It's time for smart investors to plug into solar power

Now that you've blown your next two years' bonuses on subprime mortgages and homebuilder stocks, you need a recovery strategy.

Look no farther. Solar power.

It's irresistible. You can recoup your losses and fight global warming at the same time. Companies that make equipment to convert sunlight into electricity - rather than by producing it with coal and natural gas that pollute - are already profitable. No gambling on an unknown startup.

First Solar Inc, a Phoenix-based company that makes modules used in solar panels, reported its third-quarter profit was up 10 times to $46 million, or 58 cents a share, as sales more than tripled to $159 million.

Demand for solar equipment is growing at an annual rate of 40 percent. Google Inc, the Internet search engine company, just announced it would spend hundreds of millions of dollars to develop alternative forms of energy such as solar power. It plans to reduce the electricity costs of its power-hungry computers and sell cheaper energy to others.

While solar equipment, like any new technology, is relatively expensive, subsidies from national and state governments make it affordable for business and homeowner customers and profitable for the manufacturers.

So profitable that First Solar, which went public a year ago at $20 a share, closed on Wednesday at $215.88. The company now has a total stock market value of almost $17 billion, exceeding that of either General Motors Corp or Ford Motor Co.

If you don't think that's a big deal, consider that the solar company's value isn't that far behind the $23 billion number for NYSE Euronext, which owns the world's biggest stock exchange and has been a hot stock much of this year.

You can play sun power all over the world. Q-Cells AG in Thalheim, Germany, reported third-quarter profit of 34 million euros and this month forecast 2009 sales of 1.7 billion euros, compared with 540 million euros in 2006. Q-Cells, which makes the solar cells that make the modules that make the panels, is even more inviting if you think the euro will continue to rise against the dollar.

Demand for solar equipment may be just beginning to grow. Increased sales will help manufacturers bring down their unit costs.

The price of refined silicon, a key ingredient for solar products, should decline as the capacity for making the material grows.

Solar stocks aren't for the fainthearted, though that won't bother you. Skeptics will advise against buying First Solar or, say, SunPower Corp, a Sunnyvale, California, maker of solar panels that stands to get as much as $190 million in financing from Morgan Stanley, even though they are both in the black.

First Solar trades at 288 times earnings in the latest 12 months, SunPower at 275 times, while the price-earnings ratio on Google, everybody's favorite speculation, is 56.

Don't listen. After all, based on estimated profit for 2007, First Solar's P/E is a mere 170, SunPower's 98.

Oh sure, there's also a chance you might bet on the wrong company. Some upstart may develop superior technology. Or solar power may never be profitable without government handouts. Ethanol as an alternative energy has had a rocky road.

Forget the warnings. You can be partners with Al Gore and the kids at Google - and you need a winner. Leap for the sun.

David Pauly is a columnist for Bloomberg News. Opinions expressed are his own.

(China Daily 11/30/2007 page16)