In recent years, the Chinese solar industry has done more than give Europe and the U.S. a run for their money -- the red giant has now surpassed both, with its companies now accounting for half the world's production of solar panels.
Unwilling to settle for second best, the U.S. passed the American Recovery and Reinvestment Act in 2009, restricting the purchase of foreign-made materials by stimulus money. Just two weeks ago, Obama signed a defense appropriation law banning the Pentagon from buying Chinese solar panels -- and it's likely not the last "buy American" initiative we'll see.
Just as the battle for solar supremacy appeared on-course for an all-out arms race, reports emerged that the Chinese government would be placing new restrictions on its solar industry's growth. And right now, this is looking like a potential godsend for the American market.
In their efforts to expand, many Chinese solar companies took on massive amounts of cheap debt, proving effective, but ultimately an unsustainable industry model.
Chinese regulations to curb outsized expansion may help reduce the concerns of oversupply in the near term, and the global solar sector may benefit from the stability over the coming months. However, if China's restrictive measures are kept in place for too long, U.S. solar stocks could see a golden opportunity to win back some of the market share they lost.
But don't be so quick to cash out your Chinese solar stocks -- the industry is hardly down for the count. With low earnings multiples and a commitment to reducing operating costs, they still make for an attractive value to many investors.
It's tough to say which superpower will emerge victorious in the quest for solar dominance. So we're wondering, what do institutional investors think of these trends? Since they have the resources to get the foreign intel we can't, it could be useful to pay attention to their trades.
We collected data on institutional flows to see if they prefer Chinese or American solar. We also collected performance data to provide more context. (Click here to access free, interactive tools to analyze these ideas.)
Institutional data sourced from Reuters, performance data sourced from Finviz.
Chinese Solar Companies:
|
Company |
Performance Over Last Quarter |
Institutional Transactions |
|---|---|---|
|
China Sunergy |
-2.22% |
Institutional investors currently own 10,662,175 shares vs. 10,678,296 shares held three months ago (-0.15% change) |
|
JinkoSolar Holding |
-13.40% |
Institutional investors currently own 2,887,890 shares vs. 2,871,463 shares held three months ago (0.57% change) |
|
ReneSola |
-11.70% |
Institutional investors currently own 30,322,139 shares vs. 30,063,836 shares held three months ago (0.86% change) |
|
Solarfun Power Holdings |
-16.94% |
Institutional investors currently own 18,312,784 shares vs. 17,910,472 shares held three months ago (2.25% change) |
|
Suntech Power Holdings |
0.00% |
Institutional investors currently own 57,523,840 shares vs. 57,877,946 shares held three months ago (-0.61% change) |
|
Trina Solar |
-2.58% |
Institutional investors currently own 53,776,949 shares vs. 51,792,310 shares held three months ago (3.83% change) |
|
Yingli Green Energy Holding |
-0.69% |
Institutional investors currently own 63,213,459 shares vs. 64,874,076 shares held three months ago (-2.56% change) |
- Average Quarterly Return of Chinese Solar Companies: -6.79%
- Average Change in Institutional Ownership of Chinese Solar: +0.60%
U.S. Solar Companies:
|
Company |
Performance Over Last Quarter |
Institutional Transactions |
|---|---|---|
|
Energy Conversion Devices |
-9.73% |
Institutional investors currently own 22,469,462 shares vs. 22,436,053 shares held three months ago (0.15% change) |
|
First Solar |
12.27% |
Institutional investors currently own 63,967,227 shares vs. 62,735,969 shares held three months ago (1.96% change) |
|
Hoku |
-11.07% |
Institutional investors currently own 2,521,051 shares vs. 2,534,253 shares held three months ago (-0.52% change) |
|
SunPower |
-1.18% |
Institutional investors currently own 51,912,464 shares vs. 51,351,035 shares held three months ago (1.09% change) |
- Average Quarterly Return of U.S. Solar Companies: -2.43%
- Average Change in Institutional Ownership of U.S. Solar: +0.67%
Conclusion: U.S. solar companies may have outperformed their Chinese counterparts over the last quarter, but institutional investors aren't showing a particular preference at the moment. What do you think? Use these lists as a starting point for your own analysis.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.
