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Solar Stocks Plunge with Market but Ray of Hope Ahead

By Peter Lynch
Exclusively for InvestorIdeas.com
October 27, 2008

Since 2005 Solar stocks have been the “hottest” sector in the stock market, however, with an average Beta close to 2, the volatility of the solar sector has been simply breathtaking.

Unfortunately Beta and volatility works in BOTH directions and as you can see from the table below solar stocks have been down an average of 61% SINCE September 1 2008. The popular indexes have been down approximately 31%.

In essence, it has been a TERRIBLE time for the market as a whole and a WORSE time for the solar sector.


Symbol

Name

Performance %

AKNS

Akeena Solar, Inc.

-44.2

ASTI

Ascent Solar Technologies, Inc.

-56.9

CSIQ

Canadian Solar Inc.

-74.4

CSUN

China Sunergy Company Ltd.

-69.1

DSTI

DayStar Technologies Inc.

-44.9

EMKR

EMCORE Corporation

-38.6

ENER

Energy Conversion Devices Inc

-59.4

ESLR

Evergreen Solar, Inc.

-72.6

FSLR

First Solar, Inc.

-56.4

JASO

JA Solar Holdings Co., Ltd

-78.9

LDK

LDK Solar Company Ltd.

-69.5

RSOL

Real Goods Solar, Inc.

-49.8

SOL

ReneSola, Ltd. (United Kingdom) ADR

-73.9

SOLF

Solarfun Power Holdings Co.

-68.9

SOLR

GT Solar International Inc

-65.4

SPIR

Spire Corporation

-21.4

SPWRA

Sunpower Corporation

-59.2

STP

Suntech Power Holdings (China) ADR

-69.4

TSL

Trina Solar Limited

-67.4

WFR

MEMC Electronic Materials, Inc.

-61.8

YGE

Yingli Green Energy Holding Company Ltd

-80.1

 

 

 

 

Average Stock: 9/1/08 to 10/24/08

-61.2

 

 

 

 

Popular Indexes

 

 

 

 

DJIA

Dow Jones

-27.4

SPX

S & P 500

-31.7

NASD

Nasdaq

-34.4

 

 

 

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As I said in my last article (10-13-2008) – I think that a stock market bottom is close to being in place. There may be more crazy days and perhaps weeks ahead. But if you look at historical precedence, stocks should be higher 3 to 6 months from now. Especially now, that we are seeing the forbidden word “recession” starting to pop up everywhere. This is usually the classic sign that the market has bottomed and once everyone finally recognizes that the recession is here (I personally think we have been in a recession for 10 to 12 months already), the market will be up 20 to 30% off the bottom.  This is certainly NOT a sure bet, but when panic and fear are this palpable EVERYWHERE it has historically meant that investors have given up and capitulated.

If we look at the short history of solar stocks, they too, should be lifted by the market tide and should also move higher further and faster than the general market. They are ALL well oversold and still have a BETA which is roughly TWICE that of the general market.

In addition, if Senator Obama wins the Presidency it will be hugely BULLISH for all renewable sectors of the market (PV, wind, biomass, hybrid cars, solar thermal  etc .) this victory, plus a turn in the market could add an explosive charge to solar stocks.

As I have said many times in the past, I still see a number of serious problems that the industry will face in 2009 and beyond. But I do feel there will be at least one more rally that will enable traders to take significant profits. But once again, I have to warn investors that this is NOT for the faint of heart and only for nimble traders. In addition, because of the current situation in the financial world you want to MAKE SURE to only trade the solar stocks with substantial CASH positions.

I believe that the risks of inaction are so great that governments will have to finally act in concert to create much needed confidence and thereby reverse this crisis of confidence that is the seed of the current panic.

Remember the words of the legendary investor Warren Buffet, who has recently said that he is returning to the market with his personal investment dollars:

"We simply attempt to be fearful when others are greedy and greedy when others are fearful."

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Mr. Lynch has worked, for 31 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.

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