By Jeff Siegel of GreenChipStocks.com
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In the 1973 movie Papillon (adapted from the 1969 French novel by Henri Charriere), there’s a scene where Papillon is considering jumping off a cliff to escape the island on which he is being imprisoned. His friend Dega says, “It seems so desperate. You think it will work?”
And Papillon replies, “Does it matter?”
Papillon had two options: Stay on the island and die, or study the treacherous currents and attempt his escape. Sure, the latter option could end in disaster… but fortune favors the daring. And in this case, Papillon survives the jump and makes it to freedom. He even ends up outliving the prison.
Although not quite as macabre, I do see a similar situation in the way most of us played the market this year. Our options were to “safely” stay on the sidelines, not making a dime; or to study the unreliable ebbs and flows of a very confused market and attempt a profit.
After taking such a lashing in 2008 and early 2009, investors were hesitant but also desperate to free themselves from heavy losses and uncertainty. All of us wanted to start making money again. And while we knew things weren’t nearly as rosy as the spin wizards in D.C. had wanted us to believe, we knew at some point we would have to jump back in — and hope for the best.
But make no mistake about it. Our decision to move forward was not one made because things were getting better. Not at all. In fact even as we provided new coverage and made new recommendations, we knew that what we were being fed about the economy was about as reliable as Chinese drywall.
And going into 2010, little has changed.
Now that doesn’t mean there won’t be an avalanche of opportunities in alternative energy next year. In fact, based on new technologies, government incentives and continued fossil fuel depletion, Green Chip Investors are going to make a killing in 2010.
But before we get to that, let me just take a moment to put a few things in perspective, so we…
Don’t Go into 2010 Unprepared
Over the past year, many of our Green Chip plays have done quite well. And I’m certainly not going to play down our gains.
But it’s still questionable as to whether or not the rally we’ve been witnessing this year is sustainable. I don’t think it is.
I know, I know — I’m supposed to be super bullish. And I am when it comes to renewable energy…
But no matter how bullish I am, we can’t lose sight of all the things that will continue to weigh on the market in 2010.
Consumer spending is still way down. Commercial real estate is collapsing, and will continue to collapse in 2010. Once the tax credits for new homes come to an end, the magical hand of Uncle Sam will no longer be there to prop up the housing market. Debt continues to build. Millions of Americans are still out of work.
So what was I saying before about being bullish?
Looking Forward to 2010
You know how it goes…
Crisis always breeds opportunity. And there are few crises more urgent than our energy crisis.
Fossil fuel depletion is very real, my friends. And couple that with the reality of climate change legislation and the national security issues directly related to both our oil reliance and our crumbling energy infrastructure, and you’ve got one hell of an opportunity to profit from the solutions to this crisis.
That’s exactly what we’ve been doing for the past five years — and it’s exactly what we’ll be doing next year, too!
So let’s take a quick look at what we have to look forward to in 2010.
Solar
Over the past few months, you may have read or heard about a “solar glut” or “poly glut” that could potentially have negative impacts on the sector this coming year.
Don’t buy it!
All this recent ranting about poly oversupplies is simply misleading.
Sure, large silicon supplies have pushed prices down. And that will likely continue into 2010. But between Chinese and U.S. government support, and continued strength in Germany — at least until the next feed-in tariff cut mid year — there is little doubt that these poly supplies will be consumed rapidly.
Sure, if demand going into 2010 were weak, then yes, this argument would be completely valid. But to dismiss the massive impact of U.S. and Chinese demand in the next 3 to 5 years is simply irresponsible.
Now going into 2010, I believe Chinese OEMs will continue to lead the pack. Probably our favorite going into 2010 is JA Solar (NASDAQ: JASO). Bottom line: JA Solar provides some of the most efficient cells in the space and at an extremely competitive price. Combining both the efficiency advantage and the cost advantage puts JA Solar in a very sweet position.
Also keep an eye on manufacturers setting up shop in the U.S. Their domestic operations will be rewarded with an avalanche of stimulus dollars. That’ll provide a nice boost for those stocks.
Wind
Chinese wind turbine manufacturers will also make headway in 2010.
Just like we witnessed in the solar sector, China will be going full force in wind turbine development. And they’ve already started; they have no choice if they want to reach their very aggressive renewable energy goals.
Today, Sinovel is China’s biggest wind turbine player. Although it’s not publicly-traded, you can indirectly play the company’s momentum with American Superconductor (NASDAQ: AMSC). American Superconductor provides specialty components for Sinovel. To date, the company has more than $100 million in component contracts with Sinovel.
A-Power Energy Systems (NASDAQ: APWR) will also continue to make headway in the Chinese wind turbine market. However, the stock has been flying since September, so I’d be cautious about chasing it right now.
There also seems to be a bit more enthusiasm over residential wind turbines going into 2010. To be honest, I love these things… and I know for a fact they could offer consumers in wind-rich areas an excellent alternative to conventional energy sources and even solar. But I’m still hesitant, as the industry is still dealing with permitting issues that have become a real hindrance to growth. A lot of the bureaucrats in charge of issuing these things don’t have a clue when it comes to residential wind turbine installation. And the permitting fees seem to be completely random, depending upon where you live and which bureaucrat lackey you have to deal with.
That being said, I do believe we will make some headway on this issue in 2010, as top-down initiatives from Washington —as well as funding — will force local yes men to get their acts together. And when that happens, I suspect we’ll finally see some sustainable growth in residential wind turbine installations.
Geothermal
In the world of geothermal, we’re still only dealing with a handful of players. And Ormat (NYSE:ORA) will remain in the top spot in 2010. But one thing we’re definitely going to keep an eye on is progress on Enhanced Geothermal Systems (EGS)…and of course, the companies that are working with the government to advance this technology. One in particular that I like going into 2010 is U.S. Geothermal (AMEX:HTM). U.S. Geothermal is actually working with the DOE to demonstrate the viability of EGS at one of the company’s geothermal sites. The DOE has already ponied up $6 million for that project so far.
Smart Grid
Smart grid companies did really well in 2009 and I suspect they’ll continue to do well in 2010. After all, it’s the smart grid that we know will help facilitate aggressive energy efficiency and conservation measures.
EnerNoc (NASDAQ: ENOC) and Comverge (NASDAQ: COMV) will likely stay in the spotlight in 2010, but there will also be some new entries next year. I also think we’re going to see some consolidation here, as well. So be prepared for that.
Overall, I think energy efficiency is going to get more attention in 2010 than anything else — including wind and solar.
Electric Vehicles
The year 2010 will be the one in which we’ll see the first round of electric and plug-in hybrid electric vehicles from the majors. But as we’ve written in the past, it will be the battery companies we’ll have to focus on for profits.
A123 Systems (NASDAQ: AONE) and Ener1 (NASDAQ: HEV) will probably stay in the spotlight in 2010, as these companies are focusing on both high-performance batteries for electric vehicles and for utility-scale storage applications. I believe the latter will see some serious funding in 2010; that funding will also help continue electric car battery development.
That being said, I wouldn’t go chasing these things now. Ener1 looks a little high right now, and I still think A123 is overpriced at current levels.
There’s a lot to look forward to in 2010. Momentum has never been stronger, transitions have never been more urgent, and the call to action has never been louder.
In 2010, I’m looking forward to continued technological advancements in clean energy. I’m looking forward to strong government support for renewables (the same kind of support that’s been given to oil and coal for decades), and I’m looking forward to helping you profit from the transition to a cleaner, safer, and more economically sustainable energy economy.
So get ready, because it’s going to be an exciting and profitable year for all of us!
To a new way of life, and a new generation of wealth…