The Best Solar Stocks

It’s no coincidence that Obama toured a solar manufacturing facility shortly after he signed the economic stimulus yesterday.

The bill, after all, is going to funnel no less than $65 billion in the direction of green energy initiatives, including pumped up incentives for residential and commercial solar installations.

By most estimates, the new incentives for solar will lead to a doubling of the U.S. market in 2009 to between 600 and 700 megawatts (MW). By 2010, the domestic market could more than double again to between 1.5 and 2 gigawatts (GW), or 1,500 to 2,000 MW.

Here’s what Piper Jaffray analyst Jesse Pichel had to say about the situation:

“We believe the renewable energy grant to refund the ITC is the biggest win for solar. There are no caps and although the duration is two years, a project must only be started by December 31, 2010 and be completed by January 1, 2017 to qualify. We believe that all three solar end markets will benefit: residential, commercial, and utility. The biggest problem with the US market is the lack of tax appetite. This creates a highly liquid solar market to encourage investors which have walked away from projects.”

What’s more, new tax laws for the solar industry allow 30% of a new solar project’s cost to be taken before any state subsidies. This is known as “double-dipping,” and could cover up to 80% of a new project’s cost. This will allow a great increase in solar’s profitability and will lure wary investors back to the sector.

The bill also qualifies utilities to reap $6 billion worth of state grants for solar projects, while equipment manufacturers can receive a 20% tax credit to build new plants.

If it sounds like a lot, it’s because it is. It’s an MLB-sized steroid jolt for the solar industry. And it can make you a lot of money if you play it right.

Best Solar Stocks for the Stimulus

Given all the information above, it’s rather easy to see which companies will emerge as victors.

The domestic big three are all sure bets: First Solar (NASDAQ: FSLR), SunPower (NASDAQ: SPWRA), and Energy Conversion Devices (NASDAQ: ENER), because of the added “Buy American” caveat in the bill.

Evergreen Solar (NASDAQ: ESLR) is positioned to benefit to a lesser extent, but at only about $1.55 could offer the best bang for your buck.

To benefit from the tax credit afforded manufacturer of solar production technology, try out GT Solar (NASDAQ: SOLR) and Spire (NASDAQ: SPIR).

And to take advantage of stabilizing raw materials prices due to rising demand, look to MEMC (NYSE: WFR) on the rebound.

I’ll cover other sectors benefiting from the stimulus and how to profit from them in coming issues.

To green energy and green profits,

Chris
Clean Energy Sector