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Clouds Finally Part for Solar Stocks?

Cramer went dark on the solar stocks back in late 2008 when oil was plummeting from its summer high of about $145 to land at a lowly $34 and change in February of the following year. When crude’s that cheap, no one’s thinking about alternative energy.

Besides, by that point in the Great Recession, governments across the globe were cutting back on spending, which dried up the subsidies on which this industry so deeply depends. With the solar biz getting hit from both sides, it just made no sense to recommend these companies.

Until now.

Oil’s back up to $83, making those subsidies less necessary, and an apparent pickup in solar plant construction (see here, here and here) is making the group a more viable investment. The sector isn’t surging by any means. Let that be known. But Cramer’s seeing enough positives to warrant at least some attention in this otherwise overpriced market.

His top pick is MEMC Electronic Materials, which makes polysilicon wafers, or “the building blocks of solar panels and semiconductors,” as Cramer described them. This is far from the top solar stock out there, but that’s why he likes it. WFR has been brutally beaten down 84 percent to around $12 from as high as just under $76, where it was when he first told “Mad Money” viewers to sell it back in April 2008. It looks to have bottomed, though—after five straight missed quarters—and has been soaring since early August, up 31 percent from its multiyear low of $9.

Three things sparked Cramer’s interest in this particular company: Insider buying, with WFR execs acquiring nearly 200,000 shares in the last two months. A key analyst, Richard Prati of Gleacher, predicting that next year’s earnings estimates are way too low. And the sale of the largest solar plant in Europe.

SunEdison, MEMC’s solar subsidiary, unloaded its Italian property for $380 million, or almost half of what MEMC expected SunEdison to build and connect for all of 2010. Cramer likes the parent company-subsidiary relationship here because SunEdison can use MEMC’s silicon wafers and offer customers financing through its parent, which further drives wafer sales. The Italian project alone represents about 65 percent of MEMC’s annual wafer shipments, Cramer said, which illustrates “how huge this is.” Plus, SunEdison gives MEMC ground-level visibility into its end markets.

Granted, MEMC’s main business is producing silicon wafers for semiconductors, but that business is already doing well and getting better. So with solar showing signs of improvement, too, both of this company’s businesses are improving. Understandably, though, the analysts don’t care. Not after such a track record of disappointment. But with the bar set so low, Cramer said, “MEMC seems poised to blow away the numbers by the fourth quarter.”

That means you can all but ignore the third-quarter earnings coming Oct. 18. This is a story for Q4 and beyond. Cramer only mentioned WFR now because he doubts the stock will pull back much more after what most on the Street expect will be lackluster numbers in a couple weeks. At most, he sees a downside risk of only two or three points, though the upside potential is as high as $10. And it’s cheap, trading at just nine times expected 2012 earnings despite having a 17.5-percent long-term growth rate.

“Believe your eyes,” Cramer said, “solar is improving in value. And MEMC is the lower-risk way to play it.”

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

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