What Hedge Funds Think About These 5 Solar Stocks

Solar panel prices have crashed by around 30% globally in 2016, a development that has made every major producer rethink their strategy with respect to expansion and growth. Many solar stocks have seen their prices fall by 40-80% in 2016, as a massively oversupplied market has resulted in prices going below cost for most companies. In addition, domestic solar companies could feel added pressure under Mr. Trump’s less favorable renewable energy agenda. The current downturn could lead to industry consolidation where only the strongest will survive. In this article, let’s analyze some of these solar stocks and the hedge fund sentiment towards them.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively the most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

First Solar Inc (NASDAQ:FSLR), which is one of USA’s largest solar companies, has faced a lot of heat from the investor community due to a number of reasons. First, the company has been forced to fast forward the production of its S6 solar modules and skip the entire S5 series. Second, it has given weak guidance for the upcoming year, on the account of the surplus of solar panels globally. Though the company slashed its 2017 revenue guidance by close to $1 billion, it raised its gross margin expectation to 25.5%-26% from 18.5%-19%. According to our data, funds like Quentec Asset Management, Prescott Group Capital Management, Roumell Asset Management held large holdings in First Solar Inc.’s (NASDAQ:FSLR). The number of funds inour system long on this stock declined to 23 from 30 in the earlier quarter. They held 5.3% of the company’s float as of September 30^th.

SolarCity Corp (NASDAQ:SCTY), the No.1 residential solar player in USA, witnessed 7 funds dumping the stock during the June-September period. The total value of their holdings declined to $82 million from $140 million in the quarter earlier. Although the stock is down sharply year-to-date and SolarCity Corp’s (NASDAQ:SCTY)’s 1 GW Buffalo factory does not make much economic sense now, Elon Musk finally succeeded in merging SolarCity with his other company Tesla Motors Inc (NASDAQ:TSLA). The deal was approved by more than 85% of Tesla shareholders. On a positive note, the company delivered improved third quarter results reporting an EPS of 48 cents from a loss of 20 cents per share in the second quarter.

SunPower Corporation (NASDAQ:SPWR) was amongst the first few companies to realize the importance of solar storage and expects 30% of its modules shipments in USA residential markets to ship with integrated microinverters in 2016. Solar energy is becoming more and more mainstream each day as prices have become competitive with fossil fuel. Luckily for SunPower Corporation (NASDAQ:SPWR), its DG business has a better global reach and should be less affected. For the third-quarter, the company reported revenue of $729.3 million and net loss of $40.5 million. The stock has a mean recommendation of hold. However, the aggregate value of hedge fund holding in this stock declined by a massive 64% to $52.5 million in the third quarter. Kenneth Tropin’s Graham Capital Management held 5.665 million of the company’s shares.

 

Solaredge Technologies Inc (NASDAQ: SEDG) successfully ousted Enphase Energy Inc. (NASDAQ:ENPH) and SMA Solar from their top positions, deploying 1.3 GW of inverter power in 2015, up from 600 MW in 2014. North America is the largest market for the company’s products and the company is expecting a big market in Australia and Germany for its StorEdge solution. Bulls are of the opinion that Solaredge Technologies Inc (NASDAQ: SEDG) is one of the few companies in the solar industry to have a technology edge as others are mostly commodity players competing on price. 20% of the company’s float as of September 30^th was held by 12 hedge funds that we track, a number which remained constant quarter over quarter. With that said, the value of their holdings declined by $27.6 million to $135 million in the third quarter.

SunEdison Inc (OTCMKTS:SUNEQ), a previous leader in the renewable energy space, is now a shadow of its former self. The stock was punished as a result of the company becoming too aggressive over its expansion strategy. As the solar industry is highly capital intensive, SunEdison Inc (OTCMKTS:SUNEQ) dramatically increased debt to finance expansion. As a result, investors became wary of the stock and started questioning its credibility. Appaloosa Management’s David Tepper, who happens to own large number of shares in SunEdison Inc.’s (OTCMKTS:SUNEQ) yieldco TerraForm Power Inc. (NASDAQ:TERP), started a public battle against the company’s management. The company finally filed for bankruptcy in April 2016.

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