This Solar Energy Company Knows Its Lane, and Its Stock Could Dominate

There is massive opportunity to be had in the energy industry, and First Solar (FSLR -1.64%) is a stock that could prevail in this space over the long term. In this clip from "The High Energy Show" on Motley Fool Live, recorded on May 31, Motley Fool contributor Travis Hoium makes the case for First Solar, and discusses why he's bullish on the solar industry.

Travis Hoium: I'm going to go with First Solar. My thesis in the energy industry, generally, is that the fundamental costs of producing a unit of energy, whether that's hydrogen or electricity, something you can actually use, is really going to be the driver of what we're consuming long-term. It's generally getting more expensive to pull oil and natural gas out of the ground. There are ebbs and flows with that. It is also undoubtedly getting cheaper and cheaper to produce energy from the sun. The most abundant energy source that we have in the world is solar energy. If we could capture an hour's worth of solar energy that hits the earth, we can power everything we need in the world for an entire year. That's just to put the opportunity in the context. I've got an archive of articles showing just the math on, if you could spill the Mojave Desert with solar energy, you can power the entire country with that. There are a lot of logistical challenges there, but generally that's why I'm bullish on the solar industry. Costs are coming down, the opportunity is massive. First Solar has been, I would say, it's hard to argue that they've been the best manufacturer in the space. The difference that they have between the traditional solar panels, crystal and solar panels is they make the thin-film solar panel. They are really the only company that's been able to scale thin-film. Over the last 20 years, it's been an idea that's been, a number of companies have come and gone in the thin-film space, but they've actually been able to do it. They're doubling their capacity over the next, I guess, it will be 2.5 years or so now. They have a great balance sheet with over a billion dollars in cash. They're able to opportunistically buy. If they buy, competitors are bolt-on acquisitions if they want to. I don't know if that makes sense for them strategically where they're sitting right now. But this has been a great operator, over time continues to be. It's one of those companies that I doubted for a really long time how well they run the business and they've just continued to prove me wrong over and over again and I'm done making that mistake. So, First Solar is my pick.

Jason Hall: Yes, I think the key thing there is that they've identified something they can do really well. To a customer cohort and that utility space that appreciates the advantages of thin-film; the better and the extreme environments and that thing. I think the balance sheet is like a symptom of what they're really good at and that's being disciplined in this cyclical industry and making sure they're always in a position of strength. That is what has made this such a great company. As a manufacturer in an industry where we've seen the race to the bottom and even through periods where consolidation wasn't happening quickly. In China was this massive behemoth that was wrecking [laughs] the profits for everybody. They still held their own. Now as we've seen consolidation, I think their future path to profit growth is really strong. I like that one, Travis.

Hoium: Yes, and they've actually shrunk the business down. That's the other thing is they've gone from being, well, we want to be this vertically integrated company to actually we just do one thing really well and let's just do that really well.

Hall: I think Tyler's walking over with a bucket of ice.

Tyler Crowe: I actually wish that more companies would do that. Like, we do one thing really well and we do it instead of trying to be these empire builders that go into five different directions, still get four of them.

Hoium: There are companies in the renewable energy space that have done that.

Crowe: This company is everywhere. They want to be 27 different things and they stink at 40 of them. That's my thing. Actually, I'm huge on First Solar, it's one of my largest holdings. Unappreciated thing that I like about them is the recyclability of thin film. Silicon ingot photovoltaics are a little bit more challenging when it comes to recycling and reusability for 20, 30 years down the road versus thin-film, which is much more of a recyclable product and we believe refurbished and reused. Thirty, 40 years from now, it looks like a more, we'll call it, sustainable business model.