First Solar, Inc. (FSLR), Canadian Solar Inc. (CSIQ): Bankruptcies Are a Healthy Sign for the Solar Industry

This is the challenge that faces companies such as Yingli and LDK, which have much worse balance sheets than their competitors. Installers are looking for stable companies with long-term warranties, and now that Suntech is gone, it will make them think twice about going with either of those companies, which make essentially the same product as JinkoSolar, for example, which has a better balance sheet.

Differentiation is the only thing that’s kept SunPower Corporation (NASDAQ:SPWR) alive over the past two years. Installers value higher-efficiency products, and now that module costs are only about 20% of an installation’s entire cost, a higher-efficiency module makes financial sense. Few companies are differentiated on the product side, but SunPower is, and that’s why it’s my top stock in solar.

Foolish bottom line
If you’re a solar investor, like me, don’t be freaked out by bankruptcies in the industry. Bankruptcies are a good sign, and the industry needs a few more big companies to fall before it will reach a normal state. What investors need to do is focus on the best companies with good fundamentals and differentiated products. Start with First Solar, Inc.(NASDAQ:FSLR) and SunPower on your quest for solar profits.

The article Bankruptcies Are a Healthy Sign for the Solar Industry originally appeared on Fool.com and is written by Travis Hoium.

Fool contributor Travis Hoium manages an account that owns shares of SunPower. He also owns shares of and has options on SunPower. The Motley Fool has no position in any of the stocks mentioned.

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