Solar Part 1: Lunar Eclipse, Solar Power

February 24, 2008

I hope the lunar eclipse was enjoyable for everyone. Of all the branches of science, Astronomy is the one that anyone can associate with. Who hasn’t looked up at the stars in absolute wonder. If you look up at the sky in the daytime you won’t see any stars. Wait a minute. You do see a single star, one star drowning out the rest, our beloved sun. Daylight is a constant reminder of how strong and how much energy our sun outputs. Solar cells can harvest that light and turn it into electrical power. There are many solar companies on the market, but how do you look past the green fever to find what’s golden?

First, you have to list all the promising solar companies and see where they stand in comparison to each other. As of February 24, 2008.

Company Symbol Mkt Cap (B$) P/E F P/E
SunTech Power STP 5.91 38.21 13.86
SunPower Corporation SPWR 5.49 615.04 22.12
First Solar FSLR 16.64 104.26 41.36
SolFocus Privately held      
Nanosolar Privately held      

There are several apparent trends.

First, the P/E is ridiculously high. The market has a lot of confidence in future earnings. First Solar’s 2007 revenue was almost 4 times its 2006 revenue. These companies are increasing their profit margins while doubling sales each year. The growth potential is enormous. The only thing that could possibly displace solar is nuclear fusion, but we are still at least 30 years away from that. People would rather have solar panels on their roofs than a nuclear reactor in their backyard.

Second, the F P/Es are reasonable, so one can assume that the current stock pricing takes next year’s projections into account. That’s easy to do, because most companies have already sold the panels they are going to make in the future.

Third, the companies with the potential to change the game are privately held. There is so much interest in solar, they don’t need to work very hard to raise the capital they need to start up their factories or develop their technology.

Fourth, the companies are still relatively small if they are truly the future of energy; their market cap should approach that of other energy companies. The future is bright.

In Part 2, I will go over various solar technologies.

Bottled Water, Next Generation Commodity

February 24, 2008

The stock exchange defines a commodity as “any unprocessed or partially processed good.” Wikipedia defines a commodity as anything for which there is demand, but which is supplied without qualitative differentiation across a given market. When we think of commodities or check the current prices of various commodities, we think of oil, natural gas, soybeans, corn, gold, silver, and other precious metals. Water, wind, and solar power are not considered commodities and cannot be publicly traded, but they are things that there are major demands for in our quickly developing world. Companies like First Solar, SunPower Corporation, and Suntech Power help provide megawatts of power through solar energy. Enercon and REpower manufacture the world’s largest wind turbines and take advantage of wind power to create energy. Finally we all pay water bills, we see Aquafina commercials on TV, and drink water out of public drinking fountains, yet the average person does not comprehend the demand for bottled water in this country. I guess it’s not just general water that is in demand, but the method of how we drink water and that Americans have a preference for the types of water they want and will pay for.

Within the last four quarters, Apple has reported Ipod revenue of 9.21 billion dollars with much help from the Ipod Touch and new versions of the Ipod Nano. 2007 movie tickets sales in the US totaled 9.66 billion dollars with blockbuster movies such as Spider Man 3, Shrek the Third, and Transformers all released last year. Also in 2007, Major League Baseball almost caught up to the National Football League in revenue with a little over 6 billion dollars. While all this revenue for MLB, Ipods, and movie tickets were quite impressive for 2007, what beat all those industries was bottled water. The United States contributed over 15-billion dollars to the bottled water industry last year!

Interesting bottled water statistics:

  • Americans drink more bottled water than coffee, milk, or beer. (Don’t go rushing to sell your Starbucks or Anheuser-Busch shares quite yet though)
  • In 1976, the average American drank 1.6 gallons of bottled water per year. Just last year in 2007, the average American drank over 28 gallons of bottled water. In over thirty years, we have increased our bottled water consumption by over seventeen times.
  • Fiji Water produces 1-million bottles/day while 50% of the residents in Fiji don’t even have reusable drinking water.
  • The only drink that outsells bottled water is carbonated soft drinks which totals to an annual consumption of 52.9 billion gallons.
  • Bottled water is a 50-billion dollar industry worldwide with bottling companies like Arrowhead, Poland Springs, Crystal Geyser, and Saratoga Springs.
  • 24% of US bottled water is tap water purified and repackaged by Coke & Pepsi (aka purified municipal water).
  • Pepsi’s Aquafina is the #1 selling bottled water with 13% market share while Coke’s Dasani bottled water is #2 with 11% market share.

This doesn’t mean that people are completely halting their consumption of carbonated beverages, but it means consumers are adding a lot more bottled water to their drinking options. Coke (KO) and Pepsi (PEP) realize that consumers are considering a cold bottle of water over a cola, and almost a quarter of the US bottled water industry is derived from those two companies. Just because the bottled water industry is flourishing , it doesn’t make Coke and Pepsi good investment options. At the same time they generate much revenue from their bottled water brands, they also rely on huge revenues from their carbonated drink options. I honestly don’t know of any good way to profit in the stock market from the large growth of the bottled water industry. There are much better deals in the market right now with better long-term growth than these two beverage companies.

For me, it’s just a major eye opener on how much Americans spend on purified municipal water when we can just boil and bottle our own tap water at home. If we’re paying a premium for bottled water, I’d think that we’d at least want some spring water to get our money’s worth. We tend to pay a very high price for convenience in this country. If gasoline starts to cost $4/gallon this coming summer and a gallon of milk rises to $6, then it may be prudent to bottle our own water sooner rather than later!!!!