By Robert Curran
By Rob Curran and Geoffrey Rogow
The Obama administration wants to recreate President Kennedy’s “space race” in pursuit of alternative energy, and some solar-power and electric-car battery stocks are already rocketing higher.
Shares of lithium-battery makers GS Yuasa of Japan; BYD of Hong Kong; and U.S.-listed lithium producer Sociedad Quimica y Minera de Chile have all more than doubled since their lows around the time of Obama’s election victory. To technicians, that kind of momentum means the stocks are in “strong uptrends.” Caveat emptor: corrections are likely to be extreme, too.
BYD, which is Warren Buffett’s alternative-energy play, has started producing and selling its own hybrid electric vehicle in China for about $22,000 a pop. GS Yuasa supplies Honda Motor with batteries for its electric car.
The beauty of investing in battery companies is the investor doesn’t have to bet on which — if any — electric car will eventually catch on, however.
Obama’s goal to put 1 million plug-in vehicles on the road in the U.S. by 2015 is gravy for companies that are already selling their batteries for more prosaic uses such as mobile phones. There will likely be many false starts in the race toward a “green” car, but a lot of battery power will be expended in the race.
Meanwhile, solar-power companies, one of the hot plays of early 2008, are having another hour in the sun. Both the Market Vectors-Solar Energy ETF and Claymore/MAC Global Solar Energy Index ETF have both halved, then nearly doubled
so far this year. And those are broad ETFs, not single stocks.
Long term, however, technicians note both ETFs and much of the sector is still in the midst of a strong uptrend.
“It’s one of the few areas in the market people can dream about real and big growth,” said Phil Roth, chief technical strategist with Miller Tabak. “There is almost nothing with that kind of growth and the hot money will gravitate to it.”
Pacing the sector is industry leader First Solar Inc. The maker of solar-power harnessing panels and cells is up 23% for the week after the company reported its first-quarter net income more than tripled on surging revenue
Wednesday.
“The stock has almost doubled off the lows and its all-time high was $300. There’s no reason it shouldn’t pass that in the next couple years,” said Roth.
“With the first quarter quite possibly marking the bottom of the industry’s first-ever down cycle, there was no sign of those troubles in First Solar’s stellar results,” said Raymond James analyst Pavel Molchanov. “To summarize our thesis on First Solar: The addition of solid utility-scale project development capabilities to the world’s lowest-cost (solar cell maker) … for a potent combination.”
As investors in the “commodities theme” and indeed the solar sector discovered to their detriment in 2008, “hot-money” sectors can cool off fast. Investors eager to participate in the latest space race should remember that not all U.S. or Russian rockets made it to the moon.
