Suntech Power Holdings (STP)

Suntech's placement in China gives it a production advantage, as it can take advantage of low-cost labor and low regulation to create low-cost products, making it more price competitive than Japanese or European manufacturers.

Suntech Power (STP) was another bright star in any portfolio with the stock posting a gain of 42.89% in August and registering a gain of 84.38% since over two years ago. The company reported a 58% jump in quarterly earnings, beat the top end of its revenue guidance with a 51% year-over-year increase to $480.2 million, increased its 2008 revenue guidance to a range of $2.05 billion to $2.15 billion and increased the conversion efficiency of its panels. Despite the recent run-up. It posted for a gain of 151% on 11/8/2007 over a period of a year.

The advent of environmental issues as a major source of consumer and citizen concern is driving businesses and governments all over the globe to look for cleaner ways of producing energy; Solar energy is one of the cleanest forms, placing Suntech and other solar energy firms in the foreground of this new paradigm.

Suntech's acquisition of MSK has allowed it to penetrate the Japanese market for solar energy and China's short-term resolve to add clean power to its energy mix has allowed the company to take advantage of its status as China's premier solar manufacturer; its ability to produce cutting-edge PV equipment with high efficiency ratings and low prices gives it a competitive advantage in the expanding Asian market

Look at SPWRA/B for the first part of this article. (Source Bapcha's Stocks)

Pick #2 SunTech Power. STP makes PV modules. In fact, Akeena Solar’s Andalay Panels are based on SunTech’s panels. Unfortunately, as an installer, AKNS is beyond the scope of discussion in this article. I picked STP ahead of FSLR - as STP’s manufacturing costs are similar to that of FSLR’s - despite the fact that SunTech uses Silicon. Added to the fact that silicon prices have nowhere to go except down, SunTech can easily increase their gross margins from the current mid-20’s in % to about 34%. SunTech’s current relative valuation (in light of its projected growth rate) is even cheaper than SunPower’s. STP at $10.10 is valued at 1.1x TTM sales, and a TTM PE of a little under 9. That is cheap for a company projected to grow at over 20% for the next five years, and one that currently is the lost cost leader in the world of integrated PV module manufacturers.

STP is speculative stock with high volatility. It has dropped ~50% in value since Jan. 3rd 2008 ($88). The play is similar to FSLR which has had mood swings ranging from ~$267 to ~$167 and back to ~$228 in span of 45 days. STP is good option play (CALL only), their results are going to be announced on Feb. 20th, and given how demand for energy is rising, it won't be long until STP stock reaches three figures. Remember, STP is "sector" play and not "stock" play.