The Sun Also Rises

In This Issue...

Solar stocks will again rise to higher highs

One day solar was hot, the next day not; the day after that it might be hot all over again.  Pick your day, a price target for oil, the current temperature reading in the Middle East (or the Midwest for that matter) and you've got a snapshot of the alternating euphoria and uncertainty that's been plaguing the cleantech/alternative energy markets. 

And yet, even with all the recent ups and downs, solar remains one of Wall Street's darlings.  Neither the silicon supply constraints nor the baggage of the alternative energy sector from years' gone by can shake that.  In fact, as earnings emerge from some of the industry's largest solar vendors - Sunpower (Nasdaq: SPWR) for example - the market remains hopeful that the love affair with all things cleantech will continue.   

For many investors it indeed poses a quandary.  From SunPower's perspective there's nothing about the business that seems uncertain or fleeting.  According to investment bank Cowen & Company, SunPower should see revenue growth of 180 percent in 2006 and another 57 percent in 2007. (Revenue estimates for 2006 and 2007 are forecast at $220 million and $345 million, respectively.) 

With parent company Cypress Semiconductor (NYSE: CY) holding about 70 percent of diluted shares, SunPower continues to expand worldwide.  The company states that it now operates three solar cell production lines at its first plant, and is currently installing a fourth.  It also recently bought another plant in the Philippines near its existing manufacturing facility, which has the capacity for up to 10 additional production lines, the first of which is expected to begin production by Q2 of 2007.  Cowen analyst Robert Stone maintains an "outperform" rating on SunPower, expecting further upside to manufacturing production and 'revenue per watt' over the next 12 months. 

What then of all the naysayers who say the sky is falling - again - in solar; if it hasn't fallen already?  Well, they may be partly right, in the short term at least.  SunPower went public last November and quickly shot up to a high of $45.09, well more than double its IPO price.  On June 1, SunPower announced the pricing of another public offering of 7 million shares of stock back at $29.50 per share to help fund production expansion and lock in silicon supply.  Yet, share prices have continued to tank, dipping as low as $23.75 even though most analysts on the Street are trying to support the stock.  The Cowen analyst says he still believes SunPower will outperform the market by 40 percent over the next 12 months, though other investment banking sources suggest upcoming weakness in natural gas prices implies even more trouble for the solar market. 

The issue may be one more of 'degrees' of bullish or bearishness, rather than overall trends in the solar or alternative energy markets.  With China and India widely recognized as major new consumers of the world's energy supply, there's more than enough interest on the demand side to make solar a real sector for a long time to come.  Even tiny companies such as Spire Corporation, a Massachusetts company founded in 1969,that makes manufacturing equipment for the solar industry have seen their shares rise and fall - and rise again - all within the last year.  (And Spire's annual revenues haven't even breached $20 million!) 

As SunPower's numbers hit the market, and once again prove the company's high growth trajectory and high demand for anything solar overall, I suspect the sector will again rise above Wall Street's current shadows and begin yet another path upwards.  It may be a choppy path higher, but solar will indeed rise again.

Peter D. Henig is a market columnist for Growth Report, an independent investment newsletter focused on investments in profitable, high growth small cap companies.

DC Money Show Musings

By Vijay Balkissoon, Staff Writer, Big Idea Investor

The annual Washington, DC Money Show has come and gone once again.  As is the case every year, individual investors had the opportunity to gather along with Wall Street pros and financial gurus to discuss the domestic and international market outlook, trading strategies, and stock selection among a host of other hot topics. 

The show kicked off in grand style on July 20 at the Wardman Park Marriott in the Woodley Park neighborhood of Washington, DC. In a nod to the Nation's Capital, Dr. Mark Skousen of Forecasts & Strategies opened up the show by discussing the financial wisdom that could be gleaned from founding father and all-around great American, Benjamin Franklin.  Dr. Skousen left the audience with three rules of investing, based on Benjamin Franklin's extraordinary life and writings: 1) when times are good, live frugally 2) be well diversified and 3) be optimistic. Takeaway Benjamin Franklin quote: "Economy is a great source of revenue."

Following Dr. Skousen, other speakers, including Ed Finn, Editor & President of Barron's and Knight Kiplinger, Editor-in-Chief of Kiplinger's Personal Finance, spoke at length about macro trends and opined on what the near and longer term future holds for investors.  Not surprisingly, in the wake of continued Middle East conflict and increasing commodity prices, the outlook was not all rosy; both Finn and Kiplinger forecast slowing growth for the U.S. economy and counseled proper portfolio diversification with a good representation of international securities.

Though I missed the remarks of the oft-controversial former Speaker of the House - and potential 2008 presidential candidate - Newt Gingrich, I did have the opportunity on July 21, the second day of the show, to sit in on a panel discussion on Socially Responsible Investing moderated by Nancy Zambell, Contributing Editor to our Financially Fit weekly newsletter.  Nancy, who also serves as Editor of The Money Show Digest, introduced the panel by pointing out that Socially Responsible Investing, or SRI, has been in existence since the 1950's.  But only in the past ten years or so - as evidenced by money inflows into SRI mutual funds - has the trend really taken off.

The panel featured representatives from Ave Maria Funds, a mutual fund company that invests with Catholic values in mind, Citizens Funds, a mutual fund company whose socially responsible funds run the gamut from small cap to emerging markets, and BP (NYSE: BP), one of the few energy companies that makes the SRI grade due to its emphasis on corporate governance and alternative energy.  The panelists discussed for the uninitiated what exactly a "socially responsible investment" is.  While most people know that SRI funds strictly avoid so called "sin stocks" in the alcohol, tobacco, firearms, and gambling industries, the panel identified other socially responsible investing goals including shareholder activism and community engagement.  The Citizens representative dispelled the notion that SRI is either a movement, socialism, or philanthropy of some sort.  In the Q&A session that followed panelist remarks, the panel assured skeptical investors that it is indeed possible to invest according to your values without sacrificing returns. 

After taking in the SRI panel, I strolled through the exhibition booth area.  From my time there, it was abundantly clear to me that commodities are still a hot ticket on Wall Street. I did not have the chance to check out the huge array of free and paid workshops and seminars, but I look forward to doing so next year.  Thank you to InterShow for putting on an informative, accessible, and enjoyable conference.

Wi-Fi Coming to DC's Metro System?

By Big Idea Investor Staff

Here at Big Idea Investor we have kept close tabs on all things Wi-Fi (wireless Internet) since we are advocates of a world where we can check our email and get stock quotes any and everywhere (Read our past articles Philadel-Fi and Wi-Fi: Coming Soon to a City Near You? for more on the topic).

We are excited to hear of some Wi-Fi buzz happening in our own backyard here in Washington, DC.  Last week it was revealed that Sprint-Nextel, T-Mobile, Cingular, and Verizon have jointly submitted an "Expression of Interest" to the Washington Metropolitan Transportation Authority (WMATA) whereby the companies would expand phone, Internet, and other communication services across the Washington, DC area's 106-mile rail system (Metro). 

The "Expression of Interest" by the four wireless giants follows a February symposium that discussed the need to completely overhaul Metro's aging communication systems. Metro has indicated that they would like to have wireless "hot spots" at 20,000 locations throughout the system as well as video monitors on all trains and buses in order to better communicate with the system's 700,000 daily riders.  Presently, only Verizon customers can use their phones in the underground portions of the Metro systems, since Verizon paid for an emergency radio system for Metro in the early 1990's.

Presumably after an agreement such as that proposed by Sprint-Nextel, T-Mobile, Cingular, and Verizon comes to fruition, non-Verizon customers would also be able to use their phones underground.  Sounds like things are going to get a little bit noisier for Washington, DC area commuters. 

But what's in it for the wireless companies? Plenty.  The wireless companies would generate revenue by charging for services and by selling advertising.  Metro would enter into a revenue share agreement with the companies. 

Currently, Metro takes in about $35 million a year in advertising revenue.  With an upgraded system that includes video monitors throughout the system, Metro stands to improve on that number by possibly several fold.