Worldwide Energy and Manufacturing (fka WEMU)

[stockguard]

Everything that Could Go Wrong has Gone Wrong

Just look at what the solar industry has gone through over the past few months.

Germany, a country with a government that has proudly subsidized the solar industry for years, recently announced subsidies could be getting cut. Draft legislation was recently introduced to cut subsidies for rooftop panels and solar farms by 15%.

In an industry dependent on subsidies, any cut is going to have a noticeable impact.

Also, the entire industry is facing tough times. The prices solar manufacturers have fallen sharply across the industry. In ENER's case, UBS noted the average price per solar module fell by 10% to $2.10 per watt. And that's still 10% higher than the rest of the industry.

As the last earnings season has shown, practically any company that doesn't have a big presence in the Chinese market, where the command-and-control economy has commanded solar to be a winner, has been getting hammered.

Finally, in the United States, funds from the stimulus package earmarked for solar projects have been tied up in red tape and the federal bureaucracy. Also, with 49 of the 50 states facing budget deficits, there isn't much extra cash to hand over to solar companies. And when it comes to installing a cap-and-trade scheme, a system designed to take money from the energy consumers and give it to alternative energy companies, prospects for implementing it are continually getting pushed back.

Avoid the High Costs of Conforming

Everything that can go wrong for solar has gone wrong. And, if judging by the price declines of the top solar stocks is any indication, solar investors have sold out and moved on.

That's all why solar is actually looking more attractive than ever. Not because the industry's prospects for are great, but because they're so poor.

Remember, buying something that no one wants is the toughest move an investor will ever have to make. Yet, as contrarian investors know, when a stock is so hated that no one is willing to buy it, the risk is lowest and the potential reward is the greatest. Not all of them will work out, but with the highly attractive risk/reward dynamics, less than have of them have to work out to become a very successful investor.

John Maynard Keynes wrote:

Knowing that our individual judgment is worthless, we endeavor to fall back on the judgment of the rest of the world which is perhaps better informed. That is, we endeavor to conform with the behavior of the majority or the average.

Right now, we've found a stock that's absolutely despised. We're seeing a situation where nearly everything that could go wrong has gone wrong, share prices have declined significantly, and almost no one is willing to buy now.

For contrarians who see that most everyone is conforming to the crowd and getting out of solar, it could be the right time to buy.

China is on the verge of becoming the world's largest energy consumer, energy prices are going higher over the long run, and solar could be in for another strong run. If so, solar would be the energy comeback story that no one is paying attention to right now. And disciplined investors with the right timeline should be starting to look at how to take full advantage.

Complete article:
http://www.istockanalyst.com/article/viewarticle/articleid/3928600