Octopus Jenny's Alternative Energy Investment Report

My friend Tara has been, um, pestering me for a while to research alternative energy stocks for her, so I started looking into them last week when I had some time to spare. It was a lot more interesting than I thought it was going to be. I wrote up two reports for her (and other friends who are interested)... here they are.

Needless to say, I'm not a pro at this, and I mainly just wrote them for Tara, so if you invest in these and lose money, it's not my fault. That said, I have to say that my tiny little portfolio has been doing extremely well lately!

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This morning I researched four solar power companies and three alternative energy indices:

First Solar (FSLR), MEMC Electronics (WFR), Evergreen Solar (ESLR) and Sunpower Corporation (SPWR). I also researched WilderHill Clean Energy ETF (PBW), Powershares CleanTeach ETF (PZD), and WilderHill Progressive Energy Portfolio ETF (PUW).

FYI, "ETFs are a rapidly growing class of low-cost index funds that trade like stocks. With the liquidity of stocks, they can be bought and sold throughout the market day and offer exposure to market, industry, sector, and asset indexes. ETFs enable traders to trade a group of stocks or bonds within a particular market sector by trading a single security. ETFs are automatically diversified equities, greatly reducing risk because there is minimal exposure to any one individual stock."

Here's what I found about each, along with my recommendation (which is mainly based on recommendations from Reuters, which provides really useful investment information). I also get information from Charles Schwab and other sites.

First Solar (FSLR). This company designs and manufactures solar modules using a thin film semiconductor technology. It has been around for just about a year, so it's quite risky. However, it has already expanded, is building a plant in Germany, and has long-term contracts with six suppliers in Europe. The product it creates is pretty cool - thin film solar panels - but it also has some really major competitors, like BP, Sanyo, Sharp, etc. The Reuters recommendation is OUTPERFORM, which means it's probably an OK time to buy. Not the best, but OK. I definitely wouldn't put many eggs into this basket, but it might be fun to invest a little and see how it does.

MEMC (WFR). MEMC makes silicon wafers for solar panels, semiconductors, and other uses. They have 50 years' experience making wafers, but have just started making solar wafers. They are a big company with revenues around $460 million. Reuters' consensus recommendation is OUTPERFORM. This seems pretty safe to me.

Evergreen Solar (ESLR). This company is a seller of weather-proof solar modules (the type of thing you might put on your house). This stock is very volatile, and they have a lot of huge competitors. The Reuters' recommendation is HOLD ( do not buy).

Sunpower (SPWR). This company "designs, develops, manufactures, markets and sells solar electric power products, systems and services." The interesting thing here is that Walmart is purchasing solar power from a subsidiary of this corporation as part of a pilot project to make 22 stores solar powered. (Its goal is to make 100% of stores solar powered.) So if they do go ahead with that, and use SunPower, then that is a huge plus for this stock. However, they also have a lot of big competitors. The Reuters recommendation is OUTPERFORM (OK to buy).

Wilderhill Clean Energy ETF (PBW). This is a diversified, small-cap fund that started in 2005. It includes stocks in MEMC, First Solar, Evergreen, and others. (80% of its holdings are "companies engaged in the business of the advancement of cleaner energy and conservation.") The growth chart for this isn't very smooth (there was a big surge of growth at the beginning of 2006, then a huge drop, but in general the fund is growing). Based on that, I think this would be good for the long term.

Powershares CleanTech ETF (PZD). This fund has only been around since October of 2006, and has grown about 10% since its inception. Its holdings are very similar to the one above (PBW). Since it's so new, I think I'd wait a while.

Wilderhill Progressive Energy ETF (PUW). This has also only been around since October of last year. It's grown 7% since then. This one focuses on the progressive energy business and has slightly different stocks than the other two.

In general, I'm not sure about the three ETFs. They are so new that it's hard to tell where they're going. On the other hand, this is a pretty new field, and is getting really big, so it might be a good time to invest a little and see where they go.