According to the 157 industries that make up Marketsmith’s industry groups, the solar sector has been number 1 for the last 3 month’s in stock returns. The 2 horses in the industry are Enphase and SolarEdge. This article from the LA Times explains why these companies are so lucrative in the solar business.
If electric cars are the future than solar systems have incredible growth in the next few years. This is year 1 which may be a good indicator that this sector should be looked at more closely.
One needs to view this sector with caution. For one, inverters are not “solar,” they are electronic devices that convert DC into AC and they have been around for much longer than solar. For example, they are used in uninterruptible power supplies (UPS) to convert battery DC to AC. These devices have been around for a very long time and are essentially commodity items. Every once in a while some part of this industry makes waves but it tends to be a flash in a pan. The linked article points out why Enphase and SolarEdge happen to be standouts just now:
The two companies supplied 89% of the total U.S. market for module-level inverters last year, according to Wood Mackenzie Power & Renewables analyst Lindsay Cherry. They’ve kept their edge in the United States even as China’s Huawei Technologies Co. and Sungrow Power Supply Co. dominate the global market. That’s in part because Huawei canceled plans this year to enter the U.S. market after lawmakers suggested a ban on its technology.
Around 2002 International Rectifier Corp. (IRF) was one such darling. Shortly after the market lost interest and IRF was eventually acquired by Infineon
Infineon to Acquire International Rectifier
Aug 20, 2014 | Market News
… US-Dollar 40 per share in cash to be paid for all International Rectifier outstanding shares, representing a premium of approximately 48 percent over the average share price of International Rectifier during the last three months and a premium of approximately 51 percent over the closing share price of International Rectifier on August 19, 2014.
IRF must have been trading at around $27 in mid August 2014. I sold my IRF on March 28, 2006 at $41.0612. There was a similar story about a company whose name I don’t recall that made Schottky Rectifiers. Their devices were manufactured by IBM. They made the mistake of building their own factory and the stock nosedived.
I’m not saying to stay away, only to watch the investment with hawk eyes, don’t fall in love with the stock.