This solar energy company knows its way and its stock could dominate

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There are huge opportunities in the energy industry, and First Solar (FSLR -2.62%) is a stock that could prevail in this space over the long term. In this clip from “The High Energy Show” on Motley Fool Live, recorded on May 31Motley Fool contributor Travis Hoium makes the case for First Solar and explains why he’s bullish for the solar industry.

Travis Houm: I will go with First Solar. My thesis in the energy industry, in general, is that the fundamental costs of producing a unit of energy, whether it’s hydrogen or electricity, something that you can actually use, are really going to drive what we consume in the long run. It generally becomes more expensive to extract oil and natural gas from the ground. There are ups and downs with that. It is also undoubtedly becoming cheaper to produce energy from the sun. The most abundant source of energy we have in the world is solar energy. If we could capture one hour’s worth of solar energy hitting the earth, we could power everything we need in the world for an entire year. This is just to put the opportunity into context. I have an archive of articles showing just the math, if you could topple the Mojave Desert with solar power, you could power the whole country with it. There are a lot of logistical challenges there, but that’s generally why I’m bullish for the solar industry. Costs are falling, the opportunity is huge. First Solar has been, I would say, it’s hard to argue that it has been the best manufacturer in space. The difference they have between traditional solar panels, crystal and solar panels is that they make the thin film solar panel. It’s really the only company that’s been able to scale thin layers. Over the past 20 years, it’s been an idea, a number of companies have come and gone in the thin film space, but they’ve actually succeeded in doing it. They’re doubling their capacity over the next, I guess, it’ll be about 2.5 years now. They have an excellent balance sheet with over $1 billion in cash. They are able to buy opportunistically. If they buy, competitors make complementary acquisitions if they wish. I don’t know if that makes sense strategically for them where they’re sitting right now. But it has been a great operator, over time continues to be. This is one of those companies that I doubted the quality of their management for a very long time and they kept proving me wrong over and over and I’m done making that mistake. So First Solar is my choice.

Jason Hall: Yes, I think the main thing is that they have identified something that they can do very well. To a cohort of customers and that utility space that appreciates the benefits of thin film; the best and extreme environments and this thing. I think the track record is like a symptom of what they do really well and that is being disciplined in this cyclical industry and making sure they’re always in a strong position. That’s what made it such a great company. As a manufacturer in an industry where we have seen the run down and even through periods where consolidation did not happen quickly. In China was this enormous juggernaut that was destroying [laughs] benefits for everyone. They were still holding on. Now that we’ve seen consolidation, I think their future path to earnings growth is really solid. I like this one, Travis.

Hoium: Yes, and they actually reduced activity. That’s the other thing is they’ve gone from, well, we want to be this vertically integrated company to actually we just do one thing very well and do that very well.

Hall: I think Tyler is coming with a bucket of ice cream.

Tyler Crowe: In fact, I wish more companies did. Like, we do one thing really well and we do it instead of trying to be these empire builders who go five different directions, always get four.

Hoium: There are renewable energy companies that have done it.

Crow: This business is everywhere. They want to be 27 different things and they stink of 40 of them. It’s my thing. I’m actually huge on First Solar, it’s one of my biggest holdings. The unappreciated thing that I like about them is the thin film recyclability. Silicon ingot photovoltaic is a bit more difficult to recycle and reuse for 20 or 30 years compared to thin film, which is much more of a recyclable product and we believe it is refurbished and reused. In 30 or 40 years this looks like a more, we’ll call it, sustainable business model.

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