Solar Leads Sustainable Energy Stocks (Week Ending 3/28)

Author: Mark Henwood

There was no ambiguity in sustainable energy stocks this week. All of the Camino indices advanced, two significantly.

The Solar index increased 19.6% paring the YTD decline for the sector to –34.1%. All 33 stocks in the index advanced. Ascent Solar Technologies Inc. (ASTI) led the way with a huge 84.4% increase for the week. The stock jumped Thrusday morning on the announcement of a significant investment by Norsk Hydro ASA. Several analysts also issued favorable ratings for the sector. On January 24th, when solar stocks were down 37% for the year, I looked at the PEG ratio for the sector and concluded most of the correction had occurred assuming events hadn’t affected sales growth. With recent data it now looks like the growth prospects are holding. But if we see any reduction in government support, say in the US or elsewhere, or other events that affect growth rates the sector could suffer another sharp correction.

Biofuels also rallied with a 8.6% increase with 12 stocks rising and 4 stocks falling. Gushan (
GU) was the leader again rising a massive 50.8%. The run-up occurred on the 27th and 28th after the company adopted a share option plan affecting 65 employees. If the option plan sparked the rally it was incredibly cost effective, costing shareholders about USD 7 million but increasing the value of the company by about USD 800 million. Unless there is other news supporting the increase in price I don’t see how a retention program, even though it is good business, can increase value this much.

In the Renewable Electricity sector Camino’s index advanced 2.4% with 11 stocks climbing and 8 retreating. Suzlon (SUZLON.NS) increased 15.7% for the week with 12 % of the increase occurring on the 28th, the day the company released its Investor Presentation outlining an aggressive growth plan supported by strong orders and grid parity economics. We continue to view this sub-sector as a strong long-term success story in the sustainable energy field. Suzlon’s story is supportive of our view.

Fuel Cells also had a positive week with the index increasing 3.2% on 5 stocks advancing, 1 stock declining, and 1 stock unchanged. ITM Power (ITM.L) gained 27.1%. Most of the gain (23.9%) occurred on Friday when the company announced a “collaboration agreement” with Roush Technologies. The agreement involves developing hydrogen fuel cell vehicles in the UK using ITM’s electrolyser. The electrolyzer is slated to produce hydrogen at sufficient pressure to fill up a vehicle for a range of 25 miles. This may be an electrolyzer breakthrough but certainly isn’t a transportation breakthrough.

It’s no accident that the Solar and Renewable Electricity indices alone account for 57% of the value of all the companies we track. Solar is a compelling growth story driven by its attractiveness to governments and consumers. Renewable Electricity is economically competitive and environmentally superior to traditional options.

Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks

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