wntSolar

Solar remains an attractive investment both for those who already own stocks in the sector and those looking at solar power for the first time.

Four Priority Stock Recommendations
Evergreen Solar (ESLR US)

Owner of distinctive string-ribbon wafer manufacturing process that has realistic potential to be the "next generation", for c-Si wafers and grow profitably from 14 MW of production in 2005 to 1 GW in 2010. We see realistic potential for the company to generate net profit for the first time by mid-2006 and for the stock (trading on the Nasdaq at $6.63 per share on July 22) to trade above $8 (20 times 2007 earnings) in the next year and above $28 (20 times 2008 earnings) in the next two years.

Sharp (6753 JP) World's largest solar power company with $1.5 billion in solar revenue and $150 million in solar pre-tax profit this year. Sharp's solar revenue is expected to grow to approximately $5 billion by 2010. The company currently guides for approximately 10-percent operating margins from its solar power business, but we see realistic potential (not included in our modelling) for 20 percent. With solar becoming a leading driver of earnings growth, we see substantial upside.

Solartron (SOLAR Thailand)

Thailand's leading solar power company. While small (only $25 million in revenue in 2004), this company is well positioned to benefit from increasing Thai government support. With government officials suggesting Thailand will undertake a large-scale program for electrification using solar power, we see significant upside potential for Solartron's stock price. We include Solartron in our solar portfolio to create exposure to this upside.

SolarWorld (SWV GR)

SolarWorld is the largest solar stock by market cap ($1.1 billion) and is one of Germany's leading solar companies (revenue $360 million). We see the stock reaching €100 to €130 ($121 to $15 7) in the next 12 to 24 months, as net profit increases from €33 million ($39.9 million) in 2005 to €47 million ($56.9 million) in 2006 and €63 million ($76.3 million) in 2007. We see significant upside potential beyond these estimates if SolarWorld pursues stronger-than-expected downstream integration (i.e. making more cells from its wafers and more modules from its cells), achieves larger-than-expected cost reductions, or pursues faster-than-expected capacity increases.

SunPower (IPO US)

Currently a subsidiary of Cypress Semiconductor (CY US), this fast-growing unit has the world's best cell efficiencies, capturing premium prices while keeping costs down by manufacturing in the Philippines. We expect an IPO later this year with an initial market cap of $400 to $700 million and strong potential to expand to more than $2 billion by 2010.

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