To say solar power has been a red-hot area in recent months wouldn’t do justice to the run solar stocks have had. The Guggenheim Solar ETF (TAN) is up 41% for the year so far, versus a basically flat market for 2014. Add that 41% gain to 2013’s 131% rally for TAN, and there’s little to complain about when it comes to the performance of solar stocks.
Better still, with installations projected to grow by 20% this year, it looks like solar power stocks are positioned to dole similar rewards for the foreseeable future, not that solar panels are getting their second wind. If you’re an investor looking for a growing trend, solar stocks are one of the best places to be, right now. And there’s no shortage of stocks to pick from.
Which solar power stocks are the proverbial picks of the litter, though? Here are the first five a newcomer might want to consider.
ReneSola Ltd. (SOL)
While most solar stocks have done incredibly well so far in 2014, ReneSola (SOL) wasn’t one of them. In fact, SOL stock is a bit unusual in that it’s trading well under its October high of $6 per share. That’s not a bad thing, though. In fact, it may work to your advantage because it gives new buyers a chance to scoop up ReneSola shares at a bargain price before their next big run-up.
What’s going to spark such a run-up from SOL stock at some point in 2014? Aaron Levitt offered details in his commentary on ReneSola, but the short version is that the panel maker has developed a strong name for itself as a supplier for small, independent power producers that are more cost-conscious than bigger players.
While Sunedison (SUNE) is a name that occasionally surfaces during discussions of the market’s top solar stocks, it’s not always part of the debate.
SUNE stock is rarely placed anywhere near the top of the food chain because the organization has to divide its attention among a handful of non-solar-related divisions. Investors may want to watch for a much sharper focus from Sunedison in the near future, however, as it’s going to spin off its semiconductor division within the next few months.
That narrowed focus may just be the shot in the arm SUNE stock needs.
SolarCity Corporation (SCTY)
Technically speaking, SolarCity (SCTY) is a bit of an anomaly among solar stocks. The company is an installer and a financer of solar panel installations, which makes it fundamentally different from the other solar stocks on this list.
For every system it sets up at a home, SCTY generates 20 years’ worth of revenue by securing the right to sell the excess electricity that system generates. It’s a win for the homeowner because utility bills are lowered and expensive solar panel systems are financed, and it’s a win for SolarCity because recurring revenue is guaranteed.
One of the chief concerns the market has voiced regarding SCTY stock is that the company isn’t actually profitable, and it could take years until it has enough installations under its belt to turn a profit. Fair enough. But the wait may not be all that long. SolarCity reported earnings on Wednesday, and topped per-share earnings estimates by a dime. That’s a good start for SCTY stock.
The dominant name is solar power stock is SunPower Corporation (SPWR), and rightfully so. Its panels are the most efficient in the industry, and everybody wants their product.
Demand is so great, in fact, that the panel maker was sitting on an 18-month/$1 billion backlog as of the end of last year … and it was still getting bigger. The clincher is that SPWR stock had a huge earnings rebound in 2013, earning an operating profit of $1.68 per share, reclaiming the profits seen during its glory days between 2007 and 2010.
Odds are good that SPWR stock will blow 2014’s earnings estimates of $1.19 out of the water too, as it’s finally adding 350 MW of much-needed production capacity.
Relative to its size, Canadian Solar (CSIQ) is the most overlooked of these solar stocks.
Depending on the year in question, the company ranks anywhere from being in the top five to the top three suppliers in the world. And it supplies the whole world, with big, equitable demand from the United States, China, and Japan … three nations with lots of their own solar panel manufacturers, and a bent for protectionism. Canadian Solar simply muscles its way into key markets, generating sales growth of 27% in 2013.
That’s not the reason an investor would want to own CSIQ stock, however. The reason Canadian Solar is one of the most worthy solar stocks is its swing back to profitability in the third quarter of last year, and 2014 earnings estimates that price CSIQ stock at a very affordable (and very plausible) forward-looking P/E of 8.5.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.