The months of December and January were turbulent times for world stock markets with all the major indices losing significant value during January.

The NEX was no different. After a strong December which actually saw the index gain around 8%, an improvement over the previous two months, January saw the NEX fall 28% in the first four weeks before recovering to around 85% of its 1 December value.

The NEX lost value during the sell-off faster than the S&P 500, Nasdaq, or Amex Oil indices, reflecting the volatility associated with a clean energy sector that has a high proportion of young, high technology companies.

In contrast to the previous two months in which solar had led the way with big gains, power storage and energy efficiency companies proved most capable of surviving the crises in investor confidence that dominated the start of 2008. Out of the 18 stocks on the NEX that finished the period in positive territory six fell into those two categories while biofuels and biomass companies were also well represented.

The remainder of the index suffered significant loses with many stocks falling by around 25%-30%. Solar stocks lost around 28% on average, possibly a reflection on the aggressive valuations investors had put on some companies in the sector.

Top performer for the period was Ultralife Batteries, which manufactures long-life lithium ion batteries, with a rise of 39%. The company reported new orders worth over US$150m during December and January, and realises most of its revenue from the economically resilient military and defence markets.

The second top performer was LDK Solar, an anomaly within its sector. The company had a stellar month in December on the back of news that it signed a huge 10 year silicon supply deal, and relief that previous inventory accounting allegations appeared to be subsiding. LDK gained 78% in the last month of 2007 before falling in line with other solar stocks during January, to finish up 37% overall.

Worst hit was Power-One which lost around 65% of its value in 2007 and had a 49% fall in December and January. The company manufactures energy conversion systems for the infrastructure markets and has been losing money steadily since the end of 2006. While the company had no bad news during December or January the fall could reflect investor worries over its exposure to rising commodity prices.

Vertically integrated solar company Renewable Energy Corporation was the second worst performer with a 48% drop over the period. The company announced ambitious expansion plans in mid-January that would require a doubling of spending.

CEO Erik Thorsen appeared to be aware that the share price was plunging as he came to the end of a four and half hour announcement; he berated analysts, saying: “if any of you thought that this would be done with no cost, shame on you”.

Other solar companies to be hit hard were Sun Power, Q-Cells, Suntech and Conergy. Some analysts have welcomed the downgrading of valuations within the sector although typical p/e ratios of 100 still look ambitious compared to the S&P 500 average of 14.5. Energy efficiency companies such as Zhejiang Yankon Group, Capstone Turbine, Cree and Itron saw gains of up to 22%, an indication that analysts continue to like the business models of these companies, amid high energy prices and increasing political backing for the sector.