re solar stocks:
That's a good article. Their assessment, on the various criteria, looks accurate to me. Perhaps I'd quibble with their Management scores.
I would put more weight on the Financial Health score than they do. IMO, there is going to be a shake-out in this industry, due to oversupply and falling margins. We are already seeing some of the smaller "non-bankable" start-ups go bankrupt.
So, I'd stay away from the hi-debt lo-margin solars (except perhaps as shorts), even if they otherwise look good.
solar gross margins for CY2010:
46% FSLR
33% YGE
31% TSL
29% JKS
23% SPWRA
22% JASO
20% LDK
17% STP
15% CSIQ
As you can see, quite a range. If everyone's gross margins decrease 10% (so, LDK goes from 20% to 10% GM), the companies at the bottom of the list won't be profitable, and will be forced to sell assets at distress prices, or abandon their expansion plans.
disclosure: no current position in solars. I'll be buying FSLR, YGE, TSL, when the anticipated sector and/or market downturn happens. |
