Solarfun Power Holdings (SOLF – Nasdaq)

Dear Bottarelli Research Member,

I’m happy to report that we’ve had yet another great run in some of our recent picks. Both JA Solar Holdings (JASO – NASDAQ) and WorldWater & Power (WWAT.OB) in particular have advanced much higher, putting you in position to lock in tremendous short-term profits.

Earlier this week, I mentioned to Bryan that JASO was responding beautifully to the patterns of my 3-step system (using the 9-day moving average as the launch point). This forecast has been spot-on correct, and I still believe that JASO can blow through $40 per share. After all, JASO has shown the ability to move faster than a greased hog in a rain storm, so let’s maintain exposure for further gains. But on the same hand, I also hope that you’ve taken half of your profits off the table. After all, a 50% return in just a few weeks is nothing to shake a stick at, so be sure to lock in half of your profits and let the remaining half of the position ride.

Moving over to WWAT, it appears that the stock is using the 18-day moving average as its sweet spot, which means we could see continued upside movement in the coming months. But similar to the JASO play, I can’t ignore a 73% gainer in a matter of weeks, so let’s take half of our profits off the table. After locking in those gains, let the remaining half of the position ride for further upside.

I also want to comment on the recent trading patterns of Parker Drilling (PKD – NYSE). Currently trading for $10.50 per share, the stock is down from our $11.53 entry point. When we entered this position on June 19^th, oil stocks had been making a strong run, but then they suffered a momentary and minor price correction. I feel this is nothing more than a healthy down-move that has occurred within the parameters of a longstanding upside trend, so I’m very confident with holding the stock. Look at it this way: Oil drilling is NOT going away. I see no imaginable circumstance where oil drilling or exploration will decrease, and that means big future potential for PKD – especially since they also have an oil tool rental segment of their business. This could be one of those plays that you tell your grandchildren about, so let’s certainly maintain our position in PKD.

Now let’s dive into this week’s pick, because I’ve just received some valuable information that I want to share with you right away.

You see, a member of my private inner circle just got back from Taiwan, where he spent some time looking into solar manufacturers. After speaking with him, I realized that the information that he shared with me was so powerful, I decided to temporarily hold off on the recommendation that I was planning to issue you this week – and replace it with another solar company that’s ready to take off.

As you read above, JA Solar Holdings (JASO – NASDAQ) has been a tremendous short-term winner for us, and the company I’m going to recommend to you today could be just as good — if not better.

While you won’t find this topic covered anywhere in the mainstream media, it has come to my attention that oil and natural gas producers are starting to look into “mini solar plants” to drive the pumps that extract oil out of the ground. (I’m sure you’ve seen these oil pumps in fields across our great land.) These conventional pumps are powered by filthy diesel fuel, but that could soon be a thing of the past.

From what I’m hearing, solar energy could soon be powering these oil/gas pumps, and the company you’ll learn about today is one of the top players in this field. They manufacture PV cells, with services throughout Europe, China and the Pacific Rim. They’re a 100% in-house manufacturer that’s been building their sales force and adding to their production plants with the hopes of making a move into the United States very soon. Since California just gave them the “OK” for special rebates on solar programs, the timing for this play has never been better. What’s more, the reason I want to get this recommendation out to you right away is because we’re picking up shares at (what looks to be) a very nice bottom. In fact, this bottom formation has now been confirmed by my technical system – which warrants an immediate investment.

The company is called SolarFun Power Holdings (SOLF – NASDAQ) and I’m recommending it anywhere at or under $10.35 per share. A move back up to its recent high at $17.00 would be a great near-term return, with the potential for much larger gains in the months that follow. So on that note, let me turn things over to Bryan for an inside look at SolarFun Power Holdings (SOLF – NASDAQ).Have a good week!

One last note: I also want to mention that I continue to hear good things coming from Big Cat Energy Corporation (BCTE.OB). Everyone that’s involved in CBM drilling is watching this company very closely, simply because the amount of money their technology will save is astonishing. The trigger point is that BCTE is still waiting on their next round of permits, but they should be coming out very soon. These new permits could really put BCTE on the map, so be sure to maintain your position for a pending upside move.

Breaking News! We just received some great news out of Idaho General Mines (GMO – AMEX).The company announced today that they’ve completed a drill program at their Mt. Hope project which has yielded data confirming high-grade Molybdenum.

According to CEO Bruce Hansen, “These drill results confirm the project’s high-grade core and support Mt. Hope’s robust economics, particularly in the early years of production.” As you can see by the chart above, this announcement is very positive for GMO shareholders like us, but to be honest, this is only the beginning. Continue to hold GMO for further upside!

Sincerely,

TheStreet.com Calls Them “An Easy Double”
I Call Them “A Steal” Anywhere Under $10.35 Per Share

When a market sector is hot, it’s important for investors like you and me to capitalize on the upside momentum in every way possible. As you can clearly see from the returns we’ve made on WorldWater & Power (WWAT.OB) and JA Solar Holdings (JASO – NASDAQ), the solar energy market is red hot. So in order to fully maximize this market trend, we’ll be making another solar recommendation in today’s small-cap alert.

In order for you to fully understand the remarkable investment opportunity presented by solar energy, I urge you to go back and re-read the previous small-cap alerts from Friday, June 1^st and Friday, June 8^th. This will refresh your memory on the potential of solar energy and the investing thesis that’s now available in Photovoltaic solar technology.

But as a quick “CliffsNotes” review, Photovoltaics (or PV for short) is a solar power technology that uses solar cells to convert light from the sun into electricity. Assuming a conversion efficiency of 8%, these solar power systems could provide more than the world’s current total primary energy demand. That means solar cells could produce enough energy to handle the world’s current consumption of heat, electricity, and fossil fuels. That’s massive potential. And unlike fossil fuels, solar power is an endless energy source that does not lead to any harmful emissions. That’s why financial incentives (like preferential feed-in tariffs for solar-generated electricity) have sparked a new wave of solar PV installations in Germany, Japan, and the United States – creating an ideal investment opportunity for you and me.

Combine these incentives with an energy payback of 1.5 or 2 years (with expectations of a 12-month payback within a few years) and the case for explosive PV growth is quite clear.

Now here’s the thing: With that tremendous potential as a backdrop, the raw-asset that makes solar power technology possible, called polysilicon, is facing a major supply crunch.

Since polysilicon is the key component for solar panel construction, the future growth of solar companies depends on having enough polysilicon to meet the demand. That’s why I recommended shares of JA Solar on June 8^th, because JASO has already locked up all the polysilicon wafers they need in 2007 – and they’ve already secured 70% of the supply needed for 2008.

In a savvy move, JASO used the proceeds from their recent IPO to lock up polysilicon in deals called “pre-payments.” In fact, if you look at all of the solar IPOs in the last 18 months, you’ll see that JASO has funneled back a whopping 47% of their IPO proceeds for polysilicon pre-pays. This is by far the largest pre-payment of any public solar company, giving JASO the enviable position of 18 months of polysilicon supply without pricing competition.

Company	Reinvestment
JA Solar (JASO – NASDAQ)	47% reinvestment
SunTech Power (STP – NYSE)	22% reinvestment
Canadian Solar (CSIQ – NASDAQ)	26% re-investment
SolarFun Power (SOLF – NASDAQ)	34% reinvestment
Trina Solar (TSL – NYSE)	28% reinvestment

But what’s also interesting is that the second-largest polysilicon pre-payment came from SolarFun Power (SOLF – NASDAQ). And unlike the other solar plays, SOLF has been unjustly punished to the downside, setting up an incredible buying opportunity for you.

Here’s the situation…

Solarfun Power manufactures and sells photovoltaic (PV) cells and PV modules in the People’s Republic of China, the United States, and Europe. Founded in 2004 and headquartered in the People’s Republic of China, SOLF produces monocrystalline silicon cells multicrystalline silicon cells, which they sell to solar energy firms, engineering and design firms, and energy distributors directly through third-party distributors.

Just like JASO, SOLF is favorably positioned to meet their expected silicon supply for the remainder of the year. They’ve also been growing at a tremendous clip. According to their May 30^th earnings announcement, sales grew 86% year over year. And looking at their business outlook for 2007, they expect net revenue to come in between US $250 to US $270 million, representing year-over-year growth of 209% to 234%. They also expect PV product shipments to hit between 70 and 80 MW, which represents year-over-year growth of 210% to 254%.

By all counts, SOLF looks to be a very strong investment in the years that come – but fickle Wall Street investors have been punishing the stock recently. Why?

Well, the primary reason is because their May 30^th earnings showed them losing a penny a share, and this triggered a whopping 23% sell-off that took the stock below its $13.00 IPO price. As you’ll see, this short-sighted downside reaction presents you with a remarkable buying opportunity.

The success of companies like Solarfun depend largely on governments to subsidize the purchase of their products, but slow-moving governments in Spain and Italy caused a short-term dip in SOLF’s numbers. You see, delayed solar subsidy legislation in both Spain and Italy had a negative impact on SOLF’s latest quarterly numbers, and this caused them to report a one-cent loss. Combine that situation with a nasty 6% drop in the Shanghai Composite, and SOLF really got unjustly slammed to the downside.

But here’s the important part: The stock will quickly bounce back. Here’s why:

First off, the legislation in Spain and Italy will eventually get passed. Considering the worldwide shift towards green energy legislation, it’s not a question of “if” but rather a question of “when.” That’s why I view the May sell-off as a very temporary event.

Secondly, the U.S. House of Representatives have already started modifying an energy bill expected to call for increased use of alternative energies. In fact, this bill will contain $15 to $20 billion in tax credits for alternative energy users, and this will provide a lift for the solar industry across the board. Voting on this amended bill is expected for the week of July 9^th, which could be used as a near-term upside catalyst.

Also setting a strong standard for the solar industry is the state of California. The California Energy Commission, in fact, just approved SOLF’s products. This means they’re now eligible for the state’s solar rebate program, which could provide a sales boost in their next earnings report.

So what you have is a stock in a very strong and growing industry that has been hurt in the short term – but with new incentives that’ll eventually get unveiled in Spain and Italy combined with new U.S. legislation set in motion by California’s lead, the future looks quite promising for SOLF.

Furthermore, the stock has very strong internals. They have US $98.1 million in cash and US $183 million in working capital. And since their latest earnings report came out lower than expected, their forward P/E now comes in at a super-low 2.52. It’s this valuation that caused TheStreet.com to say, “Solarfun could be an easy double at these price levels.”And since only 2.8% of the shares are held by institutions, the stock has a lot of room to move up should big-time institutions begin to accumulate shares.

All things considered, I think picking up shares anywhere under $10.35 represents a very strong buy. The company has incredible growth ahead of them in China, the demand for their solar modules and photovoltaic energy will continue to grow, and they’ve locked up the raw polysilicon asset for the next few quarterly cycles. They also have a super-clean balance sheet and possess a ton of cash compared to their market cap. All in all, the stock is poised for a snap-back rally above its recent high of $17.00.

But that’s not all. The real kicker could be the immense applications of the solar industry on the oil and gas sector. Since oil and gas exploration usually takes place in remote areas (far from utility lines), the case for using solar power in these remote locations could be an extremely reliable and economical energy source. And thanks to new solar power technology, the monitoring of gas and oil lines is now easy, reliable and inexpensive. Just imagine the explosive demand for solar power if major oil names apply PV panels to their oil rigs (pictured below both on land and on sea).

A small photovoltaic array could easily power this oil equipment, and this future demand could take solar stocks like SOLF to a whole new level. All things considered, buying the stock anywhere under $10.35 is a steal. So let’s use the current price dip as a prime opportunity to add shares of SOLF to our small-cap ledger.

PLAY: Buy shares of Solarfun Power Holdings (SOLF – NASDAQ) at or under $10.35, good for the week.

Sincerely,