(By Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Data sourced from Fidelity.)
Solar panel installation has fallen in Germany, the world's biggest solar panel market. According to Bloomberg, the country added 664 megawatts in June, a 69% drop from 2,109 megawatt installed during the same period last year. Should investors consider the drop a bad omen for the industry?
June 2010 stood out as a record year for solar installation in Germany "when homeowners raced to beat a July subsidy cut." Those subsidies have since been cut twice leaving German panel makers including Solarworld AG (SWV), Q-Cells SE (QCE) and Conergy AG struggling to keep up sales. As of now, the government intends to provide subsidies for 3,500 megawatts of panel installations each year but will reduce subsidies for all instillations beyond that amount.
And like other global manufacturers of solar panels, German producers are in competition with China whose solar industry enjoys extensive support from their government policies, cheap labor, as well as low electricity and real estate costs. This allows the companies to undercut global competitor prices and still operate within a reasonable profit margin.
Thus German solar companies are now fighting a two-front battle with lower demand and pressure to undercut price and profit margins. The plight of Germany's solar panel companies is not a unique one. It's worth reminding investors that similar problems are what caused the one-time American industry giant Evergreen Solar to file for bankruptcy in August.
Germany is working to lower their panel prices to levels competitive with Chinese manufacturers, but some say that may not solve their problems… According to Katharina Cholewa, analyst at WestLB AG in Germany, on several occasions slumping prices didn’t result in increased demand as buyers wait for them to fall further.
Cholewa also forecasts Germany will add 3,100 megawatts in the second half of the year, down from 3,400 megawatts in the same period last year.
So, is the future of the solar industry in trouble outside of China?
To find out what big money managers think of the trend in solar we put together a list of solar companies trading on US markets that have experienced net sell-offs from hedge funds in the current quarter. Big money managers think these solar stocks are in trouble--do you agree?
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1. Hanwha SolarOne, Ltd. (HSOL): Provides various energy solutions including silicon ingots, wafers, monocrystalline and polycrystalline solar cells, and solar modules. Net institutional sales in the current quarter at -3.9M shares, which represents about 17.55% of the company's float of 22.22M shares.
2. JA Solar Holdings Co., Ltd. (JASO): Engages in the design, development, manufacture, and sale of photovoltaic solar cells and solar products, which convert sunlight into electricity in the People's Republic of China. Net institutional sales in the current quarter at -12.0M shares, which represents about 13.66% of the company's float of 87.82M shares.
3. LDK Solar Co., Ltd. (LDK): Engages in the design, development, manufacture, and marketing of photovoltaic (PV) products; and development of power plant projects. Net institutional sales in the current quarter at -6.1M shares, which represents about 10.98% of the company's float of 55.54M shares.
4. ReneSola Ltd. (SOL): Engages in the manufacture and sale of solar wafers and solar power products. Net institutional sales in the current quarter at -4.1M shares, which represents about 6.76% of the company's float of 60.63M shares.
5. SunPower Corporation (SPWRA): Designs, manufactures, and delivers solar electric systems for residential, commercial, and utility-scale power plant customers worldwide. Net institutional sales in the current quarter at -21.4M shares, which represents about 63.84% of the company's float of 33.52M shares.
6. STR Holdings, Inc. (STRI): Engages in the manufacture and sale of encapsulants to the solar module industry. Net institutional sales in the current quarter at -1.3M shares, which represents about 3.64% of the company's float of 35.68M shares.