Solar Again Leads Sustainable Energy Stocks (Week Ending 4/4)

Author: Mark Henwood

Sustainable energy stocks rewarded investors again this week. All of the Camino indices advanced, one significantly.

The Solar index followed last week’s 19.6% gain with another big advance of 14.5% paring the YTD decline for the sector to –24.6%. 28 stocks increased and 4 decreased. The index increased 7.1% on Friday alone, apparently responding to the introduction of the Clean Energy Stimulus Act in the US Senate. LDK Solar (LDK) led the way with a 25.6% rise. On Friday LDK announced is had sold 83 MW of wafers and lined up supply agreements for much of the order period…….two-thirds of the weekly price increase occurred Friday. Yingli (YGE), the second largest gainer at 24.8%, also reported sales contracts covering 3.3 MW of modules to Korea. For Yingli that comes out to about USD 100 million of market cap increase per 1 MW of sales.

In the Renewable Electricity sector Camino’s index advanced 0.9% with 13 stocks climbing and 5 retreating. The index was weighed down by Goldwind’s (002202.SZ) 22% decline culminating a 71% price decrease from its February 21 peak. The Shenzhen Exchange reports a P/E figure for the company that even after these declines is still a lofty 65. In our view this price level may now be sustainable if the company is able to maintain strong growth.

Biofuels gained 1.1% with 10 stocks rising and 5 stocks falling. Gushan (GU) held on to last week’s huge increase with a gain of 2.9%. The sector leader was CropEnergies (CE2.DE) with a 10.3% gain. The company issued a statement expressing its view that the regulatory environment continued to be generally supportive and reporting on its capacity plans.

Fuel Cells also had a positive week with the index increasing 2.3% on 4 stocks advancing and 3 stocks declining. FuelCell Energy (FCEL) led the group with a 16.6% gain. We scoured the news but didn’t see any information that would drive this increase. We also looked a variety of analyst recommendations and didn’t see any significant company specific news this week. Maybe the company will have some information at the 2008 Green CA Summit where I’m moderating a panel on the Green Gold Rush: California’s New Economy.

Over the last 100 days Solar has maintained the highest beta (.95) of all the Camino indices (which ranged from 0.18 to 0.55). Solar has now regained about one-half of the declines from its peak on December 27 to its low on March 10. While some of the gain is driven by broader market gains and enthusiasm about legislation in the US, I’m sure investor’s will be starting to assess whether the growth news can support further price gains.

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

The Week in Sustainable Energy Stocks (Week Ending 3/14)

Author: Mark Henwood

The Dow traded in a 569 range this week reflecting negative credit market news and strong intervention by government institutions. Global results were mixed with EAFA advancing and the S&P and Emerging Markets declining. The final changes were not dramatic. This translated into mixed results for the Camino indices with three indices retreating and one, Solar, advancing.

The Solar index increased 1.8% bringing the YTD decline for the sector to –41.5%. LDK Solar Co. LTD (LDK), which fell 21.3 % last week, led all stocks in the index with a 16.3% increase. Most of this gain happened Thursday and Friday after the company’s press release reported it had sold 100% of its 2008 production and 90% of 2009. The communication also shed some light on the inventory issue. This strong sales picture may be supportive of the view that demand for PV product hasn’t been affected much by larger economic concerns. Overall the sector had 19 stocks climbing and 14 stocks falling.

Biofuels experienced a 1.9% decline with 6 stocks rising and 10 stocks falling. Gushan (GU) was the leader recovering 7.5% after last weeks 24.9% decline. On the declining side, Schmack Biogas (SB1.DE) led the field with a 11.6% decrease. This may be a delayed reaction to the company’s 2/26 release of 2007 results where strong sales growth (47% !) was coupled with a wider than expected loss. VeraSun (VSE) and US BioEnergy (USBE) also suffered steep declines after VeraSun reported on Wednesday that ethanol prices weren’t increasing as fast as corn costs. Getting bigger with the merger isn’t going to change that equation.

In the Renewable Electricity sector Camino’s index retreated 0.5% with 8 stocks climbing and 11 retreating. Geodynamics Ltd. (GDY.AX) led the pack with a 17.2% decline. The only news we found was an ASX note on 3/11 that a flow test had been delayed until 3/14.

Fuel Cells had another down week with the index decreasing 3.2% on 3 stocks advancing and 4 stocks declining. ITM Power (ITM.L) suffered a 25.2% decline. On Feb 5 Citigroup criticized the company’s unfocused business strategy and apparently the company’s 3/14 announcement of a testing contract with Bi-Fuels did little to sharpen the strategy.

What did I learn this week? Traders are listening carefully to company communications and are very quick to take decisive action on news, both positive and negative. I also think LDK’s order news may be significant as a bell weather for overall demand in the solar sector.

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. Mark holds a position in GDY.AX .

The week in sustainable energy stocks (ending 3/7/08) ….

By Mark Henwood

Continuing concerns with economic conditions drove all the broad stock indicators into negative territory for the week. With one expectation our sustainable energy indices followed suit with three indices retreating and one, Renewable Electricity, advancing.

The Solar index suffered another large drop of 5.9% bringing the YTD decline for the sector to –42.5%. In perspective, even with this large YTD decline the index has 46% to give up before it losses all of the huge gains in 2007. LDK Solar Co. LTD (LDK) led the move downward falling 21.3% and closing below its IPO price. Apparently there remains some lingering angst over inventory issues. Overall the sector had 4 stocks climbing and 29 stocks falling.

Biofuels suffered a significant 12.5% decline with all 16 stocks falling and 5 falling more than 20%. It looks like concerns about rising corn prices and reduced margins affected the ethanol producers. Gushon (GU) reported a Q4 loss and, despite management explaining the loss was due to a large non-cash charge, the stock declined 24.9%

In the Renewable Electricity sector our index advanced 0.9% with 10 stocks climbing and 9 retreating. Suzlon (SUZON.NS) is a big component of the index and was down 13.1% percent after reporting a turbine blade replacement program for 1,251 blades. This represents a market cap decline of more than USD 1 million per blade against management’s estimated cost of USD 24,000 per blade.

Fuel Cells had a down week with the index decreasing 6.3% on 1 stock advancing and 6 stocks declining. FuelCell Energy Inc. (FCEL) led the movement downward with its stock price falling 14.3% for the week. Most of the loss came after their earnings call on March 6.

What did I learn this week? Oil prices hit record highs and sustainable stocks fall sharply with the broader market. Given the relatively high beta of the Solar, Fuel Cell, and Biofuels indices, their stock performance seems to be weakly correlated to oil prices and much more strongly influenced by broad market trends. Renewable Electricity, with its lower beta, may offer some portfolio diversification benefit.

Mark is the founder of Camino Energy, a information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks. Mark doen’t hold a position in any of the specifically mentioned stocks.