Answers to Recent Solar Stocks Questions from Investors
Solar Stocks and Market Commentary with J Peter Lynch
Point Roberts, South Salem, New York – January 20, 2011 - Investorideas.com, a leader in cleantech stock research tools issues new solar stocks commentary from solar contributor, J. Peter Lynch. Mr. Lynch provides answers to recently submitted solar questions from his followers.
Solar Stocks Commentary with J Peter Lynch -
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Questions regarding Solar Stocks and meaning of Relative Strength
J Peter Lynch
I have received a number of e-mails since we started publishing our solar stock ratings table and the majority of the questions center around the term "relative strength".
As readers have seen in my year end article that the strongest "relative" solar stocks dramatically outperformed the markets in 2010, 42.94% to 13.87% , while the average solar stock actually decreased (-14.6%) in 2010, this is significant out performance and certainly worthy of note.
Most people seem to understand what relative strength means, on the surface - that one stock is stronger "relative" to another stock or that one stock is stronger "relative" to the market as a whole.
I use a proprietary method for measuring and comparing stocks to stocks and stocks to the market as a whole and I am sure there are other methods available that can be utilized that I am not aware of.
However, I have always found that an "example" is ALWAYS better than a bunch of words. So I have picked an example that will CLEARLY show the power of this selection process and how truly valuable it can be to investors, especially over the longer term.
I will compare two IDENTICAL portfolio of stocks
The first is the Standard and Poors 500 – symbol SPX
The second is the Rydex Standard and Poors 500 Equal weighted – symbol RSP
Both include the EXACT SAME 500 stocks except that the SPX is CAP (capitalization weighted) so that the largest stocks hold for a larger weight i.e. percentage of the total 500 stocks and the other, RSP in which EACH stock has an equal weight in the index.
When I compared these two indexes to each other I found that in early 2000 that my system indicated that the RSP had just turned positive against the SPX – which means it was the stronger (relative to each other) of the two.
To see how significant this indication was I went back to 1/1/2000 and compared the performance of both up to the close yesterday 1-19-2011 – over a ten year + period.
The results were:
SPX was down 12.69% over this decade long period and the RSP was UP 69.92% over the exact same time period with the exact same stocks included. Amazingly the RSP outperformed the SPX by over 650% in that period.
I think this illustration is a crystal clear example of how significant it is for an investor to make sure they invest in the "strongest" stocks relative to markets and to their peers and not just what they hear in the press or on TV that tells them what is "hot". The most important thing is to see what stocks or groups are the strongest relative to others and bet on those. Bet on "what is" NOT on what people think "emotionally" are the best stocks.
Remember what I said in my year end article:
"Let me give you a totally NON logical example that will make it clear that guessing and perhaps "logical" are not really good tools for an investor. I think I can safely say that the top topics for 2010 and the ones that are on everyone's mind are: jobs, the economy, the housing crisis and the persistent recession as it drags on. So, given that background, what do you think were the top 3 market sectors in 2010 in terms of returns for investors?
Give up? Can't even guess?
Well they were:
All of them are consumer related and we all KNOW (for sure?) that this is a terrible recession and that the economy is in bad shape and that it would be impossible for consumer related areas to do well, right?
Wrong! They not only did well they were the best 3 areas.
So what can we learn from this?
What we can learn is that an investor has to STOP thinking they KNOW what "should be" given the circumstances as the investor sees them and realize that the most important thing is NOT what you think should be but "WHAT IS". If umbrella sales are going thru the roof during a massive drought – forget about what you "know" – BUY umbrella stocks!"
Mr. Lynch has worked, for 33 years as a Wall Street security analyst, an independent security analyst an investment banker 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 advisor 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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Disclaimer: The views and opinions expressed in the research published are those of the individual companies and writers and not necessarily those of Investorideas.com® or any of the industry sector portals. At the time of publication, writers may hold positions in the stocks or companies mentioned.
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