to say:

“[SOLR] should give us some great profits sometime this year, but it’s also a dangerous stock to play without seeing the full picture… I’ll get a better feel for how it will trade out of the gate once I get calls from all my contacts on the deal. Then we’ll take that information and patiently watch for a place to pounce. I want to have an entry point that offers a great chance at serious profits, but limits risk, too. The key is to buy it at a time with the least amount of risk. It would be tragic to buy at the wrong time, get stopped out of the position, and then watch it sprint ahead to triple-digit gains without us.”

It was a good thing Cash was cautious… because investors who ignored his advice got burned. SOLR opened in the $16-$17 range and immediately fell lower.

I caught up again with Cash to get the postmortem, and to find out whether he still likes SOLR moving forward.

JL: Whew! That GT Solar (SOLR:NASDAQ) we last chatted about didn’t look at all like what I expected. Nice opening and then — whammo! — an immediate tank. What happened?

CASH: Yeah. You couldn’t have been half as disappointed as I was the way things went down. That deal fell out of the ugly tree and hit every branch on the way down. You could smell that thing on just about every street in Manhattan. It’s a good thing we advised caution to readers and didn’t get trigger-happy. Patience is a virtue when it comes to making a good trade.

JL: True that. But in terms of the drop, what happened? Why such a poor performance? From our last chat, SOLR sounded very strong. Its business model and market niche and prospects are all good. So why the tank? Was it overall market conditions, or some last-minute piece of nasty news, or…?

CASH: This scenario is rare but not unbelievably rare. I’d guess it happens about once a year. An IPO that should do very well ends up bucking conventional wisdom and trading sharply lower, devastating the company’s market value out of the gate. There’s usually not a single issue that brings a stock like this down… With GT Solar there were a handful of short-term variables that all worked together to send the deal south.

JL: Gotcha. So for our education, can we take them one at a time?

CASH: Sure. First of all, there was some international news last week that sent shock waves through the solar industry. It seems that Spain (which happens to be the second-largest buyer of solar products) has released the planned solar subsidy budget for next year. As it turns out, the government will be dropping its subsidy by 70%… which is certainly a frustrating event.

JL: So does this spell doom for the solar energy market as we know it?

CASH: Oh heck no. Not at all! In fact, from a long-term perspective, it is probably a good thing for the subsidies to be rolling back. The government is pulling in its horns because the solar market is becoming strong enough to stand on its own. Technology continues to find more efficient ways to produce power, and the private sector is now picking up where subsidies left off. It now actually makes economic sense, from a cost-effective standpoint, to buy solar panels. Now that solar has crossed the tipping point of economic viability, the role of government subsidy is less needed.

JL: That makes sense. So in the long term, this is a sign of health and strength for solar… government scaling back means the private sector is stepping up and solar is becoming viable, part of the plan all along. But in the short term, the hot money sees nothing but the bad news headline on their Bloomberg terminal and reacts with a knee-jerk sell.

CASH: Exactly. The knee-jerkers are setting up a great opportunity in solar, in my opinion… It’s just a matter of being patient and waiting for it. This game is often about patience and waiting out the irrational response. Sometimes the knuckleheads drive you nuts — the guys who pull the trigger without seeing the big picture — but in the long run you gotta love ‘em because they create so many profitable opportunities with their short-sightedness.

JL: Makes sense to me. You said there were other factors, too, that added to the weak SOLR showing. Care to move on?

CASH: Sure. The second issue for SOLR was the underwriters. A big part of the underwriters’ responsibility is in finding “good” buyers. Meaning, an IPO like this should be placed with buyers who really want to own the stock and believe in the long-term prospects of the company. The underwriters have to do a good job of selling the story and finding truly motivated investors instead of “flippers.” It really hurts the short-term performance if they give IPO stock to people who are going to immediately turn around and sell the stock.

JL: But with the short-term uncertainty in the markets, and a lot of hedge fund desks feeling jittery over losses in other areas, I’m guessing those kind of patient, committed investors were hard to find.

CASH: Yep. General conditions were extremely tough for this deal. Just look at what the Dow and the financials have been doing and you can see that. Times like these are when a firm like Credit Suisse (who was the lead underwriter) should have shown the discipline to postpone the offering. The IPO simply should not have been unveiled once the markets started getting slammed and the overall solar sector began heading downhill last week.

JL: And I’m further guessing that Credit Suisse didn’t show “discipline” because short-term cash is key to its bottom line. The investment banks are hurting enough as it is and need every penny of revenue they can get. If they step back and decide to postpone the GT Solar deal they miss out on millions in fees — or at least push those fees into a future period. At this point in the game, they gotta have the dollars no matter what. Am I right?

CASH: Indeed you are. The fees take precedent, prudence takes a back seat, and the customers end up getting burned. Credit Suisse may have pulled in a nice fat commission for pushing SOLR instead of holding it back, but they burned their reputation in the process. They could have an extremely hard time getting their next deal done.

JL: Sounds like Credit Suisse totally dropped the ball on this one.

CASH: Yeah, you could certainly say that.

JL: So are those the two main issues? Or are there more variables we need to know about.

CASH: Well there’s one more shoe that fell the day after the IPO priced. It seems that LDK Solar (LDK:NYSE), which is one of GT Solar’s largest customers for 2008, signed an agreement with one of GT’s competitors for a certain “furnace process” (don’t ask).

JL: And that was like pouring gasoline on an anxiety fire.

CASH: Right. The news that a big customer was inking a deal elsewhere caused SOLR to drop another 35% when the market opened Friday. Since investors were already thin on confidence — due to the poor performance on Thursday — Friday’s news gave them every excuse to panic and bail. And bail they did!

JL: It’s pretty amazing to think that this name had that much volatility in just the first two days of trading. There is so much more to this game than just the fundamental story… so many key factors it’s important to be aware of. So now we see what’s already happened… the question now is, what we do with all this information?

CASH: You sound like my old mentor — the guy who took me in when I was greener than AstroTurf. I would walk into his office in my first year or two and explain a new theory I had on the markets… why a particular stock was acting a certain way and what not. He would listen politely, smile and nod, and then say “That’s all great, young Skywalker, but how do we make money from all this?”

JL: Always a great question to ask.

CASH: And here’s the answer: Readers should know that SOLR is not dead by any means. The contract it lost with LDK represents only about 8% of its backlog for 2009. The company has been active in diversifying its client base and should continue to make money. We may have a bit of a brownout in the short term, but the lights will be blazing over time.

JL: So you’re still bullish — just waiting for the right time to pull the trigger.

CASH: Right again. This kind of thing happens from time to time. It’s the whole reason for being cautious and picking spots. It’s also where a lot of the long-term profit comes from.

JL: You mean in terms of recognizing when a short-term lousy performance doesn’t warrant throwing a stock in the garbage, and the chance to buy it proves a great opportunity later on.

CASH: Indeed. I imagine we’ll chat more about GT Solar in the IPO Confidential service in the upcoming weeks. I certainly don’t want to close my eyes and buy it blindly, but there’s a good chance the stock will set up for a strong move. When we’re ready to pull the trigger and own this name, you’ll definitely know…

JL: Sounds good.

Source: Dissecting a Dud

Pickens’ Mesa Power LLP yesterday (Thursday) unveiled the first phase of an eventual $10 billion alternative energy project that has the potential to become the world’s largest wind farm.

“You find an oilfield, it peaks and starts declining, and you’ve got to find another one to replace it,” Pickens, who once operated one of the largest independent oil-and-gas production companies in the country, said of the deal. “It can drive you crazy. With wind, there’s no decline curve.”

Mesa Power will purchase 667 wind turbines from General Electric Co. (GE). Each turbine can produce 1.5 megawatts of electricity. The first phase of the project will produce 1,000 megawatts, enough energy to power 300,000 homes. GE will begin delivering the turbines in 2010, and current plans call for the project to start producing power in 2011.

“T. Boone Pickens’ commitment underscores the ability of wind technology to help meet the country’s need for diverse sources of energy,” said Jeffrey R. Immelt, GE’s chairman and CEO. “As America’s demand for energy escalates, it is clear that wind can and will play a bigger part in meeting that need. We’re excited to partner with an energy visionary like T. Boone Pickens to bring our wind technology to the marketplace.”

Ultimately, Mesa Power plans to have enough turbines to produce 4,000 megawatts of energy, the overall project is expected to cost $10 billion and be completed in 2014.

Mesa Power has leased sparsely populated land in the Texas panhandle, where the wind often blows during daylight hours when energy needs are highest. Texas’ Competitive Renewable Energy Zones (CREZ) transmission lines will deliver what Pickens hopes will be “cost effective and reliable electricity generated by renewable energy power projects.”

“We have had a great response to this project,” Pickens said. “We are making Pampa the wind capital of the world. It’s clear that landowners and local officials understand the economic benefits that this renewable energy can bring not only to landowners who are involved with the project, but also in revitalizing an area that has struggled in recent years.”

“Alternative” Energy No Longer Just an Alternative

At a time when oil is costing upwards of $125 a barrel, alternative energy sources are no longer just for the environmentally conscious, but for the cost conscious, as well.

“The development of alternative energy projects, especially renewable resources such as wind power, is critical for the future of the country in the face of declining world oil resources,” Pickens said.

For years, emerging economies such as China have chosen “cheap” over “clean” when it comes to energy sources. But with the cost of traditional fuel sources such as oil and coal skyrocketing, environmentally friendly choices are becoming more appealing.

When it comes to China investments, “the smart money is in the clean money,” says Money Morning Investment Director Keith Fitz-Gerald.

And when it comes to alternative energy, wind power isn’t the only option. The Solar Energy Industries Association (SEIA) says that solar power will provide 50% of all new electricity in the United States within eight years, creating tens of thousands of new high-tech jobs, while helping to conserve natural gas and saving American taxpayers billions in energy costs.

And while that estimate might be a bit ambitious, it’s certainly true that solar power use is on the rise, both domestically and abroad.

One of the solar power stars is First Solar Inc. (FSLR), which designs and manufactures solar modules using a proprietary thin-film semiconductor technology. With that know-how, the company’s average cost for making a solar module is among the lowest in the world.

Another up-and-comer is LDK Solar Company Ltd. (LDK), which expects to complete a brand-new silicon plant with a 1,000-ton production capacity this summer. And another plant with a production capacity of 15,000 tons per year is set to come online sometime next year.

If you prefer the built-in diversification that mutual-fund-type investments offer, consider an exchange-traded fund (ETFs) that focuses on such “clean” technologies as solar and wind power. One of the top ETF names is PowerShares WilderHill Clean Energy (PBW).

If you’re the type of investor who prefers cool breezes to sunny skies, you could invest in the makers of wind turbines.

Two of the largest include GE and Siemens AG (ADR: SI). GE just received the $2 billion order from Pickens and expects another $6 billion in orders from the planned 4,000 MW Pampa project alone. And Siemens will supply the turbines for a 500 MW wind farm planned in the United Kingdom.

Source: Former Oilman T. Boone Pickens Makes a $2 Billion Bet on Alternative Wind Energy

But now that their darkest days are behind them, solar stocks represent a big play opportunity for any investor savvy enough to buy in while valuations are still low.

At Money Morning, we’ve said repeatedly that alternative energy isn’t an alternative anymore. Indeed, soaring energy costs and heightened awareness about global climate change have ushered solar power into the mainstream over the past year.

On Friday, light, sweet crude for May delivery rose 20 cents to $110.31 a barrel in afternoon trading on the New York Mercantile Exchange – just below the record price of $112.21 a barrel set Wednesday. Notwithstanding a much-criticized Energy Department projection that the escalation in petroleum prices will stop by June, there have been few – if any – real indications that oil and gasoline prices will retreat heading into the summer driving season.

That’s particularly bad news for consumers who are already feeling the pinch from the credit crunch and sinking home values. But it’s another round of good news for solar energy, which will almost certainly receive more attention – from the public, and from elected officials who feel compelled to extend, and even broaden, tax subsidies for renewable energy.

Reuters recently reported that a new bipartisan proposal by U.S. senators Maria Cantwell (D-Wash.) and John Ensign (R-Nev.) would extend existing tax credits for the clean energy sector. Many Wall Street analysts have said the measure has a good chance of passing because it is not linked to a tax hike or to “Big Oil.”

In addition to offering an alternative to costly and politically contentious foreign oil, solar power is also popular with environmentalists. That’s because solar power emits, per unit of energy, about one-tenth the amount of carbon dioxide emissions given off by more-conventional power sources.

Also, advances in technology have made solar cell production even more eco-friendly. A recent study by the Brookhaven National Laboratory in Upton, N.Y., found that for each unit of energy produced by solar cells, the pollution that’s emitted during the cells’ manufacture is only 2% to 11% the amount produced by power plants in the United States and Europe.

In fact, newly developed solar cells can “pay back” the energy required for their production in just one to three years. And improvements in manufacturing efficiency could reduce emissions from solar power by another 50% in five to 10 years.

There have been tremendous advances in the production and efficiency of solar technologies. And those advances couldn’t have come at a better time. Political support for the industry is at an all-time high as oil prices and environmental awareness both continue to rise.

The “First” Option in the Solar Sector

The shares of First Solar Inc. (FSLR) were badly battered during the first quarter. After climbing as high as $280.91 a share in December 2007, First Solar shares tumbled to $165.60 in February. Since then, they’ve battled back and are currently trading near their 52-week high.
And there’s good reason for all the company’s forward momentum.

First Solar’s reliance on low cost thin-film cells helped the company avert a silicon shortage that has savaged the bottom lines of countless other solar companies. As a result, the Phoenix-based solar module manufacturer has been able to produce solar cells for a lower cost than its rivals.

“First Solar’s new technology that uses cadmium telluride is much cheaper,” Matthew Patsky, portfolio manager of Winslow Green Mutual Funds (WGGFX), told FOXBusiness. “The cost of their solar cells is much less than the cost of the traditional [silicon-based] cells, so if you’re doing an installation on any scale, they are the best alternative right now.”

First Solar’s ability to undercut the competition helped it to rake in a $62.9 million profit last year. That’s a 686.3% improvement from the $8 million posted in 2006. Revenue nearly quadrupled to $200.8 million.

First Solar expects revenue to rise again this year, to between $900 million and $950 million.

To fuel that surge in revenue, the company will rely heavily on its globally diversified production base. Company officials said last year’s earnings were boosted by the full increased efficiency at their factory in Germany. This year they expect additional savings from a brand new plant in Malaysia.

“As we’re moving to Malaysia, I think our models imply a 20 cent cost-per-watt reduction,” Jens Meyerhoff, First Solar’s chief financial officer, told a Piper Jaffray investment conference.

The company expects its first Malaysian production line to start running this year, followed by three fully operational lines in 2009.

First Solar is also in talks with several U.S. utilities to build renewable energy projects. Chief Executive Michael Ahearn told Reuters the company was “having multiple discussions” with U.S. utilities.

“What we are trying to get to this year is some initial relationships and pilot projects,” he added.

Impressed with the company’s prospects, Winslow Green’s Patsky took advantage of First Solar’s turbulent first quarter.

“In January, the stock dropped to around $160 and we re-established a strong position,” Patsky said. “If it hits $300 in the near term, we might trim our position again; but our target is really for it to be trading at $380 over the next 12 months – the estimates are too low and I don’t think the street is as aggressive as what we expect.”

Canaccord Adams recently reiterated its “Buy” rating on the stock and added First Solar to its “Best Ideas” list.

JL: So, let’s talk about the rally action in stocks. Last week the Dow gained more than 3%, the S&P was up more than 4%, and the Nasdaq picked up almost 5%. And all that came in the context of weak economic news, the worst employment number in years, and a newly slumping dollar. I’ve got my own take on this, but I know you see the world a little differently. Thoughts?

CASH: My friend, we both know that bear markets can be notorious for mauling investors. We also know that some of the strongest and sharpest rallies take place in bear markets, as you and I have both pointed out. So the way I see it, there’s nothing wrong with trading these rallies as long as you keep a clear head. You just have to be careful not to get juked out and to remember the primary trend.

JL: Right. As the bard once sang, “You don’t need a weatherman to know which way the wind blows.” Though it helps to be paying attention. Speaking of getting “juked,” how’s that fancy footwork holding up? Has it been a good week in the trenches for Cash Mcdash?

CASH: Well I must say, despite my modest nature –

JL: <COUGH> Ahem! <COUGH>

CASH: Need a lozenge there, pal? Maybe a bottle of water?

JL: Nah, I’m good.

CASH: Oh good. As I was saying… have to tell you that last week was my best so far this year. LongTop Financial (one of our recommended names) hit a new recovery high, and GFA (another one) was up 10%, finishing Friday on a great note with two times normal volume. The solar stocks we tipped for a comeback, JA Solar (JASO) and LDK Solar (LDK), were up 21% and 25%. And don’t forget my buddies over at Blackstone (BX). That one crossed $17 and finished the week 21% higher.

JL: Man, that’s not a bad week. Not too bad at all.

CASH: No kidding. In fact, you can call me butter ‘cause I’m on a ROLL!

JL: Alrighty then. Calm down there, Butter…

CASH: Hardy har har. You know I’m just messin’ around. But I do get pretty passionate about this. There’s nothing more satisfying than working hard, getting the trades on, and then seeing that hard work pay off. It just feels good to win.

JL: Oh, no doubt. I’m with you all the way there. But tell me, do you think we’re going to see continued strength? Are you hanging onto your positions?

CASH: Actually, I think the easy money for the time being –

JL: Hold on, hold on, hold on. You think those gains were easy? In this market?

CASH: Sure! When you’ve got the patience to wait until the mood is incredibly sour, and you couple that with the discipline to buy quality names that have been beaten down, and then mix in the fortitude to hold them through a rally few believed would happen… then the game really does feel easy!

JL: And playing golf like Tiger Woods is easy, too, I take it. You just line up your club the right way, take a nice swing, hit the ball 400 yards…

CASH: Ha ha, point taken. Yes, I was oversimplifying things a bit there. Every trader has ups and downs. (The great Tiger Woods has ups and downs, too.) But markets have patterns. These newly issued names have highly measurable tendencies. And don’t forget, I’ve been doing this day in and day for out for many years. A longtime student of the market can gain a meaningful edge just by watching, understanding and absorbing the patterns. A wise man once said, “It’s amazing how much you can learn just by paying attention.”

JL: That wasn’t me was it?

CASH: I said a wise man, not a wise guy.

JL: True. Okay then, so what’s next? Are you going to be closing these positions? Getting liquid? Going short?

CASH: No, I still have a bullish bent to my trading; it’s just not as screaming obvious as it was a few weeks ago. I used Friday’s exceptional strength in the solar names to lighten up positions a bit, while still holding partial positions. I’m still constantly trolling for good long-term names that will give us months of good returns, while scaling out of short-term names that offered some nice quick pops.

JL: Sounds good, Butter.

CASH: Are you going to keep calling me that?

JL: Hey, it was your personal request! Are you saying that’s no longer your preferred name? You’re abandoning it already? I can’t believe it’s not butter.

CASH: Ouch! You should be fined for that one. In fact, you may need clinical help. Which reminds me…

JL: You’re reminded you need to go to the clinic?

CASH: No, wise guy. I want to tell you about the latest name on “the calendar.” Remember, the syndicate calendar we talked about last week?

JL: Ah, gotcha. A clinical IPO.

CASH: It’s actually a secondary offering. The name is Wuxi Pharmatech (WX on the NYSE).

JL: Wuxi Pharmatech, huh? That name just rolls right off the tongue.

CASH: And the company continues to roll out new services! Have you heard of contract research organizations, or CROs for short?