One Fund Sees Green in First Solar's Solar Modules

When fossil-fuel prices rise, Matthew Patsky, portfolio manager of Winslow Green Mutual Funds, buys more shares of First Solar (FSLR).

That's because First Solar, the Phoenix, Ariz., maker of solar modules, uses a technology that is cheaper, offering another option  for the large-scale solar collection found on solar farms in Europe.

“First Solar’s new technology that uses cadmium telluride is much cheaper,” Patsky said. “The cost of their solar cells is much less than the cost of the traditional [silicon-based] cells, so if you’re doing an installation on any scale, they are the best alternative right now.”

Cadmium telluride is a semiconductor for solar cells, which are used for the production of  solar panels. Solar panels convert sunlight into electricity. First Solar uses cadmium telluride in the production of its solar cells instead of silicon, which there is currently a shortage of.

First Solar is one of the largest holdings in the Winslow Green Growth Fund, a small-cap growth fund with $360 million in assets under management, which Patsky started in Boston in 1994.

Given that First Solar’s  technology is less efficient per square inch they might not be ideal for residential use where there is a limited amount of space or in cities where land is expensive, Patsky said its a low-cost option for large-scale installations or solar-farms, where land is readily available.

What's more, Patsky thinks the future looks bright for companies like First Solar that are poised to take advantage of the possible rollout of federal incentives pushing alternative energy sources, specifically alternatives that are renewable. 

“We have no concerted effort on a federal level to encourage the use of renewable resources as an energy source, but that will change regardless of which of three remaining candidates wins,” Patsky said of the upcoming election. “The most conservative of the remaining three candidates, John McCain, has said one of his policy actions is to move the U.S. into a strong role in terms of energy conservation and to look for ways to slow global climate change.”

Although some think the stock price may be too lofty, Patsky’s bullish. He thinks earnings could more than double in the next twelve months.

“In January, the stock dropped to around $160 and we re-established a strong position,” Patsky said. “If it hits $300 in the near term, we might trim our position again; but our target is really for it to be trading at $380 over the next 12 months--the estimates are too low and I don’t think the street is as aggressive as what we expect.”

In terms of competition, Patsky thinks the only real risk in the marketplace would be a sudden and dramatic drop in silicon prices without a significant increase in demand for solar technology, a situation Patsky doesn’t see happening in the next year. Ultimately, he sees the coming election as the best indicator of the company’s future success.

“Looking forward I expect to see continued wins in orders and continued progress on the regulatory side in the U.S., but you won’t see anything that gets through in terms of energy policy until the change in the White House,” he said. “McCain’s plan is encouraging and when a Democratic nominee is selected we’ll really get an idea of how much federal support is possible and how much growth to expect.”