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Generally, my bias is toward large-cap companies with a demonstrated business model. In a nutshell, "experimental" business models need not apply. However, every once in a while I make an exception, and First Solar (NASDAQ: FSLR) is one. Here's why:
In addition to growth potential for its proprietary thin film semiconductor solar module technology, First Solar has a building macroeconomic tailwind in the bottoming U.S./global recession and dawning recovery. The First Call FY2009/FY2010 EPS estimates for FSLR are $7.18 to $8.72.
To be sure, gross margins in FY2009/FY2010 are not likely to exceed FY2008's 54 percent, but as demand picks up in late FY2009, institutional investors will continue to add to existing positions. Further, FSLR's pricey P/E of 34 would normally be a deal killer, but the growth prospects, consequent ramping demand, and a preference to get-ahead-of-the-pack on a likely move to much higher territory for FSLR, tips the scale in favor of a Buy.
However, a tight Sell/Stop Loss has been deployed, given the volatile, inherent high-risk nature of the solar sector.
Stock Analysis: First Solar is a high-risk stock. Consider buying a 25% position in FSLR now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your FSLR position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $115.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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