Ascent Solar Technologies (ASTI – Nasdaq)

Dear Bottarelli Research Member,

Welcome back!

While the markets remain in a state of turbulence, I find it interesting that the “talking heads” in the financial media continue to paint an absolutely dismal feeling about the markets.

In times like this, where everyone has the same bearish sentiment about the market, I’ve learned that these are where the most dramatic turnaround points occur. In fact, you won’t hear this anywhere else, but I now believe that we have some strong headwinds which will lift the markets. By the time Q4 rolls around, I truly believe that the major market averages will be much higher than where they stand today.

The only possible threat of further downside action is the ongoing talk of Israel attacking Iran – and this truly makes me quiver in my boots. Therefore, I’ve asked Bryan to add a new downside put to our small-cap ledger to act as a portfolio insurance policy. He’ll outline the specifics of this position in his write-up below.

As we head into the second half of the investing year, our strategy of adding the highest-quality small-cap names for heavily discounted prices continues to make tactical sense. In fact, one of my all time favorite investing books is Jack Schwager’s “The New Market Wizards: Conversations with America’s Top Traders.” In the book, Schwager conducts a series of interviews with some of the most successful and wealthy traders on Wall Street – and the one thing that they all have in common is the innate ability to strike while the majority of investors are running for cover. This is truly a unique and lucrative talent, and my friends, this is exactly the strategy we’ll be adopting in today’s small-cap alert.

You see, we’re jumping back into the solar sector this week and with a company that I’ve had my eyes on for quite some time. In fact, for the last two months, I’ve been patiently awaiting the right time the strike — and that time has now arrived.

If you’ve been a Bottarelli Research Small Cap member since early 2007, then you surely remember the explosive profits we made with solar names like JASO, SOLF, and CSIQ (all of which gained over 200%). I believe today’s new pick will deliver similar returns.

When it comes to the solar market, this company was one of the very first movers in a powerful new solar technology that could pay off in a big, big way. The company was created in 2004 to commercialize CIGS Photovoltaic Technology (which was a type of solar technology previously developed by their parent company). Since this spin-off, they executed contracts for a number of major entities, including the U.S. Air Force, the National Science Foundation, the National Renewable Energy Laboratory, the Defense Advanced Research Projects Agency, the Missile Defense Agency, and NASA.

Their solar technology is unique because they have developed a way to use thin-film PV overlaid on plastic, which offers customers the ability to take large solar “rolls” and easily integrate them with various construction materials.

The end result is called Building Integrated PV (BIPV) products, which are used for both commercial and residential applications. In fact, if you’ve seen pictures from space with solar panels attached to satellites, then that’s the solar technology behind this company’s innovation. Another major benefit is that this form of solar panel construction is much less expensive than traditional solar panel manufacturing, and that’s why this company’s solar products are receiving increased attention from commercial and residential customers alike.

Now, in past small-cap alerts, you’ve most likely heard me preach about the growing amount of homeowners who are now demanding that solar panels come included on any new home construction project. Once the housing market turns the corner (and I have indications that it could soon!) I’m completely convinced that every new homebuyer will require some form of alternative energy technology come included in the construction of their home (or building). It’s just a matter of time before consumer demand forces builders to incorporate this technology in every new project that they develop. As you’ll see below, this company’s CEO feels that his solar panels will soon be as prevalent in future construction projects as plywood!

As early stage investors, we must realize the huge potential that’s coming our way and fully capitalize on the opportunity. And in this case, the best way to accomplish this strategy is by investing in this small-cap company’s unique and cheap solar panel technology.

Just imagine, for a moment, the growth that lies ahead for this company’s lightweight, inexpensive, and extremely durable solar technology. It could be used in large commercial buildings, master planned communities, and residential homes – with further applications in markets like solar blinds, roller shades, solar tents, solar awnings, solar roofing tiles, and possibly even solar windows. That’s a massive market segment! And remember, that doesn’t even include any of the current demand from the governmental space or military contracts!

Furthermore, this little gem has geared up for some major production this year, and the list of customers they are working with is incredible. For example, Hydro of Norway has taken a 35% stake in the company. Now that’s some muscle! They also have inked agreements with ITOCHU Corporation of Japan (an operator of over 600 domestic and overseas subsidiaries) and Icopal Group of Denmark (an operator of 35 manufacturing sites in Europe, North America, and Asia). Then, add to this list the U.S. Air Force, which just awarded them a 48-month contract valued over $1.5 million, and you can see that this company is well positioned to ride a multi-year growth trend in the booming solar industry.

While the market sells off, educated investors (like us) must rely on our research and due diligence and take advantage of huge opportunities being offered in market sectors that we believe will be leadership groups for years to come. Like I mentioned above, this is exactly the situation we have right now.

So on that note, today’s pick is called Ascent Solar Technologies (ASTI – NASDAQ). With the stock close to its yearly lows, our timing could not be better. Establishing a position at these levels will let us ride the next upside wave of solar power technology, and in the process, line our pockets with some glitter. On that note, ASTI is a buy anywhere under $10.00 with a very realistic chance to double by the end of Q4 2008.

UPDATES

Mercadolibre (MELI – NASDAQ): We were unfortunately stopped out of MELI in this market frenzy. I will keep close eye on it, as I continue to feel that they’re a great company with tremendous upside potential, but for now our position is officially closed. Sell.

Suntech Power Holdings (STP – NYSE): Here is another example of a grossly over-sold solar play. We’ve already taken a 50% profit off the table on STP, and now that the stock has pulled back, it’s time to buy back in. You can easily make great returns by taking advantage of great stocks as other investors panic and run for cover – and this represents one of the best examples I’ve come across in a while. Therefore, I’d like to add more STP to our small-cap ledger now. Buy!

International Coal Group (ICO – NYSE): Please use this market weakness to accumulate both of our small-cap coal plays: ICO and NCOC. The massive sell-off that we just witnessed in coal, gas, and energy was nothing more than Q2 profit-taking. You can bet that investors will soon come running back into these sectors with a vengeance, so let’s take the savvy approach and establish a position ahead of the herd. ICO and NCOC remain strong buys.

E-House China Holdings (EJ – NYSE): Although the stock down form our original entry price, we told you the last time EJ traded down at these levels to buy it. As you know, this advice lead to some sizeable short-term profits. In fact, some members wrote in to report profits of 30%, 50%, and even 73% the last time it traded at these low levels. So once again, let’s capitalize on the recent pullback and add shares of EJ to our ledger. After all, being nimble in this market is not only smart, but it’s very prudent as well. Let’s carefully add EJ and plan to take quick profits on any forthcoming price jump over 30%. Buy.

Side Note: Another bullish catalyst for EJ is my view of the Chinese markets. As you can see from the FXI chart below (which is a collection of top Chinese companies), the chart has taken quite a fall – but could now be hammering out a near-term bottom. Therefore, I expect to see the Chinese markets pick up steam starting in about 60 days (perhaps even less). If this occurs, it could offer a boost to all of our China-based positions.

Minera Andes (MNEAF.OB), Metalline Mining (MMG – AMEX), Polymet Mining (PLM – AMEX) & Ivanhoe Mines (IVN – NYSE): Our collection of small-cap mining stocks all took a hit last week as the whole mining sector got beaten down. Now remember, each of these companies are involved in their own unique market niche, whether it’s drilling, production, or exploration. Since the global growth story is not going away – as a matter of fact, I expect it to get even stronger! – I fully expect to see the mining sector rebound. Therefore, each position remains a hold. Hold.

Accuray Incorporated (ARAY – NASDAQ): The maker of the revolutionary non-invasive CyberKnife treatment announced that Japan’s Ministry of Health granted approval of the CyberKnife Robotic System for use in treatment of extra-cranial tumors. Also, the Centre Hospitalier de l’Universite de Montreal just purchased a CyberKnife system to treat both intracranial and extra-cranial tumors in the lung, spine, and prostate. These are big moves for ARAY, which leads me to believe that their technology is finally beginning to gain approval around the globe. Though ARAY shares are below our original recommendation, their technology will eventually replace the old way of surgery, and that’s why I want to maintain ARAY in our small-cap ledger. Hold.

Brigham Exploration (BEXP – NASDAQ) & Northern Oil and Gas (NOG – AMEX): After locking in profits on our two Bakken Oil plays, let’s now let the markets take them each back down to levels that make it attractive for us to re-enter. To my eye, BEXP under $13.00 and NOG under $11.50 would qualify as attractive re-entry prices. The Bakken Oil discovery is getting a lot of attention, so we’ll make sure to re-enter both positions when the timing is right. I’ll give you the official go-ahead in a forthcoming small-cap alert. But for now, keep a close eye on both BEXP and NOG.

On a personal note, I’ll be leaving this week for my yearly “inner circle” summit with many of my most trusted contacts. One member retired from the oil business after 40 years, and I tell you, the man is like a walking encyclopedia when it comes to the U.S. Geological Survey (USGS). So as you can imagine, I’m thrilled to be picking his brain for investing ideas, and I’m sure I’ll have some great opportunities to share with you in the weeks that follow.

Until then, have a great weekend. And be sure to give thanks for the abundance in your life.

Sincerely,

“Ascent Solar Technologies’ vision is to see the day when BIPV will become pervasive as a building and construction material much like plywood is today…”

- Matthew Foster, Ascent Solar President and CEO

“Solar power could be ‘Bigger Than The Internet By An Order Of Magnitude.’”

- Ray Lane, Partner at venture capital firm Kleiner Perkins Caufield & Byers, famous for being among the very first backers of Google, Amazon, and Netscape

As Mark mentioned above, we’ll begin today’s alert by establishing a protective put position that increases in value as the major market averages decline.

In the past, we have used put options on the Dow Diamonds (DIA – AMEX) as a way to protect ourselves against downside market movements. But today, I’ll be recommending an even more powerful position which comes in the form of the UltraShort S&P 500 ProShares (SDS – AMEX).

The benefit of the SDS is easy to understand. Instead of moving at the same rate as the major market averages, the SDS is a special investment vehicle that moves at a rate of twice the inverse of the daily performance of the S&P 500 index.

For example, if the S&P 500 moves down 2%, the SDS is designed to move up 4%. Thus, it’s referred to as an “ultra-short” position. As you can imagine, owning a position in the SDS is a wonderful way to hedge yourself against falling markets. And thanks to the leverage of put options, we can multiply the effectiveness of this ultra-short position even more. So today’s first order of business is adding a new call play on the SDS.

PROTECTIVE PLAY: Buy the SDS August 75 Calls (SBJ HW) at or under $3.60, good for the week. Plan to sell this position if it increases 25% (or more) above your original entry price. Also place a protective stop limit at $1.75.

Now that we’re equipped with this new protective SDS call play, let’s move into today’s new pick. And I’ll begin by following up on Mark’s comment about bear market opportunities by illustrating a quick and powerful point.

Consider this…

• On October 1^st 2002 (in the heart of the dot.com crash), shares of Apple Computer (AAPL – NASDAQ) were trading for the split-adjusted price of $7.26 per share.
• On that same day, shares of Amazon.com (AMZN – NASDAQ) were trading for the split-adjusted price of $16.95 per share.
• And not to be outdone, shares of Research in Motion (RIMM – NASDAQ) were trading for the split-adjusted price of $1.56 per share.

I’m sure you know why I’m bringing this to your attention. As I write today, shares of Research in Motion trade for $120.00 per share, a whopping 7,592% above October 2002 levels. Apple trades for $175.00 per share, good for a 2,310% increase. And Amazon trades for $75.00 per share, good for a 368% increase.

As you can clearly see, bear markets can create tremendous opportunities for those investors who are savvy, patient, and level-headed enough to properly take advantage of them. So in this spirit, today’s newest small-cap alert focuses on taking advantage of the recent market weakness by getting positioned in one of the most promising small-cap growth stocks operating in one of the most promising growth sectors: Solar Energy.

The case for solar energy is easy to grasp. As the world’s population increases, global energy demand will rapidly increase the depletion rate of our natural resources.

According to the Energy Information Administration’s annual report, world energy demand will increase 37% between 2010 and 2030. And the only way to satisfy our growing energy needs without compromising the environment is by using alternative energy.

Of all the alternative energy choices, solar power and wind power are the two that come with the least amount of public resistance. In fact, according to a May 2008 report by the U.S. Department of Energy, wind power could contribute 20% of the United States’ power by 2030. But since wind power is also one of the most unreliable alternative energy sources, this leaves solar power as the best available form of highly renewable and reliable energy with no carbon by-products.

As a super-quick review, solar photovoltaic (PV) technology converts sunlight into electricity using solar cells made from polysilicon. PV-related technology was first developed in 1954, but it was always cost-prohibitive since it cost more than conventional energy. But over the last 50 years, solar technology has dramatically improved, which has reduced the cost-gap relative to fossil fuels to near parity.

According to the “Renewables Global Status Report,” global PV production has increased from 1150 megawatts in 2004 to two giga-watts in 2006. But more importantly, each time that installed capacity doubled, the total production costs subsequently dropped 20%. Tthroughout 2007 and 2008, the skew has gotten even more attractive, making solar power that much closer to widespread application. This is a good reason why venture capitalist Ray Lane recently told The Wall Street Journal that he believes solar energy could be 10x bigger than the Internet.

Before you dismiss this as an absurd prediction, please consider the source…

You see, Ray Lane is a partner at the venture capital firm Kleiner Perkins Caufield & Byers, who is famous for being among the very first backers of Internet companies like Google, Amazon, and Netscape. So when Ray Lane describes solar power as “bigger than the Internet by an order of magnitude,” you know that this truly is a global mega-trend that cannot be ignored. That’s why the recent pullback in solar stocks should be viewed as such a gift.

Looking specifically at Ascent Solar Technologies (ASTI – NASDAQ), they’re a development-stage company that engages in the commercialization of photovoltaic (PV) technology for satellite, space, and terrestrial markets.

As Mark mentioned above, they use copper indium gallium selenide (CIGS), which is a special form of polycrystalline thin film. Just recently, the National Renewable Energy Laboratory modified the CIGS surface and achieved a 19.9% efficiency rating – a new world record. In fact, this is the highest rating (by far) compared to other thin-film technologies. No wonder venture capitalists have poured more than $344 million into CIGS companies in the last few years!

Using a plastic film coated with thin-film PV to turn natural sunlight into power for electricity, Ascent’s flexible and lightweight solar panels (pictured below) are more flexible and more affordable than traditional solar panels, which are rigid and easily breakable.

The benefits of this technology are:

• ASTI’s product will be manufactured in large roll formats using a proprietary monolithic laser-patterned cell integration process that enables individual cells to be interconnected during production (saving time and money).
• Modules are produced on durable and lightweight plastic, which results in a unique combination of high power levels, compactness, and flexibility. This is not offered by competing solar firms, and this enables ASTI’s solar products to be configured directly into roofing membranes (and other building materials). ASTI’s flexible solar cells pictured below.

Looking ahead, Ascent Solar plans to be the first solar technology company to take monolithically-integrated PV plastic into full-scale production. Their new “plug-and-play” module eliminates the vast amount of wires, cables, connectors, junction boxes, and conduit required in current solar systems. This is a major benefit for mainstream application. Plus, Ascent Solar expects their cost to produce electricity to be reduced from $0.20 per KW hour to $0.05 per KW hour (calculated based on U.S. Department of Energy models). This will tremendously help bring their solar technology to mainstream markets like large commercial buildings, master planned communities, and residential homes.

In fact, Ascent Solar estimates that their new BIPV solar rolls provide flexibility to cover up to 35% more area. When combined with the “plug-and-play” product improvements, the multiplying effect on cost can be remarkable. That’s why Ascent Solar President and CEO Matthew Foster said, “Ascent’s vision is to see the day when BIPV will become pervasive as a building and construction material much like plywood is today and becomes affordable for all in need of low cost electricity.”

Folks, that’s remarkable potential. But what I really like about the stock is the fact that it currently trades at the lowest market cap among its solar peers. With a market cap of only $157 million (compared to $2.64 billion for Energy Conversion Devices, $21.17 billion for First Solar, and $5.08 billion for Suntech Power Holdings), ASTI has a tremendous amount of upside potential.

Their balance sheet shows total cash of $63.75 million versus total debt of $4.14 million, which translates into total cash per share of $3.57. With a 52-week high of $28.36 on December 31^st 2007 and a 52-week low of $6.50 on August 16^th 2007, it shows you just how quickly shares of ASTI can move up. With shares now trading at $8.55, it appears like we have an ideal time to enter into the stock and ride the next upside wave. So on that note, let’s add shares of ASTI to our small-cap ledger now!

PLAY: Buy shares of Ascent Solar Technologies (ASTI – NASDAQ) at or under $10.00, good for the week.

Sincerely,