Writing about solar used to be fun…
I used to love taking on the naysayers, combating their Luddite sensibilities with boring data transformed by the magic of Photoshop and infographics.
They’d talk about the limited availability of solar, the high costs, and its inability to compete in a real free market. As if a real free market has ever existed in the world of energy.
The debates were fun — especially when they were face-to-face and not confined to 140 characters on Twitter.
Listening to folks sing the praises of coal while trivializing the economic and environmental superiority of solar was particularly enjoyable when I would peek down at my smartphone to see how much money I was making that day on solar stocks.
Of course, the sun did not always shine on my solar portfolio. Certainly, like every other sector, solar has had its ups and downs. But overall, we’ve done very well investing in solar stocks by timing the peaks and valleys appropriately.
Buying on Weakness
There’s no doubt about it…
You can make a boatload of cash in the solar space. But in order to do that, you have to stay on top of the dozen or so variables that dictate the direction of solar stocks.
We see this year after year, and in 2016, it’ll be no different.
So if you want to make a few bucks in the solar space next year, here are a few predictions that will help you navigate the tricky yet highly profitable terrain of solar stocks.
Number one…
Prepare for the bloodbath that’ll never come.
As I wrote earlier this year, the solar ITC is set to expire at the end of 2016.
The ITC, or the investment tax credit, has been around since 2006, and it’s basically a 30% tax credit for solar power systems on both residential and commercial properties.
For a number of reasons, I expect to see the ITC get an extension of at least two years before 2016 comes to a close. That being said, solar installers are going to rush to get as much installed as possible before the 2016 deadline is reached.
So companies like SolarCity (NASDAQ: SCTY), Vivint Solar (NYSE: VSLR), and SunEdison (NYSE: SUNE) will be very, very busy.
{$custom_solar_2}
The Biggest Bang for Your Solar Buck
On the manufacturing side of things, I expect to see steady and continued growth with U.S. companies, like SunPower (NASDAQ: SPWR) and First Solar (NASDAQ: FSLR). Chinese solar companies could still do quite well, too, as the Middle Kingdom continues to push its very aggressive solar expansion — backed by Chinese banks, of course.
To be honest, I’m still a bit uncomfortable investing in Chinese solar stocks, as I fear their continued government-backed financing is not sustainable. That doesn’t mean stocks like Trina Solar (NYSE: TSL), Canadian Solar (NASDAQ: CSIQ), and JA Solar (NASDAQ: JASO) won’t do well in 2016. But to play it safe, I’ll likely avoid the China players — unless I see a good opportunity for a quick trade.
In addition to solar manufacturers and installers, I also like the inverter company SolarEdge (NASDAQ: SEDG). It’s gaining market share at a surprisingly rapid rate. It’s a solid company and, quite frankly, also a real bargain at current levels.
Keep a look out for new solar technologies in 2016, too. I suspect we’ll start seeing more in the next-generation solar nanotechnology space. I’m talking about things like solar films, paints, and yes, solar sprays.
Although you won’t be seeing this stuff at Home Depot in 2016, opportunities could arise from new tech leaders that are able to up the ante on this kind of next-generation solar. And quite frankly, that’s where we’re ultimately going to see the biggest bang for our solar buck.
All in all, solar will continue to deliver in 2016. We’ll see the rate of installations continue to crush it — particularly in the U.S., Japan, and China.
Solar installers will continue to find ways to drive down prices, manufacturers will do the same, and in the end, consumers will benefit handsomely.
In fact, if you want to invest in solar but you’re unsure about solar stocks, consider just going solar yourself. These days, in most places, the long-term economic benefits of solar are quite impressive and could save you tens of thousands of dollars in the long run. With that kind of scratch at stake, it’s certainly worth a look.
To a new way of life and a new generation of wealth…
Jeff Siegel
Check us out on YouTube!
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.
Want to hear more from Jeff? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.
