Trina Solar Taps into Red Hot Sector

11/12/2013 8:00 am EST

Focus: STOCKS

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

One booming area is the red hot solar sector. To play this market, our latest recommendation is a Chinese integrated solar manufacturer, suggests global investing expert Nicholas Vardy in his Bull Market Alert.

Trina Solar Limited (TSL) has—excuse the pun—more gas in the tank, even after more than doubling over the past year.

First, with annual sales of $1.3 billion, Trina Solar is a member of the first tier among both Chinese and global solar companies.

After the solar sector tanked last year, the Chinese government introduced a program of subsidies and low-cost loans for new solar projects, lending support to what it deemed to be the sector's leaders.

With the Chinese government essentially picking the winners, a handful of companies like Trina Solar are almost guaranteed to gain share in both the Chinese and global solar markets.

Second, the surprisingly robust Chinese economy means that Chinese solar companies' capacity is sold-out through the end of this year and early 2014.

Trina Solar itself expects to ship 2.4 gigawatts (GW) of solar cells this year, an amount near its total capacity. 2014 looks even better for the solar sector, with most solar companies expecting global demand to reach 45 GW to 50 GW.

That's particularly good news for a company like Trina Solar. Although it is based in China, Trina Solar also boasts a strong global sales force in other fast-growing markets like Japan.

Third, analysts at Deutsche Bank expect that the bull market in solar will continue, at least, toward the end of this year, and call the current weakness in the solar industry a buying opportunity.

That's why they recently upgraded Trina Solar to a buy and raised its price target from $18 to $23.

Positive industry third-quarter earnings results are expected to drive solar stock prices higher. Trina Solar reports earnings on November 19.

So buy TSL at market, and place a stop at $11. A word of warning: Trina Solar can be a very volatile stock, so prepare for a potentially wild ride.

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