When I lived in New York, I almost never thought about gas prices. After all, I only ever saw a gas station when I was sitting on a bus heading in or out of the city. But once I moved back to DC and started driving again, I became painfully aware of gas prices.
Luckily for those of us filling up our cars, oil is down 40% since June and trading at a 5 year low. The recent drop in oil prices has made my 2 hour daily commute significantly less terrible. But it hasn’t just eased my auto budget; it’s also provided a big stock buying opportunity in the form of solar companies.
You might wonder why oil prices are creating a solar buying opportunity. Well, solar stocks and oil prices have been related recently. The drop in oil and gas prices has made alternative energy less desirable, and therefore has driven down the price of solar companies. For example, the Guggenheim Solar ETF (TAN) is down 20% since June, and First Solar (FSLR) is down 35%.
I’ve said this before in posts, but a major decline in stock price doesn’t necessarily mean it’s time to sell a stock. If the price decline is due to random or unexplained reasons, or factors outside of the company, it could actually signal a chance to get in the stock for a bargain price. I believe that is what’s happening right now with solar stocks.
I’ve been invested in solar stocks for quite a long time now. Solar is a fast growing industry, and I think rising fears of oil dependence and environmental consciousness will make solar power a major energy player in the future. There are two major reasons that make me confident in my solar power investments, even with the recent decline:
- Massive industry growth
The solar industry has been one of the fastest growing industries over the past few years. Solar installations have grown 36% in America, and China has made a big commitment to solar energy and provides incentives for those who fuel with solar power. China backed this up with a growth rate of over 200% in 2013.
Even with this massive growth the solar consumer base is still relatively untapped, leaving significant room for future industry growth.
- Increase in solar price accessibility
The cost of solar, particularly large scale solar projects, has come down 70% over the past five years, and is continuing to decrease. The price of solar is now is now on par with coal and natural gas in many areas on sunny days. The increasing affordability of solar should mean that solar demand will increase as well.
So what solar companies am I eyeing to buy more of right now? I’m looking for industry leaders that are trading significantly lower than analyst price targets, and trading at a cheap price to earnings (P/E) ratio. Right now that includes Trina Solar (TSL) at a 10 P/E, Canadian solar (CSIQ) at a 7 P/E, and First Solar at a 16 P/E.
I’m also considering NRG Energy (NRG) for a solar investment. NRG is a utility company, but the CEO David Crane is a big believer in alternative and solar energy. He is transforming the company into a clean energy provider, with plenty of solar projects. While short term the company has been trading behind the other utilities, I think it is one of the only utilities right now that is ready to meet the changing energy landscape.
If you agree that solar power is a growing trend, it might be worthwhile to check out some of these stocks and see if any of them make sense to add to your portfolio.
Robinhood giveaway update: Congrats to Matt, Michelle, and Emily for winning the Robinhood invites! If you didn’t win, look out for another giveaway later this week!