Welcome to Progressive Investor/ June 2010!

This is our last issue before our summer break. We'll send a mid-summer update, and the next full issue in September.

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Have a wonderful summer and hopefully we'll see this oil spill stopped!!

Upcoming Investor-Related Conferences: 

June 29-30, New York City
7th Renewable Energy Finance Forum- Wall Street

June 30-July 1, Brussels, Belgium
AEBIOM European Bioenergy Conference & RENEXPO® Bioenergy EUROPE

June 30- July 1, San Diego, California
Charged2020: The Global Energy Storage Forum

July 6-7, London, UK
Wind Power Finance & Investment Congress

July 12-15, Jakarta, Indonesia
Green Investments Summit Indonesia

July 19-21, Cleveland, Ohio
Freshwater Wind 2010

August 10-12, Boston, Massachusetts
Canaccord Genuity 30th Annual Growth Conference

August 31- Sept 3, Shangri-La Kowloon, Hong Kong
Clean Technology World Asia

See all the Events.

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Enjoy and Learn!

News Highlights

It's no longer news that China is outspending the US on clean energy investments, but we thought the US was catching up through the Recovery Act.

Private investments in Chinese renewable energy hit $34.6 billion last year, almost double the U.S. figure of $18.6 billion, according to a  Pew Environment Group report. The Chinese government plans to invest $216 billion over the next five years compared to $80 billion in the US, which now trails Turkey, Brazil, the UK and Italy.

Countries with leading clean energy sectors as a percentage of their economy have all implemented energy and climate policies. The US lags because of the lack of policy frameworks, financial incentives, priority loans, mandated clean energy targets, and other factors.

The good news is that we're still at the heart of cleantech innovation. The U.S. leads G20 countries in venture capital and private equity investments.

The report points out that one reason for China's leadership is its ability to force re-location or buy land for wind farms anytime while the US has to go through a long legal process. And China doesn't have an Endangered Species Act.

But there's more to it than that. Even the $80 billion investment the US made in cleantech through the Recovery Act hasn't reached the industry.

Out of the $36.7 billion allocated to the Department of Energy (DOE), for example, only $4.5 billion has actually been spent, reports Ardour Capital. $2.1 billion of that is cleaning up nuclear waste and $1.3 billion is for state governments for Energy Efficiency Conservation Block Grants, weatherization assistance, and state energy programs. States haven't spent much of that money yet because of delays associated with budget shortfalls and, says Ardour, they're likely siphoning off some of that money for other programs.

$11.5 billion has been awarded to directly fund cleantech companies but that money hasn't been dispersed. Smart grid companies will benefit, however, because utilities are getting $3.9 billion in matching funds to spend on smart meters and demand response.

The loan guarantee program is sitting on $3.9 billion in funding to support $34 billion in loans to cleantech companies. 99% of the funds haven't been spent and Ardour doesn't expect them to be spent well into 2011. Solyndra is the only company that's received a loan; six others have been conditionally approved. Ardour attributes the delays to lack of due diligence expertise among staff, stringent credit requirements, and mandatory environmental studies that move at a snail's pace.

The bright spot for cleantech is the Treasury Department grant program, which exempts renewable electricity project developers from many of DOE's most burdensome requirements. $3.6 billion has been granted to 671 projects since August 2009, benefiting companies like Iberdrola Renovables and EDP Renovaveis.  

Company Updates

South Korea's largest conglomerate Samsung Group announced it will invest $20.6 billion by 2020 in new cleantech and health care businesses. Samsung Electronics (005930.KS) has aspirations to be the largest solar company in the world by 2015, and recently committed $6.6 billion to wind and solar investments in Ontario, Canada. Samsung also wants a major presence in battery cells and LEDs.

Last summer, South Korea announced it would invest 2% of annual GDP on cleantech industries over the next five years and LG Group, another large conglomerate there, plans to invest about $18 billion over the next decade to establish cleantech businesses.

Financial market operator IntercontinentalExchange (NYSE: ICE) is acquiring Climate Exchange (CLE.L) for about $600 million. Climate Exchange owns European Climate Exchange, a primary market for EU emissions trading, and the Chicago Climate Exchange in the US.

BYD Company (BYDDF.PK), the Chinese battery and automaker backed by Warren Buffet, is locating its North American headquarters in Los Angeles. They say they'll start selling all-electric hatchbacks to US fleet operators later this year and to the public in 2011. BYD also plans to base a solar-panel division there and has plans to make batteries for US utilities. (See our profile on BYD in Issue 69).

Switzerland-based ABB (NYSE: ABB), a world leader in transmission infrastructure, is getting into the energy management/smart grid side of the business through a $1 billion acquisition of Ventyx. The Atlanta, Georgia-based company's software helps utilities and grid operators forecast electricity needs. One application can match electricity generation with consumption down to the individual household and can help integrate large amounts of intermittent wind and solar energy.

Some of the big capital raises on the private side include California's Solaria, which raised $45 million to meet increasing demand for its proprietary concentrating PV modules, used for ground-mounted tracking systems. Norwegian electric car company Think raised an additional $40 million and plans to launch its Think City vehcle in the US later this year.  

Netherlands-based LED lighting maker Lemnis Lighting raised $37.5 million in a Series D round from undisclosed African investors. The company, which also has an office in San Francisco, is known for its LED retrofit lamps, branded Pharox. The investment values the company at $170 million.

Cambridge, Mass-based Joule closed a second round of $30 million for its process that uses microorganisms to convert sunlight and waste carbon dioxide into liquid fuel. Diesel fuel production is scheduled to begin in 2012. If successful, Joule could leapfrog biofuel companies which depend on large quantities of biomass for fuel production.


Netherlands-based Sensata (NYSE: ST), raised $569 million in the biggest IPO this year. Sensata makes sensor and control technologies for alternative fuel vehicles and solar panels. The largest cleantech IPO of 2009 was China Longyuan Electric Power Group, which raised $2.23 billion on the Hong Kong exchange.

JinkoSolar (NYSE: JKS), based in China, also listed on the NYSE, but got a lukewarm reception. The company, which makes silicon wafers, cells and solar modules, raised $64.3 million. Jinko has a deal to sell into North America in addition to its markets in Europe and China, and plans to reach 500 MW of production by year end, up from 200 MW.

After two years without any biofuel IPOs, bio-catalyst development company Codexis (CDXS) listed on Nasdaq and biodiesel producer Biox (TSE:BX) listed on the Toronto Stock Exchange.  Amyris Biotechnologies, which recently raised $80 million in private equity, filed for an IPO and Gevo is preparing to register. Given the aggressive mandates of the US Renewable Fuel Standard, there will be more IPOs in the next several years.

China's Xinjiang Goldwind Science & Technology Co, a leading turbine manufactuer, is planning a $1.2 billion public offering on the Hong Kong exchange.  The company's shares trade in Shenzen, where they have gained 27% this year.  Goldwind's profits are forecast to rise almost 40% this year to $351.4 million, and another 26% in 2011.

And China Huaneng Group, the country's largest power producer, plans to float shares of its wind energy unit in a $1 billion IPO in Hong Kong this year.

Almost half the companies that had IPOs last year were in China, according to Cleantech Group. There were 11 IPOs in the last quarter of 2009 alone, raising a combined $3.1 billion.

Another upcoming IPO is Zipcar, which runs car sharing services in urban areas and college campuses across the US. , Canada and the UK.  While it has the most name recognition among car-sharing companies, Zipcar still isn't profitable. It's planning to raise $75 million in the IPO.


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Status of Solar Industry & Stocks

Although you'd never know it from the solar sector's stock performance, solar grew dramatically in 2009 worldwide and is having a strong 2010.

In 2009, about 7300 MW of solar PV was installed, up 20% from 2008, for a total of 6.43 GW - enough to supply electricity for 5.5 million households each year. Also, 127 MW of solar thermal plants came online, bringing the world total to 613 MW. Solar meets about 1% of electricity demand in Germany and over 2% in Spain.

The PV industry generated $38 billion in global revenues in 2009, while raising over $13.5 billion in equity and debt, up 8% on the prior year. European countries accounted for 4.75 GW, or 74% of world demand; the US was third largest, growing 36% to 485 MW.

With few exceptions, solar stocks have been on a roller coaster the past year. The sector dropped 21% in May after a single digit decline in April. Investor interest cratered as the Euro currency crisis unfolded, adding to the volatility over the past year because of anticipated subsidy cuts in Germany and Spain.

We've written about the huge influx of solar firms - there are now over 190 cell and module makers, making consolidation inevitable for weaker players. The silver lining is that overcapacity and intense competition creates downward pressure on prices, which is accelerating grid parity for the cost of solar to the 2013 timeframe in many markets.

Pike Research forecasts that worldwide solar demand, driven by lower costs and greater availability of credit, will increase to 10.1 GW in 2010, an increase of almost 43% year-over-year, and to 19 GW by 2013, a 25% compound annual growth rate (CAGR) from 2010. Germany will continue to see steady growth, but the biggest markets will be the US and China. The most important differentiators for successful solar companies will be: (1) low cost per watt, (2) module efficiency, and (3) moving down the supply chain to provide "one-stop shopping."

Situation in Europe

Germany has been planning to reduce its historic feed-in subsidies 15% on July 1, but that doesn't look like it's happening. Any delay or reduction in subsidy cuts should be a significant catalyst for solar stocks. 

On June 4, Germany's upper house of parliament blocked the proposal to cut subsidies 15% and is instead pushing for a 10% cut later in the year.  German states banded together to curb the cuts to save jobs and on concerns about future investment in the sector. The amended bill now goes to a reconciliation committee which meets in July, pushing off the cut at least until September.

Installations are surging ahead of the cut as people capitalize on government benefits before the rebates decline, and there should be another bump in Q3 anticipation of a 2011 cut. Germany could account for over 40% of the solar market in 2010, installing 7-8 GW (a 78% increase), according to Ardour Capital. Their global forecast for the year is 11.5 GW, with 5 GW in Germany. The boom should continue into 2011 when Germany will have a massive 9.5 GW installed, making fears of a collapsing market there unfounded.

Spain's National Energy Commission is still debating how much to reduce feed-in tariff rates, but it could be as much as 45%. Since Spain accounts for just 2% of global PV installations, the outcome isn't expected to have a material effect on the global solar market. 

Uncertainty about feed-in cuts in Italy and France for 2011 could also spur strong demand in 2010, mirroring Germany's situation. Other European countries are prime markets for growth, along with the US and China.

China is expected to be the largest solar market by 2015 although the country is re-thinking its feed-in law. China has invested over $1 billion in solar and wants to prevent the market from over-heating. Suntech (STP), China's largest solar PV manufacturer, estimates domestic sales will account for only 5% of 2010 sales, whereas 85% will be in Europe and North America.

Ardour Capital expects the US market to double in 2010, adding about 1 GW of new capacity, and projects capacity to grow from 2 GW in 2009 to a blockbuster 11 GW by 2015. Strong demand should keep prices from declining further this year, another concern for investors.

Solar Stocks

While selling could continue in the near term, investors may want to allocate some long term capital to stocks that are now at historically low levels. Stocks will rebound as economies recover and oil prices rise.

Beneficiaries would be module manufacturers First Solar (FSLR), Trina Solar (TSL) and SolarWorld (SWV.DE), which we've been recommending for the past year. SAG Solarstrom (SAG.DE) stands out on the developer side and Power-One (PWER) is leading on inverters.

Based in China, Trina stands out because of its strong balance sheet, low cost structure, high efficiency panels and strong presence in China and the US. Trina nearly quadrupled shipments in the first quarter, and forecasts strong growth through 2010, particularly in the US.

Trina has grown 15+% a year for the past six years. It makes the second-most efficient PV cell (after SunPower) for just $0.78 per watt, among the lowest cost in the industry. This has resulted in significant profits with margins over 30%. First Solar is the only solar company with lower costs because it uses recycled cadmium telluride for its thin film cells instead of silicon.

Although Trina did 90% of its business in Germany and Spain in 2009, it's quickly diversifying into the US, China and other emerging markets. About 30% of sales will be in Germany this year. German subsidies allow Trina to cut prices even more and while the decline of the Euro is worrisome, the company can compete even in a tough market. When the European market stabilizes and they further diversify, their prospects are very bright.

First Solar, the world's largest solar firm, remains best-in-class in 2010 and is benefiting from an improving industry outlook. Manufacturing process improvements and recent price stabilization have helped preserve its strong margins despite dramatic cost competition from Chinese players.

The company is doubling its capacity in Germany, from 223 MW to 446 MW by late 2011. The expansion is valued at $250 million in revenue and brings its total capacity from 1.3 GW today to 2.1 GW in 2012. The announcement demonstrates the strength of the German solar market, and although about half First Solar's sales will remain in Germany, it's also expanding into the US, France and China. For more on First Solar, see the SB20 profile in issue 64.

Ardour Capital believes First Solar is most insulated from the Euro in the solar group because of its low cost structure and that Chinese firms generally are most at risk. 

SolarWorld, with its top brand, is the best positioned solar company in the coveted German rooftop market. Its strong balance sheet and vertically integrated facilities in Germany and the US differentiate it form its peers.

Solar plant developer SAG Solarstrom is Ardour Capital's top pick among the European companies. SAG reported record profits in 2009 and proposed its first dividend. It has the lowest exposure to the Euro - international sales grew 60% year-over-year by making strong inroads in the robust Czech Republic market.

Inverters are in short supply right now and Power-One is selling them as fast as they can build them. They're increasing capacity to 3 GW by the end of this year - this should be a break-out year for them.

Research firm Canaccord Adams came out of a meeting with solar industry representatives this month feeling "incrementally positive on the solar sector." After talking with installers, developers and wholesalers they see the rest of 2010 shaping up better than anticipated. Every module maker says they're sold out for the year and developers seem to have access to financing and aren't delayed scheduled projects.  

European institutional investor demand for completed projects remains very strong, not only at today's abnormally high rates of return, but even at reduced returns implied by subsidy cuts, given the stability of a PV project's fixed income stream relative to other European fixed income investments at this time.

Prices for modules are up over the last quarter and given the strong demand and sold out supply, may rise further in the third quarter. Tier-1 Chinese modules are increasingly becoming undistinguishable from top European suppliers in terms of bankability and module quality. Foreign exchange is still a major risk for solar firms, but some have been able to re-negotiate agreements from Euro to US dollars.


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Status of Wind Industry & Stocks

After a strong 2009, the problems associated with the recession and lack of a US energy policy caught up with the wind industry this year.

Wind supplied 2% of the world's electricity in 2009. Even during the dog days of the recession, wind installations charged ahead 31%, ending the year with a breathtaking 38,343 MW in new capacity for a cumulative world total of 158,505 MW. It was the highest growth rate in the last eight years.

Also of note, China surpassed the US as the largest wind turbine market, installing 13,803 MW, reaching a total of 25,805 MW. China accounted for over a third of the world's wind installations in 2009, more than doubling its cumulative capacity for the fourth consecutive year. The US also had a record-breaking year, installing over 10,000 MW.

China introduced a feed-in tariff for new onshore wind plants, but because of inadequate transmission capacity about 25% of its existing wind capacity has yet to be connected to the grid.

To remedy this lack of oversight, China's National Energy Board announced in late April that 11 provinces must dovetail renewable energy installation schedules - which are mostly wind - with related transmission infrastructure development. The schedules will be used to set targets through 2015 and to choose which projects are eligible for national subsidies.

India became the fifth largest wind producer in 2009. India and China now serve 29% of the world market, with 4 of the top 10 turbine manufacturers.

Not So Good in 2010

As 2009 progressed, however, it became clear the wind industry was living off orders from the previous year and that headwinds were in store for 2010.

Poor project financing conditions in 2009 meant few orders this year. A meager 539 MW was installed in the US during the first quarter of 2010, the lowest levels since early 2007.

In addition, the American Wind Energy Association (AWEA) attributes the slow-down to low energy demand, low natural gas prices and a lack of long-term market signals. On top of that, there's increased competition, over-loaded inventories and pressure to reduce prices. IHS Emerging Energy Research expects the U.S. wind industry to add only 6300 -7100 MW in 2010.

"2010 marks the first time since 2004 that the U.S. wind industry will not surpass the previous year's growth level. Despite unprecedented federal wind incentives, reverberations from the financial crisis continue to create a difficult near-term market landscape especially in light of continued energy policy uncertainty," IHS Senior Analyst Matthew Kaplan said.

In a 2010 U.S. Wind Industry Monitor opinion poll (conducted by Droege & Comp), wind executives say lack of financing (72%), lack of national energy policy (67%) and lack of transmission (54%) are "important" or "very important" obstacles to industry growth.

Heightened transmission congestion and waning utility demand for wind are straining growth in traditional wind hot spots including Texas, Minnesota and California, forcing developers to go to states with less prolific resources and more arduous development conditions. Low energy prices have led to waning interest among utilities, making power purchase agreements difficult to get signed.

A national renewable energy standard or federal energy policy legislation and streamlined transmission siting are essential for the U.S. wind market going forward.

On the supply front, the sudden drop in turbine demand and increased competition has created a buyer's market. Thus, turbine manufacturers are focused on lowering costs through technological innovation.

Last month General Electric introduced a full service agreement, Siemens showcased its next-generation turbine design using direct drive technology, and Vestas rolled out two new models to capture lower wind speeds.

In anticipation of better days ahead, nuclear giant Alstom (ALO.PA), Mitsubishi Heavy (7011.T), and A-Power Energy (Nasdaq: APWR) are building manufacturing plants in the US.

Longer Term Prospects Still Bright

Despite these near term challenges, most wind executives believe U.S. business will grow in 2010 (69.6%), 2011 (83%) and 2012 (84.6%). More aggressive sales and marketing efforts in the US will be the dominant strategy for most respondents, according to the 2010 Wind poll.

The Global Wind Energy Coalition (GWEC) expects the North American market to grow steadily for the next two years and then accelerate in 2012. GWEC forecasts that 63 GW of capacity will be added in the US and Canada over the next five years, an average of 12,600 MW per year. Globally, they anticipate average annual growth of 21%, resulting in global wind capacity increasing from 158.5 GW in 2009 to 409 GW by 2014.

Since much of China's capacity will be supplied by domestic manufacturers, European producers such as Vestas and Gamesa may capture only 15-20% of the market. In 2009, Vestas' revenues from the Asia region dropped 20%.

General Electric, the world's second-biggest turbine maker, expects global sales for land-based wind turbines to grow by $130 billion in the next two years. Rapidly growing markets include: Canada (40% compound annual growth);  Latin America (70%); Eastern Europe (28%); China and India by 20%. Offshore turbines are expected to increase by about $100 billion during the next 10 years.

Lastly, utility Sempra Energy (SRE) is doing its part to sustain the North American wind industry. The company plans to build a massive, $5.5 billion wind farm in Baja California, with about 1200 MW in capacity. And Google (GOOG) is investing $38.8 million in two North Dakota wind farms, its first direct investment in utility scale renewable energy.

Wind Stocks

For now, stock pickers do have wind companies to be bullish about. Companies we've written about over the past year continue to do well. Spain-based project developer Iberdrola Renovables (IBR.MC) reported strong Q1 results because of stable electric prices and new capacity. 93% of its production for 2010 is covered by feed-in tariffs.

Germany-based project developer PNE Wind (PNE3.DE) had much higher than expected Q1 results. Excess turbine inventory may be bad for manufacturers but it benefits developers through lower prices.  2010 should be a good year based on onshore and offshore projects.

Germany-based turbine manufacturer Repower Systems (RPW.DE) saw a 27% increase in profits y/y with margin growth. Unlike its peers, orders are increasing and the company announced a dividend of €1.57 per share for 2009/10. The former CEO of Siemens Wind Power joined Repower, a positive development. (See price targets in our Stock Rating section at the end of this newsletter).

Other promising stocks for Q3 and Q4 are US-based Western Wind Energy (WND.V), a small, growing wind farm developer in California and China-based A-Power Systems (APWR) as it aggressively moves into the U.S. market.

American Superconductor (AMSC) just announced a partnership with Korea-based Hyundai Heavy to jointly develop a 5 MW offshore wind turbine and continues to benefit from its close relationship with rapidly growing Chinese turbine manufacturer Sinovel.

Sinovel placed a $445 million follow-on multi-year order with AMSC to supply core electrical components for 1.5 MW turbines - enough for 10 GW of turbines. The two companies are jointly developing a range of advanced, multi-megawatt wind turbines for Sinovel.

Sinovel is China's largest turbine manufacturer and holds the third largest market share in the world - it expects to be the world's largest within the next five years. The company is planning an IPO on the Shanghai Stock Exchange later this year.

Sinoval has competition from China Longyuan Power Group Corp (0916.HK), which as similar aspirations. Longyuan intends to spend $13 billion over the next five years to install a minimum of 16,000 MW in China and abroad. That would elevate Longyuan from the world's fifth largest producer to the top position. In December 2009, it raised the equivalent of $2.2 billion on the Hong Kong exchange in one of the largest cleantech IPO's in history. 

Top Wind Mfr 2010


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Market Commentary

The world feels out of control right now between the uncontrolled oil spill, the fiscal crisis in Europe, a shaky economy, and a volatile stock market. Concerns about Greece, Spain and Portugal drove the market down last month, making it one of the worst Mays in nearly 50 years - the market dropped 8%, leaving the S&P down 5% and the FTSE100 down 10% for the year.

True to form, green stocks were crushed in May.  Solar stocks, for example, gave up about 21%. The WilderHill New Energy Global Innovation Index (NEX), which tracks clean energy stocks worldwide, is down nearly 30% for the year. Investors lack confidence that debt-strapped governments will be able to maintain financial support for renewable energy. Cheap oil and natural gas prices don't help.

Before the May crash, we saw generally strong corporate earnings in the first quarter and US equities climbed for 13 months to top 11,000 - to summer 2008 levels. Choppiness began in April in reaction to debt rating downgrades in Europe and the SEC charge that Goldman Sachs defrauded investors. The US economy grew 3.2% as citizens boosted spending by the most in three years.

Among the few stocks that rose lately are Calgon Carbon (CCC), a water company up 21.45%; Romag Holdings (ROM), which makes laminates for renewable energy, up 17.9%; Brazilian ethanol producer Cosan (CZZ), up 60.8%; and Power-One (PWER), which makes energy-efficient power conversion and management solutions, up 88%.

But let's put this in perspective: in early 2009, the consensus was that stocks would fall across the board because of the broken financial system. Yet, investors enjoyed extraordinary results. This year, the consensus view shifted toward strong gains which resulted in an over-valued market. In 52 days, equity prices rose 15% without a hiccup.

Before the May drop, the atmosphere was giddy, a sure sign we were nearing a correction (read our past commentaries!). Classically, as prices rise, investors become over-confident - the  sentiment among "Dumb Money" (analyst lingo for the "little guy") became wildly bullish as they poured money into the market. Sideliners and naysayers finally entered and put their cash to work - the set-up for a correction. Even without the string of world events, the market would be strong, but tired, and unable to move up again without a correction.

Since the beginning of this bull market in March 2009, there have been two meaningful corrections, both between 5-10% (June-July 2009, January-February 2010). This historically indicates a healthy unfolding stock market; a market that marches straight up indicates danger ahead. No bull market in the past 80 years has reached a top without a correction of 10% or more - after that there's typically another move up before the bull market ends.

The US market just experienced its first correction in excess of 10% since the March 2009 lows.   On average, there are six corrections of over 10% during a bull market. If the longer term uptrend isn't broken, we can expect both higher highs and more 10% corrections in the months to come.

We interviewed portfolio manager Sam Jones, to further understand current market conditions and how investors should participate.

Sam Jones:

Last week felt terrible as it always does near the end of a brutal correction. On one bone crushing day, 99% of all stocks fell in price, but technical indicators show we hit bottom and we can look forward to a break upwards. We're now 35% in cash, 25-30% in short positions and continue to hold a core group of stocks that show good relative strength. 

In late April, investor sentiment was 78% bullish about the future. Now that the market dropped that sentiment turned very sour - only 33% bulls. This is the lowest level since the very deep dark price lows in March 2009.  That means we should put our contrarian hat on and be prepared to add stock exposure in the coming days on the basis that this correction is largely over.

The S&P 500 has room to run higher based on strong corporate earnings and, as I've said for many months now, I'm looking for the market top at 1300-1350. July will be a real test for stocks, but in the absence of negative news, we only have a fairly valued market trading at a discount to look at between now and the end of the quarter.   

PI: What do you see in your crystal ball longer term?

Sam Jones:

Hard to believe, but I think we have to prepare for the possibility of deflation. If that scenario occurred, we'd be operating in an environment that few people have experience in. We've been operating in a zero to positive inflation environment for over 80 years; it's never slipped into negative territory except for the last half of the 1930s to about 1942.

When deflation sets in, prices erode and commerce basically stops. People don't buy anything because they're waiting for a lower price tomorrow. People don't seek loans, housing slides in price and deals aren't made.

PI: Why do you see this happening given that the housing market is rising and manufacturing is up?  

Sam Jones:

That's hollow economics. Manufacturers are re-stocking inventory and there's some spending, but nowhere near enough to jumpstart the economy. Unemployment is less worse. Banks still have a lot of bad debt on the books they aren't writing down. We still have a huge pray and delay policy in place.

Yes, we're better off than we were a year ago, but remember, the stock market sniffs out trends six to nine months in advance. Take March 2009 as an example - the stock market bottomed when everything was dark and scary.  

For now, I think markets will go higher, but the kind of volatility we're seeing is typical when we near the apex of a broader topping cycle.

PI: When do you see the bull market topping out?

Sam Jones:

My target is still 1300-1350 on the S&P, a healthy move of 15% if we make it that far. The market could turn bearish either in late July or sometime in the third quarter.

The downside won't be catastrophic like in 2008, but we could lose half of what we've gained since last year's March lows.  A 30% wipeout - down to 875 - would be a typical retreat.

I don't know how it unfolds, but market indicators and sector rotations are screaming that we're entering a deflationary cycle: the long bond, the total failure of the commodities complex - everything took out the lows. Commodities - including renewables - never really rose and are almost back to the June lows of last year. When you see a failure in commodities, with the exception of gold, there's no demand and no pricing power, which in itself is deflationary.

PI: Don't commodities drop harder when the overall market declines?

Sam Jones:

Yes, there's more volatility in commodities, but this pattern is abysmally worse. Most peaked at the end of 2009 and instead of participating in the February to April rally they went flat. Now they're experiencing downside volatility.

I categorize renewable energy as a commodity because you can overlay any cleantech ETF right over the commodities index. You get higher highs and lower lows in cleantech, but the correlation is very high. Renewables are even more speculative than commodities these days.

There is a silver lining though. Investors that have money to invest can get another round of great buys in cleantech stocks. Hopefully your readers sold during the up-cycle or by early May. We have 30% exposure to the stock market now - we have 60% on the table, but we hedged half of that.

PI: Unless you're a long term investor.

Sam Jones:

I don't know what's long term anymore. You could've sold in 2000 and you'd be better off than  today. From my perspective, you have to be active if you want to make money and keep it, especially in renewables. What can you own with a five year window that doesn't go through crazy cycles?

In the short run, renewables are down because of problems in Europe and the complex situation wind, solar and other sectors face. But if you look at the broader pattern, not what's happening this week or this month, stocks in the space are getting crushed much worse than they should. That reflects an underlying weakness in ... something. Remember, markets look forward. They're suggesting we have a deflationary cycle ahead - that's not good for commodities, including renewables, but it's good for bond holders and income producers.

One thing I'm sure of is this correction is either over or very close to over. I think we'll get a run back up to the highs. I think renewables will participate. But I'll be analyzing which sectors rebound and which don't. I won't be surprised to see commodities lag even on the rebound and when selling starts again they'll get crushed. If that happens, it adds support to my deflationary cycle theory.

The problem is that most portfolios are defending against inflation not deflation, which puts them on the railroad tracks to get really beat up. That's the portion of the market that's most likely to get punished.

The areas where I see good, continuing strength are consumer stocks, lighting and some smart grid players. Whole Foods has behaved very well through this cycle. Some of the water companies have been doing well.

PI: Which stocks are you sticking with?  

Sam Jones:

The green stocks I've stuck with are:

Baldor (BEZ): efficient motors
Johnson Controls (JCI): building controls, batteries
Philips (PHG): lighting
Westport Innovations (WPRT; WPT.TO): transportation
Cisco (CSCO): smart grid
EnerNOC (ENOC): smart grid
Itron (ITRI): smart grid
Whole Foods (WFMI): natural food
Powershares Water ETF (PHO)

Siemens (SI) had a nice run before it topped and it could go higher. Itron had a stiff correction and is worth buying into. Baldor has done great this year. I did well with NBTY and sold it before it went down.  I sold all the mutual funds and ETFs when I saw the trend downward unfolding -  they're in death spirals. The only ETF I've held onto is the water ETF.

I haven't had luck in energy storage either, but I got out before I took a bit hit. Exide, for example, is down 50% from its high as of today - these are scary numbers, nothing to do with the stock market. I'm seeing way more carnage in this space than the overall stock market.

How can First Solar be growing 20% but the stock be down 60%? SunPower is frightening at $11. I don't get it. This has got to be the best buy of a lifetime because it's unthinkable that support for renewables is waning. If we are entering a deflationary cycle where the price of oil drops back to $40, renewables could be in trouble. It would be shocking. I'm disappointed and frustrated.

But there's still time to do well buying the stocks at current low levels.

PI: Are any sectors holding their own right now?

Sam Jones:

Companies that aren't capital intensive or natural resource-based and don't have to compete with other resources the way commodities do are surviving. There aren't many.

In my core group, for example, EnerNOC provides a technical solution that's less dependent on resource scarcity - same for Westport Innovations. Software companies fall into that category - they provide low cost solutions that save people money - a good thing in current economic conditions. They seem more insulated. They're holding up and doing quite well. Green-oriented companies include AutoDesk (ADSK), Kyocera (KYO), and Power-One (PWER). Lighting companies are also doing well, such as Cree (CREE) and Veeco Instruments (VECO).

Internationals are poison right now - far worse than the US. They'll snap back, but many people have allocated too much to emerging markets, thinking they're the next great stock market play.

China is a global powerhouse, consuming everything in sight. Yes, they're growing at 8-12% a year, but does that translate into strong stock market performance?  You would think so, but actually China's acting like any other emerging country compared to the US market. They have higher highs and lower lows, and is at present underperforming the US market by about 14% since peaking in the middle of November 2009.

During long bull market expansions, investing in China (and Asia) is fine. When the trend turns down, consider selling Asian securities first because they tend to lose even more than the US market. Obviously, longer term trends in the global equities markets are very tenuous now, with the real possibility of turning down.

I've heard too many investors say if the US market goes to hell, they'll simply put their money in China as the stronger economic force. Truth is, if the US stock market caves, the Chinese stock market caves. 

PI: Given we're facing another up cycle, should people be buying now?

Sam Jones:

I do think this is a short term low and we'll get a bounce up, but the next top could easily be just 30 days away. If you're an active investor, go ahead and buy, but if you're a longer term investor there isn't much time.

If we bust out past 1250, we'll run to my target of 1300 -1320ish - then I would sell. When you reach the target, unwind the stocks you like least for cash.

The next cycle down doesn't look good. Based on the last couple years of volatility, I wouldn't be surprised to see renewables lose almost twice as much as the broad market when the decline occurs. Whatever the market does, multiply it by two. Don't wait until blood's in the streets to sell, because you'll be selling way off the highs.

If you haven't sold by now, I'd hold. Play the bounce and sell into it. Sell selectively to cut your overall exposure and trim over-sized positions where stocks have taken a big move up. I'd be shocked if we're not in full corrective mode by August - that's when the bear market begins, taking us lower into the end of 2010.

The next two bear markets won't be show stoppers in length or magnitude, but they will probably be longer than a year and the market could drop 20% with each. 

But you never know, maybe something will change - unemployment improves dramatically, earnings blow everyone out in July. It could change but right now, that's the pattern.

PI: Should people be in large caps with dividends?

Sam Jones:

Here's a conundrum: large caps do very poorly in a deflationary cycle. Most people run to them because there's a perception they're safer. In a deflationary cycle many large companies are encumbered by entitlement programs, huge capital costs, labor, operations and overhead. Small companies, on the other hand, are innovative with few capital costs and therefore fare quite well.

In the 1940s, small caps beat large caps 6-1. I'm taking that bet and angling toward small caps. That could be a boon to renewable energy and  smaller green stocks at large. If companies are truly innovative and come up with cost saving solutions for the world and they're not encumbered by heavy CEO salaries and entitlement programs, they could do very well as a flight to quality. Traditionally, many people stay away from small caps because they're more speculative, but in this kind of cycles, small wins.

The large caps to go with are companies that can adjust to changing conditions and progress during the harshest of times. Look for companies that have consistently raised dividends, even during 2009. Last year, 16% of companies on the S&P cut or eliminated their dividends, the most in its history.

People who are on board with the game of oil scarcity and natural resource scarcity won't do well in a situation of flat or no demand. Recyclers might be a good buy now, but what if we get into a deflationary cycle and steel prices keep getting cheaper?

The stock market forecasts economic events six to nine months in advance - we wouldn't be seeing this kind of selling pressure if the economy was as improving as much as you hear today. It has the looks of a potential deflationary cycle because of lack of demand, action in the treasury bond market, volatility in the stock market at this level, and a hollow economy where there's little organic growth. I don't have overwhelming evidence, I'm just opening the door to the possibility.

We should be open to the possibility of deflation and learn what that means from a portfolio standpoint. If you're not prepared and it happens it could wipe you out.

PI: What do you see for the longer term?

Sam Jones:

In terms of deflation, it would slowly manifest over the next 2-3 years.  After 2013, I'm relatively bullish on the next 10 years. One of the reasons is a cycle of innovation creeping into the global financial markets (biotech, wireless, software, renewable energy). 

The odds are in favor of a decade where returns are in excess of 100%. Besides the 2000's, which produced a negative return (-9%), the 30's was the only decade in recorded history when the S&P generated a total return loss (-1.7%).  After the 30's, the following decades produced returns of 137%, 483%, and 111%. By 2020, the market could be at least twice current levels.  

Editor's Note: It's interesting that as Sam talked about the potential for deflation, I received information about a conference, Preparing for a No-Growth Economy, an international gathering of 200 scientists, economists, and business and government leaders organized by the Global Footprint Network.

"A major correction to world GDP is inevitable," economist Hannes Kunz said. "How the world manages the transition to a no-growth economy will make the difference between whether it is a benign or a drastic correction, with per capita GDP stabilizing at levels closer to those of 20 years ago, or over a hundred years ago. Ecological economists talk about how we can rethink economic growth so we can also enable a sustainable world economy, he said. "But we don't have to rethink growth. Growth is going to go away."

"The financial claims on the world economy -- such as debt obligations, pension expectations, stocks, investments -- can only be paid back by extracting more resources and converting them into financial assets. But we have a finite amount of resources, and those resources are becoming less and less available, so we're trapped," he said, cautioning assembled experts that if this transition to a sustainable economy is not managed adequately "we won't have a chance to build something good afterward."


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Stock Ratings Update

Stock Ratings from our research partners, Canaccord Adams and Ardour Capital:

All stocks ratings are updated throughout each month. Check for updates.

When you see two Ratings, that means the rating changed from last month. The first is the previous rating; the second is the current rating, eg, Accumulate/ Buy

Currencies: "home" currencies

** foreign stocks that have US ADRs
** Best Idea Stock

Large Caps

Company Ticker Price Target 52-Week Range Rating  Target
Apple   AAPL  $292  $366  180.70-294.73  BUY  9/27/10
Google  GOOG  $503.97  $660  433.63-629.51  BUY  8/10/10
 IBM  IBM  $129.79  $150 114.39-134.25  BUY  7/20/10

Apple: target raised from $320; ramping tablet sales: increased iPad estimates
Google: mixed Q2 results; very strong mobile, display growth.
IBM: Raised 2010 guidance. Focus is on higher-margin segments, selling off less valuable businesses.

Healthy Living

Company Ticker Price Target 52-Week Range Rating  Target
Atrium Innovations  ATB.TO  C$17  C$24  11.45-17.98  BUY  3/19/10
BioExx Specialty Proteins  BXI.TO  C$2.40  C$4.10  1.18-2.38  Speculative BUY  9/7/10
Cereplast  CERP  $3.22  $6  2.78-7  BUY  8/17/10
GLG Life Tech  GLGL  $7.34  $11  6-12.45  BUY  4/27/10
Green Mtn Coffee GMCR  $31.40  $40  18.11- 33.20  BUY  8/10/10
Hain Celestial  HAIN  $22.16  $26  14.45-23.56  BUY  6/18/10
Jamba Juice  JMBA  $1.98  $3.50  1-3.83  BUY  8/18/10
Martek BioSciences MATK  $22.84  $26  17.09-25  BUY  9/24/10
Medifast  MED  $32.79  $40  6.36-36.58  BUY  5/6/10
NBTY  NTY  $54.09  $55  31.80-54.50  Tender  8/10/10
SunOpta STKL; SOY.TO  $5.77  $6.50  2.65-5.84  BUY  8/18/10
United Natural UNFI  $34.13  $38  23-36.35  BUY  9/9/10
Whole Foods WFMI  $36.48  $47 24.94-43.18  Hold/BUY  8/10/10

Atrium: price target raised from $19. Q4 revenue increased 33%, beating estimates; strong internal growth and acquired Trophic Canada, a leading natural nutritional supplement mfr.
BioExx: completed first production run, proving process works at commercial scale.
Cereplast: raised equity round, eliminating concern for cash flow. Solid base for growth.
GLG: strong 2010 expected; nearing EU approval for stevia.
GMCR: strong Q3; 0+% EPS growth through 2011 at minimum.
HAIN: raised estimates based on 2 acquisitions and expected growth in Europe.
Jamba: in the process of a turnaround, but long term prospects look good.
Martek: humming along with higher margins; long-term extensions with major infant formula customers, more expected.
NBTY:  agreed to be acquired by Carlyle for $55/ share.   
SunOpta: entering its most volatile quarter, but estimates raised for the year on strongest margins in its history ad category growth.  
UNFI: market leader in growing category with ample room to grow share; acquiring long sought Whole Food's internal distribution system.  15% earnings growth forecast.
WFMI: target raised; opportunity to buy ahead of strong growth outlook.   


Company Ticker Price Target 52-Week Range Rating  Updated
Astec Industries  ASTE  $27.23  $30  22.76-36.94  Hold  9/7/10
Bioteq Environmental**  BQE.TO  C$0.62  C$1.20  0.40-1.56  Speculative     BUY  8/18/10
Casella Waste  CWST  $4.40  $6 2.55-5.39  BUY  9/8/10
Covanta  CVA  $14.81  $21  14.43-19.69  Accumulate  7/30/10
Darling International  DAR   $7.53  $9.50  6,.43-9.75  Accumulate  8/17/10
GrafTech International  GTI  $15.52  $20  11.68-17.78  BUY  8/10/10
Headwaters  HW  $3.52  $7  2.62-6.84  BUY  8/10/10
Horsehead Holding  ZINC  $8.79  $14  7.11-13.92  BUY  9/23/10
Kadant  KAI  $18.74  $25  10.92-22.77  


LKQ  LKQX  $20.74  $21  16.50-22  Hold  9/24/10
Metalico MEA  $3.70  $8  3.07-7.09


Newalta  NAL.TO  C$8.67  C$14  5.13-10.24  BUY  8/10/10
Schnitzer Steel SCHN  $42.07  $67  40-62.52  BUY  6/29/10
Sims Metal Mgmt SMS  A$16.73  A$20  13-23.60  BUY  9/8/10
 TEG Group  TEG.L  




 33.50-48.5  BUY  7/2/10


Astec: Growth expected after fed's approve highway bill. Recycled asphalt use rising in 28 states - now 15-20% of the mix.
Bioteq:  attractive entry point; outperformed for Q2. Newalta is investing in Bioteq; proprietary water treatment for mines; expanding to oilsands and power sectors.
Casella: attractive valuation; raised revenue estimates
Covanta: mixed Q2 results, muted for the year. 
Darling: expanding through acquisition, new biofuels mandate bodes well.
GrafTech: game changing acquisitions of Seadrift, world's 2nd producer of Graftech's feedstock and C/G Electrodes, a competitor. Guidance raised for 2010, 2011.
Headwaters: returned to y/y growth for first time since 2007; improved balance sheet, stabilizing markets, yet street expectation remain low.
Horsehead: target reduced from $18; re-building from fire in production plant progressing smoothly. Valuation at historic lows. 
Kadant: target up from $18. Broad strength across product lines and geographies.Global recovery underway in pulp and paper. Backlog, orders up sharply.
LKQ: shares fairly valued. Anticipate positive Q3 outlook.  
Metalico: strength in platinum prices, steady volume of catalytic converters portends strong Q3; very attractive valuation. 
Newalta: strong quarter results, increased dividend 30%.
Schnitzer: business remains strong; given the pullback in share price, it's an aggressive BUY.
Sims: attractive entry point for long term investors; near term remains somewhat challenging with lower scrap prices and demand. 
TEG: acquisition will double processing capacity and expand services. positioned to benefit from the UK's move to landfill bans; strong 2010 outlook.

Green Building

Company Ticker Price Target 52-Week Range Rating  Updated
Ameresco AMRC  $13.13  $16  9.34-14.17  BUY  9/16/10
Apogee  APOG  $9.13  $10  8.76-16.89  Hold  9/16/10
ICF International  ICFI  $23.83  $30  21.77-31.06  BUY  5/18/10
Interface  IFSIA  $13.54  $13  5.70-14.42  Hold  8/10/10
Lime Energy  LIME  $3.60  $6  2.77-7.60  Speculative BUY  9/21/10
NCI Building Systems  NCS  $9.48  $17.50  8-21.50  BUY  9/8/10
Trex  TREX  $22.14  $25  15.39-26.51  Hold  8/10/10

Apogee: margins under pressure as lengthy downturn in non-residential construction persists. 
ICF: beat Q4 estimates, growing 21% from efficiency projects for wide variety of gov't and commercial clients.
Trex: proceeding with turnaround, despite recession.
Interface: solid Q2 in challenging market. Shares are fairly valued. 
Lime: better than expected Q2, raised guidance; previously delayed stimulus projects getting funded; $92M backlog, management bullish.  
NCI: exceeded estimates again; making solid progress despite difficult residential market.
Trex: solid Q2, expect strong margin expansion. Shares fairly valued. 

Efficiency/ Energy Storage

Company Ticker Price Target 52-Week Range $ Rating Updated 
Active Power  ACPW  $1.29  $1.25  0.67-1.50  Accumulate  8/10/10
Acuity Brands  AYI  $41.19  $41  30.13-47.91  Hold  8/10/10
 Aixtron  AIXG  $28  $32  16.28-38.96  Hold  8/10/10
American Superconductor  AMSC  $29.66  $50   24.35-43.95  BUY  8/10/10
Badger Meter  BMI  $39.90  $45  32.58-44.71  Hold  8/10/10
Baldor Electric  BEZ  $38.22  $47  24.67-41.51  BUY  8/10/10
Beacon Power  BCON  $0.35  $1.50  0.28-1  BUY  8/10/10
C&D Technologies CHP  $0.93  $1  0.88-3.12  Hold/SELL  4/21/10
Capstone Turbine  CPST  $0.95  $1  0.90-1.57  Accumulate/Hold  8/10/10
Comverge  COMV  $8.10  $11  7.90-13.36 Accumulate  8/10/10
 CREE  CREE  $82.17  $71  24.50-83.88  Hold  4/21/10

Day4 Energy

 DFE.TO  C$0.80  C$0.83  0.33-1.32  Speculative BUY  11/9/09
Dialight  DIA.L  




 260-415  BUY  8/10/10
EnerNoc  ENOC  $30.75  $42  24.10-37  BUY  8/25/10
Enersys  ENS  $22.52  $30  18.61-27.23  BUY  8/13/10
Esco Techn.  ESE  $32.37  $35  24.55-42.70  Hold/Accumulate  8/10/10
Exide Technologies  XIDE  $5.86  $6.75  3.60-8.87  BUY/Accumulate  8/10/10
Fuel Tech  FTEK  $6.51  $8  5.15-12.65  BUY  8/10/10
Itron  ITRI  $58.74  $80 52.05-81.95  BUY  9/8/10
Maxwell Technologies  MXWL  $13.64  $17.50  10.16-21.81  BUY  8/10/10
Nexxus Lighting  NEXS  $2.99  $7  2.66-7.22  BUY  1/27/10
Orion Energy Systems  OESX  $2.85  $5  2.10-6.35  BUY  9/8/10
Polypore  PPO  $26.89  $31  10.17-26.89  Accumulate  8/10/10
Power Integrations  POWI  $35.01  NA  16.75-37.15  NA  2/23/10
Power-One  PWER  $12.17  $17.50  1.19-13  BUY  8/10/10
Rubicon Techn  RBCN  $30.10  $45  8.70-34.19  BUY  7/2/10
RuggedCom  RCM.TO  C$13.90  C$21  11.19-24.85  BUY  8/13/10
Satcon Technology  SATC  $3.68  $3.60  1.70-3.86 Hold  8/10/10
Telvent**  TLVT  $19.97  $32  16.57-41.65  BUY  9/16/10
Ultralife Batteries  ULBI  $4.69  $5  3.42-7  BUY/Accumulate  8/10/10
Universal Display  PANL  $22.93  $26  9.80-23  BUY  8/10/10
 Veeco Instruments  


 $44.38  $58  17.88-54.50  BUY/Hold  8/10/10
Zenergy  ZEN  85p  200p  84-151  BUY  3/23/10

Active Power: strong Q2 sales, margins challenging.  
Aixtron: very strong quarter, but shares fairly valued given digestion period in industry.
American Superconductor: exceeds estimates, continued strong execution, raised guidance. 1st profitable year; $445M (10GW wind turbines!)  
Badger: good quarter, risk/reward balanced.  
Baldor: target raised from $35; business is humming, strong quarter; upcoming requirements for super-efficient motors.
Beacon: secures DOE loan guarantee, significant milestone. Quarter's results in line. 
C&D: completed new financing, but at a significant price; concerns about balance sheet.
Capstone: quarter's revenues well below estimates, target reduced from $1.30.
Comverge: target down from $13.50, because of lower margin expectations; positive outlook.  
Cree: price target raised; continues to execute very well, only limited by capacity restraints. Valuation is too high.
Dialight: target raised from 270p. 33% revenue growth y/y, beat estimates - led by LED group.
EnerNOC: solid Q2; continues to differentiate from peers, continued business momentum into 2011.
Enersys: missed target, by y/y growth; backlog up, demand promising. $100M in additional annual revenue in FY2011 due to acquisitions, along with presence in China.
Esco: soid quarter, positive outlook for the rest of the year; risk/reward balanced.
Exide: target reduced from $8.50; quarter's revenue, EPS below estimates. restructuring related charges likely to weigh on bottom line, strong recovery still expected, but at slower pace. 
Fuel Tech: solid quarter, back to historical run rates, improved by strong expense control. 
Itron: important collaboration with Cisco; impressive quarter; raised guidance is still conservative; record backlog of $1.7B.   
Maxwell: target raised from $16; poised for growth in Chinese hybrid bus & EU auto markets; and in stop/start in cars.  
Orion: attractive valuation; efficiency upgrade trends improving and almost always include lighting. 
Polypore: target up from $24; beat Q2 forecast on strong top and bottom line results; expanding capacity, strong market trends.  
Power-One: target raised from $5.50; record quarter; continued upward estimates from increasing solar demand and capacity buildout. Strong growth expected for remainder of 2010.
Rubicon: target raised from $35; successful capital raise removes risk; prices rising. very bullish guidance.
RuggedCom: bullish outlook; strong market share,but order flow could be lumpy.
Satcon: fully valued despite higher estimates.   
Telvent: bullish outlook remains; business resilient despite lingering EU concerns; strong backlog, bookings. Near term catalysts. 
Ultralife: target down $6.50; Q2 revenues missed moderate forecast. Global demand trends supportive. 
Universal Display: OLEDs opportunity ramping; shares undervalued; very strong position for next decade. 
Veeco: strong quarter, raised guidance again, China fueling growth, but that depends on subsidies. Expect cyclical digestion period in equipment industry and pause in earnings power in coming years.
Zenergy: 2 high temp superconductor products commercialized; good growth potential over the next 12 months.  


Company Ticker Price Target 52-Week Range Rating Target
5N Plus  VNP.TO  C$5.33  


 4.40-7.74  BUY/Hold  1/14/10
Akeena Solar/Westinghouse Solar  AKNS/WEST  $0.82  $1.25  0.51-1.76  BUY  7/30/10
Arise Technologies**  APV.V  C$0.20  C$0.90  0.18-0.66  SELL  8/18/09
Ascent Solar  ASTI  $2.55  $2.25  2.39-8.58  Reduce  8/10/10
ATS Automation  ATA.TO  C$6.35  C$9.75  4.10-8.45  BUY  8/10/10
Canadian Solar  CSIQ  $12.52  $15  8.99-33.68  BUY  8/25/10
Carmanah Technologies  CMH.TO  C$0.66  C$1.40  0.57-0.95  BUY  9/23/10
China Sunergy  CSUN  $4.12  NA  1.36-6.40  NA  1/11/10
Conergy AG**  CGY.DE   €0.72  NA  0.34-1.90  NA  
DyeSol  DYE.AX  A0.87  NA  0.62-1.15  NA  
Energy Conversion Devices  ENER  $4.98  $3  3.76-14.21  Reduce  9/8/10
Ersol Solar  ES6.DE  €106.43  NA  92-112  NA  
E-Ton Solar  3452.T  TWD77.60  NA  62.10-121.50  NA  1/11/10
Evergreen Solar  ESLR  $0.69  $0.60  0.62-2.10  Reduce  8/10/10
First Solar  FSLR  $127.86  $180  98.71-163.32  BUY  8/10/10
GT Solar  SOLR  $7.81  $10  4.51-7.98  BUY  8/10/10
Hoku Scientific  HOKU  $3.16  $2  1.72-4.33  Sell  8/10/10
JA Solar  JASO  $4.76  $5.75  1.77-6.95  Hold  12/15/09
LDK Solar  LDK  $6.14  NA 3.75-14.27  NA  1/11/10
MEMC  WFR  $10.60  $11  9.19-19.31  Hold  8/10/10
Phoenix Solar AG  PS4.DE  


 €39  25.63- 45.12  Accumulate  7/13/10
Power-One  PWER  $4.15  $5.50  0.82-4.81  BUY  3/29/10
Q-Cells AG**  QCE.F  €4.92  €5.70  4.62-19.25  Reduce   5/18/10
Real Goods Solar  RSOL  $3.22  $6  1.95-4.80  Speculative BUY  8/10/10
ReneSola  SOL  $4.93  NA  2-7.90  NA  
SAG Solarstrom  SAG.DE  €4.45  €5.50  2.29-4.80  BUY  8/25/10
SolarFun Power  SOLF  $11.22  $15  4.48-12.30  BUY  8/10/10
Solar Millennium  S2M.DE  €30.64  NA  6.11-45  NA  
SolarWorld AG**  SWV.DE  €10.15  €9  7.86-17.64  BUY  8/10/10
Solon AG**  SOO1.DE  €4.75  €4.50  3.72-11.50  Reduce  6/1/10
Spire Corp.  SPIR  $4.21  Discontined Converage  3.28-9  Reduce  4/5/10
SunPower  SPWRA  $12.93  $17  10.11-33.97  Hold/Accumulate  8/11/10
Suntech  STP  $8.76  $10  8.43-18.78  Hold  8/25/10
Systaic AG  SJK.DE  €1.13  €0.70  0.88-7.75  Reduce/SELL  5/28/10
Trina Solar  TSL  $23.70  $32 11.70-31.19  BUY  8/25/10
Yingli Green Energy  YGE  $10.77  $10  8.31-19.11  Hold  8/25/10

5N: price target reduced from $6.25; this is the third quarter that results are below expectations.
Arise: Balance sheet risk too high.  
Akeena: changed name to Westinghouse Solar; met lofty Q2 revenue forecast on higher distribution volumes thanks to new Westinghouse partnership. 
Ascent: shipment delays, enough cash for 2010.  
Canadian Solar: internal investigation from SEC subpoena concludes company accounted results properly. Foreign exchange and reliance on outsourced components are headwinds but has resolved manufacturing issues and will produce internally again.
Carmanah: acquisition of global LED power supplier, Lightechgrowth, adds exposure to LEDs; systems business to grow from Ontario feed-in law.  
ENER: target reduced from $4.50; weak demand dampens revenues; increasingly competitive landscape.   
Evergreen Solar: good quarter, but target reduced from $1. Potential to grow following build out of China JV. 
First Solar: very strong quarter, beat earnings and revenue estimates.  
GT Solar: target raised from $6; strong order momentum, guidance raised; acquires LED sapphire producer. 
Hoku: shipment delays, substantial financiing required for polysilicon plant. 
Phoenix: bellweather European plant operator should grow substantially in 2010. 
Power-One: impressive growth and improving operations. Strong 2010 outlook.
Q-Cells: target cut from €6.50. Restructuring to regain competitiveness; diversifying into module mfr and distribution, project development. 
Real Goods: continued healthy demand, strong margin expansion. Long term play on CA solar market.
SAG: revenues surge 145% y/y, well ahead of estimates, boosting profitability. Refocused strategy on project development paying off in addition to German pull-forward from expiring feed-in. 
Solarfun: strong Q2, new strategic investor, $30B Hanwha Gp, marks new era of access to finance, construction, partnerships.
SolarWorld: Q2 well ahead of estimates; 69% y/y revenue growth; benefiting from strong sales prior to German feed-in cut. Flush balance sheet. Strong growth for 2010.   
Solon: revenues grew 132% y/y, EBIT breakeven expected in Q2. Faces mountain of debt - received refinancing lifeline.
Spire: discontinued converage due to deteriorating performance and lack of investor interest.
SunPower: strong pipeline and expected cost improvements support strong 2011 outlook. Growing dealer network is retaining price premium. 
Suntech: strong volume, but challenged margin outlook. 
Systaic: weak Q1, company existence in question. Previous CFO misled investors on company's balance sheet; internal turbulence, cash flow problems.
Trina Solar: target raised from $23. Strong 2010 forcast.  Leading cost structure.
Yingli: target cut from $16; strong volume, but anticipated compressed margins. Next few quarters could have growing pains as it moves to verical integration.


Company Ticker Price Target 52-Week Range Rating  Target
A-Power Energy  APWR  $13.45  NA  3-21.04  NA  1/11/10
Broadwind Wind Energy  BWEN  $4.95  NA  2.60-12.49  NA  1/11/10
Clipper Wind** CWP.L  75p  100p  75-179  Reduce/Accumulate  6/9/10
EDP Renovaveis  EDPR  €4.71  €7.50 4.65-4.75  BUY  8/10/10
Gamesa**  GAM.MC  €6.74  €6.75  6.66-16.20  Hold  7/30/10
Iberdrola** Renovables  IBR.MC  €2.68  €4  2.36-3.51  BUY  7/30/10
Japan Wind Development  






 NA  Japan Wind
Nordex**  NDX.F  €7.24  €6  6.53- 13.89  Reduce  


PNE Wind  PNE3.DE  €2.06  €3.50  1.59-2.49  BUY  6/15/10
REpower Systems  RPW.DE  €118  €140  117-148  Hold/BUY  6/2/10
Theolia**  TEO.PA   €3.09  NA  1.09-5.48  NA  
Vestas Wind**  VWS.CO  DKK288  DKK250  247-398  Hold/Reduce  8/10/10

CanHydro: TransAlta agrees to buy company for $5.25 per share in an all-cash offer. Investors recommended to tender to the offer.
Clipper: after 3 years of losses and the CEO stepping down, United Technologies took a 49% stake, bringing in much needed cash and mfr/logistics excellence. Should be profitable in 2011.
EDP: gross profit up strongly on new installations, but net income down more than expected.
Gamesa: target reduced from €9.50; Q2 mirrors industry slow-down, but cost controls keep GAM in black. Idle capacity and intense competition for turbine manufacturers. 
Iberdrola: trades below book value. stable electric prices and new capacity; 93% of production covered by feed-in tariffs for 2010. Wind farm operators stronger than turbine producers right now. Stronger balance sheet than EDP, double the order pipeline.
Nordex: target reduced from €11; wind industry faces continued headwinds, substantial over-capacity.  
Nordex: production down 40% and sales down 35% y/y; almost all sales in Europe, China stalled. Breakeven earnings. Low orders in Q1.
PNE: much higher than expected Q1 results; developing 53MW of projects; raised €28M, bullish outlook.  
Repower: 27% increase in profits y/y with margin growth. Will pay dividend of €1.57 per share for 2009/10. Unlike peers, orders increasing.
Vestas: likely to continue facing hard times. Weak US market, low natural gas prices, challenging competitive landscape.  

Geothermal/ Wave Energy

Company Ticker Price Target 52-Week Range Rating  Target

Alter Nrg

 NRG.TO  C$2.05  C$2.75  0.60-2.98  Hold  3/22/10
LSB Industries  LXU  $17.27  $16  10.62-19.96  Hold  9/9/10
Ocean Power Technologies**  OPTT  $6.90  NA  3.78-11.22 NA  
Ormat Technologies  ORA  $28.55  $29.50  26.13-44.13 Hold  8/10/10
Raser Technologies  RZ  $1.02  NA 0.88-4.80  NA  11/2/09
US Geothermal**  GTH.TO  $0.95  $1.80  0.83-2.09 Accumulate  2/10/10
WaterFurnace**  WFI.TO  C$25.31  C$31.50  22.07-28.59  BUY  8/10/10

Alter Nrg: target reduced from $3.25; developmental stage turnkey geothermal installer expects order flow later this year.
LSB: ongoing sluggish construction trends; no near term catalyst for the stock; production delays because fire in the building.    
Ormat: continues with new projects, but product sales growth is concern.  
US Geothermal: undervalued compared to peers; strong company, good pipeline. Will need more cash to grow portfolio and reach profitability.
WaterFurnace: outperforming - revenue up 16% for quarter; gained market share despite significant headwinds. Excellent management. Pullback in stock over past months offers buying opportunity.

Biofuels/ Transport

Company Ticker Price Target 52-Week Range Rating  Updated
BYD Company  1211.HK  HK63.55  NA  13.38-88.40  NA  
Canadian National Railway  CNI; CNR.TO  C$65.92  C$78  50.75-67.20  BUY  8/10/10
Canadian Pacific Railway  CP; CP.TX  C$60.09  C$75  42.05-62.14  BUY  8/10/10
Clean Air Power  CAP.L  




 17.41-42  BUY  5/14/09
D1 Oils**  DOO.L  £5.58  NA 5.15-13  NA  
Dynamotive Energy  DYMTF  $0.15  $1.10  0.13-0.51  Hold 1/11/10
Fuel Systems Solutions  FSYS  $35.87  $37  24.50-52.53  Hold  9/21/10
Gushan  GU  $0.73  $1  0.70-2.16 Hold  8/25/10
Westport Innovations**  WPRT; WPT.TO;  $17.76  $13.75  7.05-21.34  Hold  8/10/10
Zongshen PEM Power Systems  ZPP.TO  C$1.11  C$1.40  0.76-1.57  Hold  8/10/10

Clean Air: raised £2.4M, reducing risk
Canadian Railway: strong results; expect strong rebound with recovering economy. 
Fuel Systems: diversifying outside Italy; well positioned for US orders.
Gushan: continues to face challenges; ongoing consumption tax issue keeps production low. Signs of stabilization. 
Westport: revenue increased 17% y/y; lower shipments offset by higher margins, lower costs. Shipments impacted by wait and see approach pending clarity on natural gas incentives for fleets. Signed agreement with Volvo Powertrain.
Zongshen: now 6th largest Chinese motorcycle manufacturer after acquisiton, but market is mature and competitive.

Fuel Cells/Hydrogen

Company Ticker Price Target 52-Week Range Rating  Target Updated
Ballard Power Systems  BLDP  $1.71  $2  1.49-3.25  Hold  8/10/10
Fuel Cell Energy  FCEL  $1.10  $2.25  0.98-4.61  Accumulate  9/8/10
Hydrogenics Corp.  HYGSD  $0.23  $0.50  0.21-0.75  Hold  2/9/10
Mechanical Technology  MKTY  $0.82  $1.20  0.1-1.90  Hold  8/31/09
Plug Power  PLUG  $0.53  $1  0.49-1.35  Hold  3/15/10
Quantum Fuel Systems  QTWW  $0.51  $0.50  0.47-1.77  Hold  7/13/10
SFC Energy  F3C.DE  €5.59  €6.50  4.78-9.19  Accumulate  8/10/10

Ballard: mixed Q2; core business slow, but key customers remain. 
Fuel Cell: results beat estimates; near term order trends remain positive.  
Plug Power: backlog improving, enough cashflow for 1-2 years.
Quantum: lackluster revenue, supplying systems for Fisker Karma PHEV, to launch later in 2010, which should increase sales, but in the meantime reduced target from $1.
SFC Energy: Q2 missed; near term trends worrisome, but positioned for 2011 growth.  


Company Ticker Price Target 52-Week Range Rating  Updated
Aqua America  WTR  $17.27  NA  15.39-20.37  NA  
BWT AG**  BWT.AV  €20.15  NA 9.64-21.84 NA  
Calgon Carbon  CCC  $12.51  $21.50  11.94-18.35  BUY  8/10/10
Energy Recovery  ERII  $4.11  $5  3.15-7.40  BUY/Accumulate  8/10/10
GLV  GLV.A.TO  C$7.55  C$11 7.19-10.35  BUY  9/24/10
Insituform Technologies  INSU  $24.03  $24.50  16.81-28.38  Hold  7/29/10
Met-Pro  MPR  $9.35  $12  8.65-11.62  Accumulate  9/8/10
Nalco Holding Co.  NLC  $24.55  $33  16.87-29.25  BUY  8/10/10
Pentair  PNR  $33.33  $35  25.86-39.32  Hold  8/10/10
Pure Technologies  PUR.V  C$4.40  C$6.50  3.65-5.30  BUY  8/25/10
Rino International  RINO  $13.83  $25  4.51-35.15  BUY  5/18/10
Tetra Tech  TTEK  $20.32  $23.50  18-32  Hold  8/10/10
 Veolia Environnement**  VE  $32.39  NA  19.14-40  NA

Calgon: growth outweighs near term hurdles integrating Japanese acquisiton. Returning municipal demand, mercury control regulations.
Energy Recovery: target down from $5; missed quarter's estimates, faces many short term challenges, but strong longer term potential. 
GLV: getting known outside of Canada for water treatment and recycling, expansion expected.
Insituform: risk/reward balanced at current levels. 
Met-Pro: continues growth while lowering costs; strong balance sheet, anticipate steady performance in FY2011.
Nalco: strong quarter, bullish guidance; undervalued; strong position in water treatment technology; emerging presence in multi-pollutant air emissions control.
Pentair: strong quarter, markets in recovery mode.
Pure: strong Q2 results and 2010 prospects; announced C$13M in contracts, bringing backlog total to C$51M;  strong balance sheet. Pure China represents them in China, where substantial water infrastructure investment is underway.
RINO: quarter results weaker than expected, lower margins expected to remain; restrained capacity until new facility completed in May 2011. Target lowered from $34 - reduced forecasts. 
Tetra Tech: solid quarter against tougher Street sentiment.


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