Time Is Energy

Some beaten down tech stocks I think will bounce

Looking over the wreckage of my portfolio this weekend, a couple things stand out (other than all the red ink).

1) Solar stocks have been clobbered in the past 6 weeks; most are down 50+% from where they started the year. I think this selling is overdone. While they may not recover all this lost ground this year, I'm fairly certain that in 6-9 months time they will 30-50% higher than they are right now. The lower dollar will help US companies selling into European countries especially, Germany, Spain and Italy, which are the largest and fastest growing solar markets respectively.
Individual US companies in the solar space include SunPower (SPWR--$65.7) which is the largest manufacturer and installer of panels in the US; First Solar (FSLR--$205) which is the fastest growing panel manufacturer and possibly the low cost supplier with its thin film CdTe technology and Evergreen Solar (ESLR--$9.6) which is just turning its attention to increasing panel production in the US with its promising "string ribbon" technology for making solar cells using less silicon. I own a 200 shares of ESLR and 150 shares of SPWR.--Full disclosure.

Finally if you prefer to buy a basket of stocks, PBW-$20.7 (Powershares WilderHill Clean Energy Fund) is a way to get exposure to the clean energy sector (all of stocks I mention and a few dozen more) without relying on any single company...but be warned that the entire sector is volitile and seems to trade up and down in unison.

2) Nortel Networks (NT) has put in a thoroughly dismal performance the past 12 months (-75%) and the stock is down 25% in the past week alone. Nevertheless I think the stock has become seriously oversold...I "doubled down" on Friday buying more NT with shares trading about $8.70. The company has annual sales of $10.5billion, a $3.8 billion market cap and $3.2 billion in cash (meaning $7.40/sh in cash). While I'm not expecting a miracle, if over the next year NT can regain what it has lost in the last 3 months (in terms of share price) it will be a double. I'm looking for NT to be up 50% in 6-9 months.

FWIW, I know the markets in general look terrible right now, the credit crunch is worrying as it is hard for an "outsider" to calculate its impact. Things can always get worse especially in the next month or two as the magnitude of the economic slowdown comes into better focus. Assuming the slowdown/recession is not protracted, by late spring I expect the markets will begin to look past the slowdown and bid up share prices. So no need to "pull the trigger" immediately, but remember that the time to buy is when everyone else is selling.

Edit 3pm 3/4/08: I bought NT a few days too early--it happens. NT closed ~$7.75 per share...I'm only updating this because according to NT's recent filing they have $3.6 billion in cash, and the market cap is now under $3.4 billion.

posted by Daniel @ 3:57 PM