Investing in Green Chip Stocks

A doctor walks into an examining room and tells his patient that he has some good news and some bad news.

The good news is that his tests show he has 24 hours to live.

The patient asks, "What's the bad news?"

To which the doctor replies, "I meant to tell you about this yesterday."

Timing is everything, my friends.

And while jokes about bad timing can certainly give you a good laugh, there's nothing funny about it when you're at the losing end of a poorly-timed trade...

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I certainly got a dose of that bitter pill when I first began studying energy markets back in the early 1990s.

You see, the more I read and the more I learned, the more I was convinced that this very dangerous and unsustainable fossil fuel foundation on which our energy economy was built would ultimately leave us vulnerable to economic and environmental catastrophe.

There was no swaying my belief that alternative energy solutions were the only way by which we could avert disaster. So I began sharing what I had learned, and I also jumped on a few early alternative energy startups that, well, went belly up.

Now understand that these were not bad companies...

Management was always top-notch; the technology was about as advanced as it came back then; there was definitely some big money backing these operations. In fact, most of the guys I knew back then are now major players in the alternative energy industry.

But none of that mattered back then. Because, while it was obvious to me that we would not be able to quench our future thirst for energy with only conventional fossil fuel resources, no one else seemed to know it — or even cared to discuss it.

The fact is back in 1993-1994, you would've been hard-pressed to find more than a dozen investors who knew about peak oil, the liquidation of natural capital, or the billions in subsidies that have kept the fossil fuel machine purring for all these years.

You weren't going to read about this stuff in Newsweek; you weren't going to hear it from the major news organizations, and you know damn well the politicians weren't going to bring it up.

But all that has changed. And today, there's a wealth of data available for any investor willing to take the time to do the research. Not to mention, literally hundreds of alternative energy stocks to choose from.

Of course, there is one thing that hasn't changed — and that's the importance of timing.

Is the Timing Right for these Green Chips?

In 2009, timing allowed us to help a lot of investors make a lot of money. Especially in energy efficiency, where our Comverge (NASDAQ: COMV) play delivered gains in excess of 145.5%, and our EnerNOC (NASDAQ:ENOC) play finished the year with a gain of 321.07%.

But as the year came to close, I began cautioning against a market that was just getting too hot — especially considering the still very volatile global economy.

This is the reason editors Nick Hodge, Sam Hopkins, and I have only provided coverage on a few stocks so far this year.

Bottom line: The timing simply hasn't been right for the kind of buying spree we witnessed last year after the market bottomed out.

But it's getting pretty damn close again. Especially in solar, where an overreaction to a German feed-in tariff cut put additional downward pressure on a broader market-driven decline...

It was a double whammy that has pushed a number of quality solar stocks down to some pretty attractive levels.

Especially the Chinese players.

You see, while a cut in the German feed-in tariff (which is absolutely necessary if you want to avoid a massive bubble) will not make life easy for German manufacturers, the Chinese manufacturers — with their significant pricing advantages — will inevitably benefit from new market share.

The first half of this year will still be a bit bumpy. But by the end of the year, it will be many of these Chinese players profiting big time from Germany's solar market — this, by the way, is not insignificant.

This is a very pro-solar country, representing about 50 percent of the global market for photovoltaics (oddly enough with nowhere near the solar potential as in the United States), a pro-solar government, and pro-solar banks with relatively deep pockets for financing.

So in an effort to capitalize on what is sure to be a continuation of China's solar dominance going forward, we're looking to pick up shares of the following Chinese solar stocks on major dips:

• Yingli Green Energy (NYSE: YGE)

• JA Solar (NASDAQ: JASO)

• Canadian Solar (NASDAW: CSIQ)

• Suntech Power (NYSE: STP)

• Trina Solar (NYSE: TSL)

At current levels, I have little doubt that these stocks will deliver gains of anywhere between 10 to 30 percent by summer — assuming the market doesn't implode again. And for sake of clarification, I wouldn't necessarily cross that off as a possibility, either.

Again, it's all about timing.

But while it's impossible to pinpoint the bottom with complete accuracy, it doesn't take a rocket scientist to know a bargain when you see one.

And as we learned last year, those who are in it for the long haul — and can exercise a little patience — will be rewarded.

To a new way of life, and a new generation of wealth...

Jeff