An Analyst’s View on Solar Stocks and Today’s Market

Q: Mr. Lynch: What do you think of this “crazy” market? Do you think it will continue? How do you view solar stocks and their recent activity? — Frank P., Jacksonville, FL

The current market is the MOST “crazy” market that I have seen in my 30+ years of observing the market. The one thing for sure, that I can tell you is that everything today seems to move “faster” than ever before. I am not sure if this is a result of the internet and instantaneous worldwide communications or some other reason. But the markets move much faster and further than they have in the past.

Stock Symbol

Current Value

%Change 3/1 – 5/31

%Change YTD

 

 

 

 

AKNS

1.2

13.2075

-30.2326

ASTI

6.05

124.91

60.9

CSIQ

13.23

268.52

104.8

CSUN

3.78

117.24

-4.3038

DSTI

0.67

-43.677

-28.6915

EMKR

1.31

90.2963

0.7692

ENER

17.21

-21.52

-31.73

ESLR

1.86

52.459

-41.69

FSLR

190.29

79.96

37.93

JASO

4.23

108.37

-3.2037

LDK

9.12

78.13

-30.49

RSOL

2.1

0

-42.47

SOL

4.24

75.21

-3.8549

SOLF

7.48

150.17

49.3

SOLR

6.42

50.35

122.15

SPIR

6.57

30.88

27.82

SPWRA

29.03

4.09

-21.54

STP

16.34

168.31

39.66

TSL

24.77

278.75

166.63

WFR

19.29

28.51

35.08

YGE

12.8

229.05

109.84

 

 

 

 

Average Change

 

89.7%

24.6%

 

 

 

 

S&P 500

919.14

25.04

1.76

S&P Equal Weight

1260.67

38.78

12.97

Dow Jones

8500.33

20.35

-3.15

Nasdaq

1774.73

28.78

12.51

As you can see from the table above the general markets are up close to 30% in the last three months and solar stocks have moved up and even more amazing 89.7% on average since March 1. Another way of looking at it is that solar stocks have given us an excellent 3- to 5-year performance in 3 months.

As a result, I would have to say that the market and solar stocks in particular are currently significantly OVERBOUGHT, just as I mentioned that they were dramatically OVERSOLD in early March of 2009. I do not think that they will continue at this current pace without a break and possibly a significant correction. No one can predict exactly what will happen, but I would say that the probabilities would favor a correction rather than a continuation.

If one looks a little more closely at some of the internal indicators of the stocks in the solar sector you will see that over 1/3 of the stocks we follow have recently had their momentum turn negative (an early sign of a reversal of direction), another 40 to 50% of our stocks have had positive momentum for close to 10 weeks in a row. Historically speaking this is a fairly long time for momentum in one direction and is usually followed by a reversal of momentum. Given this factor and the overbought nature of solar stocks in general I would be very cautious at this time.

If I owned solar stocks I would look to place protective stops or take some profits off the table, remember: no one ever went broke taking a profit. If I did not hold solar stocks I DO NOT think this is the time to jump in, thinking you have missed the boat. Remember the future of the industry is incredibly bright and there will be many opportunities in the future to take advantage of this dramatic growth. This is the time for patience NOT for fear of “missing” an opportunity and following the crowd, possibly over a cliff.

It reminds me of the paraphrased quote by John Maynard Keynes, the great economist of the 1940’s: “The markets are moved by animal spirits, and not by reason.” I think Keynes was referring to emotions when he spoke of animal spirits and right now the emotion that is gaining ground is “greed,” just as “fear” was paramount in March.

Remember: fear is the emotion at stock market bottoms and greed is the emotion at stock market tops — words of wisdom that all investors need to take to heart and add to their investment skill set.

Mr. Lynch has worked, for 32 years as a Wall Street security analyst, an independent security analyst and private investor in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this field. He was the contributing editor for 17 years to the Photovoltaic Insider Report, the leading publication in PV that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. He is currently a private investor and has from time to time been a financial/technology consultant to a number of companies. He can be reached via e-mail at: SOLARJPL@aol.com. Please visit his website for the promotion of solar energy – www.sunseries.net

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I have worked, for 33 years as an independent analyst and investor in small emerging technology companies. I have been actively involved in following developments in the renewable energy sector since 1977 and am regarded as an expert in this field. I was the contributing editor for the past 17 years to the Photovoltaic Insider Report, the leading publication in Photovoltaics industry that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. I currently am a consultant to a number of technology and solar related companies. I can be reached via e-mail at: solarjpl@aol.com. Visit my website for the promotion of solar energy - www.sunseries.net

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