Pictet adds to solar stocks in clean energy fund
LONDON (Reuters) - Geneva-based manager Pictet has been adding to solar stocks in its clean energy fund after the recent earnings season showed that companies are reducing costs faster than expected, through scale and greater efficiencies.
Philippe de Weck, who manages the fund, said that the solar power industry had doubled this year in terms of watts sold, and revenues were not far behind.
He recently added to his holding in JA Solar (JASO.O), a Chinese company that is one of the leading low-cost producers of solar cells.
"We see a lot of value emerging in the solar industry, particularly in Asia where there is strong demand and limited pricing pressure," he said. "In solar we look for cost leadership and JA Solar is very competitive."
In August he also added to Chinese companies Trina Solar (TSL.N), Yingli (YGE.N), and RenneSola SOLA.L, which make solar panels.
Another key holding is STRI STRIb.ST, a U.S. company that makes the film that holds the solar cells between glass. "STRI sold twice as much of its film this year compared with last year," he said. "We like companies that are exposed to solar industry volumes."
Clean energy stocks have lagged the broader market this year due to investor concerns that European governments' austerity packages will reduce support for renewable fuels.
Pictet's fund, which has some $71.3 million under management, was down almost 4 percent in the 12 months to end-August, and lagged the global equity sector by almost 5 percentage points, data from Lipper showed.
"There have been cuts to feed-in tariffs for solar power in Europe but this is because the price of solar panels has dropped," de Weck told Reuters. The tariffs reward households who fit solar panels, to encourage the take-up of renewables.
"Governments have to cut the tariffs when companies can make the panels more cheaply because otherwise it would be too generous. This is how the industry becomes competitive."
De Weck said that the rapid, underlying cost reductions in solar will allow the profitability of industry cost leaders to remain at satisfactory levels, as subsidised tariffs reduce in a progressive, not a drastic way.
Other key holdings include wind farm operator Iberdrola Renovables IBR.MC, which is 4.2 percent of the fund, and Cree (CREE.O), a U.S. company that makes LED components for more efficient lighting.
"Energy efficiency is an interesting sector -- the market has begun to appreciate our investments here," he said.
Cree exports a lot of its components to China where there is a drive to light streets and buildings as efficiently as possible.
"The Chinese are building entirely new cities and they are aware of the tremendous amount of coal they are consuming," said de Weck. "LED lights consume about 15 percent of the electricity used in traditional bulbs."
Cree has been in the fund for about three years. It did well in 2009 but has been flat in 2010. De Weck said that although it reported strong results this year the market had been anticipating more and an industry correction in LEDs had left the stock vulnerable. (Editing by Mike Nesbit)
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