Solar is now a screaming buy [SPWR]

I generally avoid discussing particular sectors or stocks on this blog but I just have to point out that solar is a screaming, flaming buy.  It is now exactly at the levels that Prechter predicted many if not all stocks would go: down to about 5% of their real worth.  One of my favorites for the coming big bounce is Sunpower (SPWR).  At its credit induced bubble peak the company shares were going for $165 each.  Now the market has run them into the ground as if they are nearly worthless at $3.77 each.  That is a whacking far worse than the Dow average decline of 89% during the great depression. 

If any stock has value, SPWR does.   While it doesn't currently pay a dividend, is forward PE is now a very fair 8.02.  Better still, its P/S is only 0.19 and P/B is only 0.36.  Prechter predicted that many stocks would see PEs of 5-6, P/S of 0.5 and P/B of 0.5 before the collapse is over.  Sunpower is below that right now. 

It posted a huge loss of $6.66 per share over the trailing 12 months but it has 302mn cash and 693mn debt.  Its basically trading at breakup value right now.  10.4 % of its shares are held short (pretty high - these people all have to cover some day and will likely do it all in a hot hurry to lock profits in quickly).

In addition, one of the world's largest petroleum companies, Total SA, purchased 60% of the company for around $24 per share back in 2011.  As part of the deal, Total will provide a $1 billion line of credit. Finally, Sunpower is right up there in the list of solar panel efficiency as shown above-left.

So why now?  The stock has been falling like a rock (along with other solars) for a long time.  Why buy now?  Several reasons:

• At today's price of $3.77 it's like buying a long term, non-expiring call option.
• At some point the shorts have to cover.
• Volume has been falling off.  This is generally a good sign that a trend change is near.
• Electricity prices are climbing.  I have a friend who explained to me how his electric bill has jumped both in terms of cost per KWH and in terms of new fees and charges.  The result: his typical $400 something electric bill is now an $800 something bill.  As a result he is now thinking about solar panels.
• EU countries that bought heavily into solar (to fuel the original bubble) will soon default on the Euro debt and will revert to their historical currencies.  When this happens they will again be able to buy solar without the Germans and the French telling them not to spend money.  The market is forward looking.  At some point it will factor in a Euro crash.  This will send the blue chips into the tank and the smart money will be running to cash and then later on into commodities and into energy. 
• Why?  Because deflation NEVER lasts forever and when the markets finally bottom there will be a massive inflation based on a much larger monetary base than has ever been in play in history.  It will cause solar companies to get a huge bounce as people flee from rapidly rising oil prices into something that at least they can control.  Solar power might still be expensive but at least you will know that your monthly bill is simply going to be the payment on the loan you used to buy the system with.  If anything, that debt will get easier to pay off once the Great Inflation hits us.  I'm not saying we are ready for inflation yet (deflation has not yet played out).  But someday it will come and solar panels have a working life of 25 years or more.  They will still be there producing power when the inflation arrives.
• Total SA already bought 60% in the low $20s. If they announce they will purchase the rest of it the stock could double or triple overnight.  Even a simple extension of larger credit lines by Total to Sunpower will cause the stock to rocket.  Why? Because it will give Sunpower not only staying power in a depression but it will also give it acquisition power.  Solar industry consolidation is upon us and those with credit lines will pick up the pieces of those who go under for literally pennies on the dollar.  It will make the survivors very strong during the recovery. That has to be a concern for the short sellers.

If all of the above reasons didn't convince me that now is the time to start accumulating, all I had to do was look at the chart.  I see that SPWR is currently tracking out a 5th of a 5th of a 5th.   It has also completely retraced its mania chart.  This is getting to be, if not already there, a once in a lifetime buying opportunity.  A good strategy here is to dollar cost average in.  If it goes down a lot more then pick up the pace of buying.  All you need is about $5K worth of the stock at these price levels in order to have something that could return some real money in just a few year's worth of holding.