Let’s start with the basics. Technically, solar cells are called photovoltaics, since they convert the energy that’s in solar radiation into electricity. These devices are built of semiconductors, typically silicon. When light strikes the front of a semiconductor, some of the light energy is absorbed within the material, knocking electrons loose, allowing them to flow freely. If these electrons are encouraged to flow to the back of the device, an electric current results, and if enough of these devices are combined, you get power enough to run any electric device in the world.

The basics of the technology have been known since 1883, when Charles Fritts coated selenium with a layer of gold. But the modern age of photovoltaic technology arrived in 1954, when Bell Laboratories found that silicon doped with certain impurities was very sensitive to light. Today, solar cells easily power calculators, because their power requirements are very small, and they power satellites and highway call boxes, because there are few practical alternatives in those remote areas. But until recently, solar cells just couldn’t compete with fossil fuels. And now that’s changing.

After waiting some 30 years since the first “oil shock,” we’re confident that solar power is finally going to fulfill its promise. And we’re very excited about the investment opportunities in the industry.

Now, most other companies build their cells on slices (wafers) of silicon ingots, but First Solar builds its cells using thin-film technology. By doing this, it uses just 1% of the silicon used by other manufacturers, a fact that frees it from serious pricing pressures felt by the others, for whom silicon represents some 45% of the product’s total cost. These pressures stem from the fact that silicon is the main component of semiconductors made by companies like Intel, Motorola and SanDisk, and these companies pay a premium price for premium product, leaving the solar companies paying through the nose for the silicon needed to grow their business.

Another advantage to First Solar’s thin-film technology, which uses cadmium telluride (CdTe) as the semiconductor, is that it remains very efficient at generating electricity at higher temperatures, while traditional silicon cells’ performance degrades as temperatures rise. Also, cadmium and tellurium are abundant; tellurium is produced during the refining of copper, while cadmium is derived from zinc smelting.

Technically, CdTe’s energy bandgap is 1.45ev (electronvolts), which allows it to convert more energy from the solar spectrum than the lower energy bandgap materials (1.20ev) used historically.

Interestingly, even though First Solar is headquartered in sunny Phoenix, Arizona, the company does not sell its products to the residential housing market. It sells mainly to utilities who build power plants, and to energy producers who sell their output back to utilities.

Last last year, for example, the company announced it would supply modules for a 40-megawatt plant to be constructed in Germany that will be one of the largest solar power plants in the world, and will prevent about 25,000 metric tons of greenhouses gases from being released into the environment. (A one megawatt plant, running continuously, can power nearly 800 homes.)

More recently, First Solar announced long-term agreements to supply 557 megawatts of electricity through Babcock & Brown (a well-known global investment advisory and development firm that specializes in renewable energy projects) and Ecostream (which specializes in the development, design, and construction of commercial PV projects across Europe).

These agreements represent approximately $1 billion of revenue through 2012, so First Solar now has long-term contracts in place to deliver more than 3 gigawatts of production capacity in 2012, which will bring in more than $6 billion. Bottom line: the company continues to sell all it can produce, and it expects that state of affairs to continue, as it reduces customer pricing approximately 6.5% per year, year-over-year, through 2012.

To date, the lion’s share of business has come from Europe, mainly because that’s where the biggest incentive programs are, but First Solar is working on a contract with SunEdison to support projects in Ontario, Canada. And after that will come the firm’s first big projects in the U.S.

In November, in fact, First Solar announced that it had paid $34.3 million to buy Turner Renewable Energy, an installer of solar cells backed by media mogul and environmentalist Ted Turner. This is not only a step toward supplying the U.S. market, it’s also a step toward vertical integration, which, if pursued properly, can increase the firm’s market substantially.

The company also has big plans to serve the U.S. utility markets, where some producers are required to produce a portion of their electricity from renewable sources. It’s given no specific details, but has promised that initial revenues from this evolving market should arrive in 2008.

Bottom line: With solar power currently generating less than 2% of our globe’s electricity, the market potential is simply huge.

In our opinion, the company’s biggest challenge might be ramping up production. Aware of the challenges, First Solar named a new president, Bruce Sohn, in March 2007. Bruce was formerly a senior executive at Intel. His expertise? Building new semiconductor fabrication plants!

First Solar currently has plants running at full capacity in Ohio and Germany, and it is expanding in Ohio. But the company’s biggest growth push is in Malaysia, where it intends to have four factories with sixteen production lines churning out solar cells with electricity-producing capacity of 600 megawatts every year.

When this goal is reached at the end of 2009, it will bring First Solar’s total annual production capacity to 920 megawatts.

The Holy Grail

The Holy Grail here, of course, is to become the first solar power company that can compete with traditional utilities without government subsidies, and First Solar believes its prices will reach competitive levels by 2010.

Its cost-per-watt for the fourth quarter reached a new low of $1.12 per watt. It expects to achieve a cost-per-watt decline of 40% to 50% by 2012.

The most impressive numbers, as mentioned at the start of this report, pertain to the company’s revenue growth rate, 281% in the latest quarter, 273% in 2007. That should slow a bit in 2008, which is natural. Second are the earnings numbers. The firm’s first profitable year was 2006, when it earned $0.06 per share. 2007 resulted in $1.43, while 2008 could bring $2.50. Finally, there’s the after-tax profit margin, 31.3% in the latest quarter.

These numbers are public, and thus have been attracting a growing number of institutional investors. At the end of the fourth quarter, there were 183 mutual funds on board, up from 102 at the end of the third quarter. And that means this stock has a long way to go before it’s over-owned!

One aspect that will give some investors pause is the company’s valuation. The market says the company is worth over $17 billion, or roughly 35 times annual revenues. Also the current PE ratio is 157. Those numbers are high, of course, but they don’t bother us; we know from long experience that the very best growth companies are always expensive!

First Solar came public in November 2006 at 20, and hasn’t traded below that level since. Throughout 2007, it soared from the 20s to 280! It's since correct and consolidated during the rough market of 2008. But that doesn't mean the uptrend is over; it simply means that the stock is building a launching pad for the next bull market.

Our advice: You could buy a little now, and then look to add more shares in the months ahead. In the long run, we think you’ll be well rewarded.

First Solar (FSLR)
4050 E. Cotton Center #6-68
Phoenix, AZ 85040
Phone: 602-414-9300
http://www.firstsolar.com
Return on Equity: 1.9%			Revenue and Earnings
Forward P/E: 116		Qtrly Rev	Qtrly Rev Growth	Qtrly EPS	Qtrly EPS Growth
Current P/E: 306		($mil)	(vs yr-ago-qtr)	($)	(vs yr-ago-qtr)
Profit Margin (latest qtr): 24.2%	Latest qtr	159	290%	0.49	717%
Debt Ratio: 15%	1 qtr ago	77	177%	0.07	NA
Dividend: None	2 qtrs ago	67	392%	0.07	NA
Dividend Yield: None	3 qtrs ago	53	288%	0.12	NA

The secret to turning $5,000 into $100,000 with just one stock

I uncovered this stock with a system we’ve refined over the last 37 years to become the best disciplined stock-picking system in the world. This system has helped our subscribers turn $5,000 into $20,000, $50,000 or more.

Now, I'd like to share our millionaire-making success with you.

The best stock-picking system ever developed is based on momentum analysis

Ever since I first became fascinated with the stock market, I've made it a habit to study every conceivable method for picking winning stocks.

I've evaluated the fundamental approach to investing. I've religiously studied technical analysis, plotting stocks on bar charts, point and figure charts, and candlesticks, reviewing volume studies, stochastics and mas–sive amounts of other data. I've taken a good hard look at psychological approaches to investing, including the Theory of Contrary Opinion, Hi-Lo Studies, Sentiment Studies and more.

I found that all of these methods are lacking to varying degrees…but along the way, I discovered the single most important tool for pick–ing winning stocks: momentum analysis. It is the heart of our stock selection process.

Simply put, momentum analysis accurately tracks dramatic changes — either positive or negative — affecting the future of a company. These changes tend to develop a momen–tum that will ultimately mean success or failure.

Here's another way to look at it: All things have life cycles, including companies. They are born and grow, they merge, they go through major changes, and sometimes they even die.

But here's the key point: If you know how and where to look at companies — their problems and successes — you can find select companies with positive momentum and ride them to fantastic profits!

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Why I ignore 99 out of 100 stocks, and focus on those with the potential for spectacular 1000% gains

The remarkable success of my Momentum System 1000™ is found in an often-over–looked market indicator: relative performance (RP). RP is simply a measurement of how a stock is acting relative to the market as a whole. It answers the question, “How is my stock doing compared to the market?”

If a stock's RP line is moving up, the stock is performing better than the general market. If it's flat, it's about the same as the averages. And if it drifts downward, beware — because the stock is underperforming the general market.

And here’s a critically important fact: Once a trend begins, it is very likely to continue. That's why I scan RP lines of hundreds and hundreds of stocks, seeking out the very few with strong, upward RP lines. This way, I don’t miss a hidden stock gem that's often overlooked by the general public.

I only look for those stocks whose RP lines are advancing by leaps and bounds, those moving ahead, continually and persistently with a minimum of corrections. This usually means everybody — management, board of directors and stockholders — is enthusiastic. The company is poised to dramatically grow! 

Take, for example, the spectacular momentum of Intuitive Surgical, shown in this chart. Note that despite a few corrections, its RP line rose dramatically. If you had purchased Intuitive Surgical for $29 when I recommended it on October 30, 2004, you would have seen it leap in price to $139, producing a 379% gain in just 15 months.

And there’s a rule we’ve developed that has made my Momentum System 1000™ even more powerful and profitable. We call it our Relative Performance 13-Week Rule.

In general, companies report their earnings every quarter (every 13 weeks) and earnings are reflected in the relative performance lines weeks before they became public knowledge. I'm very interested in any company whose RP line advances for 13 weeks or more (like Intuitive Surgical). Conversely, once the RP line has started downward from its peak for a period of at least 13 weeks without signs of a turnaround, watch out!

Here's an example of a negative 13-week signal. As you can see by the chart, Whole Foods’13-week limit on corrections was exceeded in April 2006, when the stock was selling at $65. Sixteen months later, it was down to 36, driven down by selling in response to slowing growth at the chain.

And my market timing indicators make Momentum System 1000™ better and more pow–erful than any other stock-picking system…

For accurate market timing: Two-Second Indicator, Cabot Tides and Cabot Trend Lines

I have found that following RP lines alone to pick great stocks isn't enough. You also have to know how to time the market — when to be fully and aggressively invested in bullish markets and when to be safely on the side–lines during defensive markets.

My basic premise on market timing is as follows:

1. No matter how favorable the fundamental factors appear for an individual stock, it should never be purchased if the market trend is down. When the market is down, all stocks — blue chips as well as lesser-known issues — suffer.
2. You can't depend on brokers for long-term market timing. Their sole focus is selecting stocks for you to purchase. You — with the help of my Momentum System 1000™ and market timing indicators — must take responsibility for determining when to sell.
3. Most large institutions and mutual funds pay little regard to market timing. They remain invested to a high degree through market ups and downs.

That's why I developed the Two-Second Indicator to work hand-in-hand with Momentum System 1000™. It's called the Two-Second Indicator because it takes you just two seconds to check it in your daily newspaper — really!

My Two-Second Indicator tracks the number of daily new lows of the stocks traded on the NYSE to tell us how healthy the stock market is. 

Look at this chart and observe how timely these signals were. Wouldn't you have liked to avoid the credit crunch of 1998? Notice the similarity to 2007.

My second market-timing resource, Cabot Tides, are without equal in monitoring the intermediate-trend of the market. They consist of five market indexes, ranging from large-cap to small-cap to high-tech, and I watch them all like a hawk. As long as the indexes are above their 25-day moving averages and those moving averages are advancing, all is well and I recommend aggressive investment. But if three or more of the indexes drop below their 50-day moving averages, I tell my subscribers to start building cash.

Why two different-length moving averages?  Because I want you to be buying quickly after market bottoms, and I want to give the best stocks a chance to continue climbing even after the broad market tops.

What’s more, my third market-timing resource, Cabot Trend Lines, have proven to be a unique way to determine the long-term trend of the stock market. As long as both the S&P 500 and the Merrill Lynch 100 Technology Index fluctuate above their respective trend lines, I consider the market to be bullish. If both are below their trend lines, we are in a bear market.

If my indicators are bullish, I am interested in being fully invested. If my indicators turn bearish, I quickly rid myself of my weakest issues and place close mental stops on those remaining stocks, striving at all times to avoid losing money.

Now you can see why Timer Digest has rated Cabot Market Letter #1 numerous times. Combined with my Two-Second Indicator, Cabot Tides and Cabot Trend Lines, my Momentum System 1000™ offers you...

Five unique benefits that can lead you to spectacular long-term profits

Why should you use my Momentum System 1000™?

1. You'll only invest in the strongest stocks, even in weak markets. My system screens thousands of stocks, rejecting most of them, even so-called popular stocks. I'm really only interested in stocks that can bring 100%, 250%, 500%, even 1000% gains over the long haul.
2. You'll gain staying power, learning to sit tight even as profits soar, as long as the relative performance line is in a healthy uptrend. You'll gain a big psychological advantage. I'll train you to watch your strong stocks grow. You’ll learn not to be fearful of short-term corrections.
3. You'll have the tools you need to easily monitor your stocks. No overwhelming reams of paper, no super complex charts, no investment gobbledy-gook. Just a simple, easy-to-follow plan for profits.
4. You'll be able to discover relatively unknown stocks, leading to some spectacular results.
5. You’ll know when to sell your weak stocks. This is a key to real profit-taking. While I firmly believe in a patient, disciplined approach to stock investing, I also believe in selling when it's time to sell. No emotion here. Just a winning approach than can protect your portfolio.

You can find out the full story of how my Momentum System 1000™ works in another Free Special Report I'd like to send you called Momentum System 1000 How to Pick Winning Stocks with Scientific Precision— more about this in a moment.  

America’s most unique stock advisory: Cabot Market Letter

If the information I know about you is correct, chances are you currently subscribe to at least one other investment or stock newsletter.

But here's why my newsletter, Cabot Market Letter, has been America's most unique stock advisory for the past 37 years.

You see, Cabot Market Letter is the only newsletter that helps you discover super concept stocks — that can grow 100%, 250%, 500%, even 1000% — using my proven, disciplined, easy-to-follow Momentum System 1000™ relative performance (RP) approach.

I’ll let our subscribers describe its value…

    “The Cabot Market Letter gives you information that you absolutely need to be in the stock market — market timing indicators and a selection of fast growing stocks.”—L. Marchetti, Midlothian, VA

    “It's excellent. If the Cabot indicators are not saying 'buy', don't buy anything. (Well, maybe cash and bonds.)”—M. Timlin, Redwood City, CA

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    “The best letter from top to bottom I have ever received…There are some losses but the gains greatly out number the losses.”—R. Mullis, CPA, PFS, Kingsland, GA

    “I often recommend Cabot to fellow investors. I just give them examples of winning stocks I've found through your newsletters.”—R. Kieft, Anchorage, AK

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Seven profit-making, portfolio-protecting advantages to give you a distinct edge

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Cabot Market Letter makes stock investing easy for you. Our winning Model Portfolio typically holds no more than 12 super stocks.  Twice each month, you follow our portfolio recommendations to buy, hold or sell. It's that simple.

How well has the Cabot Market Letter Model Portfolio done? *

* Over the past five years, our portfolio has gained an impressive 122%, a full 74% better than the S&P 500, which returned only 70%.
* Over the past three years, our portfolio gained 51%, a full 41% better that the S&P 500, which gained just 36%.
* And through the first ten months of 2007, our portfolio was up 47% versus the S&P 500, which gained only 8%.

*As of 10/29/07.

2. You’ll safeguard your stock investments with proven "Sell" indicators — your best insurance against big losses

One of the best things about my Momentum System 1000™ is that it's free of emotion. I never get so attached to any one stock that I hold it too long. When my proprietary indicators, particularly the RP lines, show “Sell,” I tell my subscribers to sell in the pages of Cabot Market Letter, on our website and in our email updates.

How well has my Momentum System 1000™ done?

* Momentum System 1000™flashed a sell signal for Enron in March 2001, when it was trading at 61.  A few months later, Enron was trading for pennies.
* In February of 2006, we told subscribers to take their profits of 396% in XM Satellite Radio (XMSR) as it began to break down.  At the time, it was trading at 25; by July it had fallen to 10.
* In May of 2006, we recommended selling Trident Microsystems (TRID) at 26; a year and a half later, it had fallen to 7.

My point is that Momentum System 1000™ can help you enjoy BIG profits and get out before impending declines. In each case above, the general public had no advance warning of lower prices. But I did!

3. You’ll keep yourself on the right side of the market with my proprietary timing strategies

I make sure that all my market timing signals are easy to understand in each and every issue of the Cabot Market Letter. As I mentioned earlier, Cabot Market Letter not only tracks my highly effective Two-Second Indicator, it also updates you — in plain and simple terms– — on Cabot Tides for the market’s intermediate term trend and Cabot Trend Lines for the market’s long term trend.

4. You’ll receive email Hotline messages for additional peace of mind

Your subscription to the Cabot Market Letter also brings you a weekly Hotline message that’s emailed directly to your inbox. This Hotline includes our latest thinking about the market and updates you on all recommended stocks in the Model Portfolio.  And when the market – or any of our recommended stocks – is especially active, we send a special additional Hotline message.

5. When you’re not in email contact, you can call our telephone Hotline

Hotline messages are also recorded so you can call in on our toll free line any time, 24 hours a day, 7 days a week. How valuable has this Hotline been? Consider the words of R.M.C. of Ft. Myers, FL: 

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6. You can email the editors directly — and you will get an answer!

That’s rare these days, but personal contact is a tradition at Cabot, and we’re not about to break it.

7. Finally, you get the security and comfort that comes from our 37-year-old heritage.

Since 1970, hundreds of thousands of investors all over the world have come to rely on Cabot for high-quality independent investment advice. Each issue of Cabot Market Letter also includes:

* Stock Market Focus   This covers the state of the stock market...the monetary environment...investment warnings...and key stock market investing trends. You'll gain important insights into new profit opportunities and avoid disasters.
* Model Portfolio Updates   Each issue of Cabot Market includes charts and commentary on each recommended stock, so you know exactly what to do.
* Momentum Analysis Update   Discover my latest research on key stocks with positive RP lines that can lead you to dramatic, even spectacular stock profits.
* Successful Stock Tips   You'll learn the best money-making, safe-investing tips we’ve developed over our decades of research.

When you add it all up, Cabot Market Letter offers you a powerful, proven, disciplined way to make superior stock profits of 50%, 100%, 250%, 500%, even 1000%.

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When you order by December 31, I'll send you...

FREE Special Report #5: The 12 Worst Stocks to Own Now An underrated part of investing comes from something you don’t do — by avoiding well-known stocks that sport poor longer-term fundamentals and chart patterns. If most investors simply steer clear of these losers, their returns would be sure to increase. In this Special Report, you’ll learn the names of 12 stocks to avoid and why.

And, your order is protected by my Personal Double-Money-Back Guarantee

Ever since Cabot was founded in 1970, we've done everything within our power to make certain our clients profit from our advice. Over the years, I've honored that commitment by offering an unheard-of double-money-back guarantee. 

That means if you're not impressed and delighted with the profits you gain from my recommendations, just let me know in the first 60 days — I'll send you a 100% refund, no questions asked. After that, if you're ever unhappy, we'll send you a full refund on the balance of your subscription. And of course, you can keep all the special reports and issues as our way of saying thanks for giving the Cabot Market Letter a fair try.

You may think that I'm sticking my neck out making a guarantee like this. I'm not, really. After all, Cabot Market Letter is one of only a handful of newsletters that have been published for more than three decades. When you deliver what you promise, people stick with you.

If you're satisfied with 5% or 10% gains on your stocks, you don't need Cabot Market Letter.

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I look forward to helping you become a smarter and wealthier investor.

Sincerely,  

Timothy Lutts   

Chief Investment Strategist

Cabot Market Letter

P.S. As I mentioned in my letter, four unstoppable forces bigger than any President, any act of Congress, or any government mistake — will fuel a rising stock market, and ignite my #1 concept stock of the year.

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