Solar Stocks Continue Weakness; Why are Solar Stocks down and when will they turn around?
Solar Stocks and Market Commentary with J Peter Lynch
Point Roberts, South Salem, New York - May 31, 2011 www.Investorideas.com, a leader in cleantech stock research, releases a new solar stocks review from contributor, J. Peter Lynch for May 31st. Mr. Lynch discusses why solar Stocks down and when will they turn around?
Solar Stocks Commentary with J Peter Lynch -
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See Peter's technical solar stocks review: http://www.investorideas.com/PL/Solar-Stocks-Review.asp
Solar Stocks Continue Weakness; Why are Solar Stocks down and when will they turn around?
J Peter Lynch
Solar stocks have continued their weakness relative to the market since the beginning of the year continuing their sub-par performance since January of 2010.
As I have mentioned a number of times in the past one of the best and simplest indicators, from my experience, is to compare the price of any stock to its 50 day moving average (50 Day MA) and its 200 day moving average (200 Day MA).
IF a stock price's is below its 50 Day MA it is a short term negative and it if is above its 50 Day MA it is a short term positive. These two points can be very successfully used to trade a stock it is moves above the 50 Day MA you buy it and if it breaks below its 50 Day MA you sell it.
If you look at the table below it lists all of the 22 Photovoltaic publicly traded stocks we follow in the U.S. markets. I think the numbers speak for themselves:
91% of the stocks are trading BELOW their 50 day MA. The only exceptions being SOLR which is the last remaining stock we hold and SPWRA which is up as a result of a purchase of control of the company by the French oil company TOTAL.
86% of the stocks are trading BELOW their 200 Day MA. The only exceptions being SOLR,SPWRA and EMKR.
In addition, 82% of the stocks (18 of 22) have their 50 Day MA BELOW their 200 day MA another very negative indicator. A healthy stock will always have its 50 Day MA ABOVE its 200 Day MA.
US Photovoltaic Companies - as of the close 5-27-2011
|ASTI||Ascent Solar Technologies, Inc.||1.32||1.802||2.988|
|CSIQ||Canadian Solar Inc.||9.28||10.19||12.839|
|CSUN||China Sunergy Company Ltd.||2.38||3.549||4.19|
|DSTI||DayStar Technologies Inc.||0.72||0.824||1.451|
|ENER||Energy Conversion Devices Inc||1.37||1.924||3.811|
|ESLR||Evergreen Solar, Inc.||0.73||1.355||3.163|
|FSLR||First Solar, Inc.||121.37||138.56||140.413|
|HSOL||Solarfun Power Holdings Co.||5.9||6.566||8.928|
|JASO||JA Solar Holdings Co., Ltd||5.67||6.348||7.212|
|JKS||JinkoSolar Holding Company Limited||25.29||25.539||26.526|
|LDK||LDK Solar Company Ltd.||7.02||10.461||10.793|
|RSOL||Real Goods Solar, Inc.||2.42||2.491||2.709|
|SOL||ReneSola, Ltd. (United Kingdom) ADR||7.2||8.795||9.948|
|SOLR||GT Solar International Inc||11.53||10.763||9.507|
|STP||Suntech Power Holdings (China) ADR||8.04||8.725||8.74|
|TSL||Trina Solar Limited (China)||22.02||26.703||26.346|
|WEST||Akeena Solar, Inc.||1.18||1.743||2.084|
|WFR||MEMC Electronic Materials, Inc.||10.12||11.601||11.932|
|YGE||Yingli Green Energy Holding Company||8.74||11.425||11.437|
Solar Seven Selection Criteria
Back in the beginning of 2010 I explained that we were rating all of our solar stocks and that the seven strongest stocks - later named - "The Solar Seven" were the strongest stocks among the industry. My rating system to select the "strongest" stocks is a proprietary combination of various relative strength measures, technical measures and some fundamental components.
What can we learn from this amazing performance in a terrible solar market?
What we can learn is that there are always stocks going up somewhere, even in a terrible market and if you select the "strongest" stocks in a given market segment you will, on average, do quite well. Even if, the strongest stocks are all umbrella's companies and we are in a drought - regardless of what you "think" you know or "think" should be - always remember that "what is, is" and always buy the strongest stocks in a sector or market. You may not always know "why" something happens, but you will, on average, do much better than most investors and most likely better than the market.
Why are Solar Stocks down and when will they turn around?
As to why solar stocks are down there are ONLY opinions and no real answer. It could be a number of things:
- Worldwide capacity is almost double worldwide projected demand
- Margins are, as a result of #1, probably going to shrink industry wide.
- The U.S. Treasury Grant may not be renewed after it expires at the end of 2011
- Recession has cast further doubt on the status of feed in tariffs worldwide
- General lack of any long term or coherent energy policy in the U.S. despite over 30 years of talk only and ZERO significant action.
But it is really not important to understand exactly why solar stocks have dramatically underperformed over the last 18 months. What is important is understand when to buy them and when to sell them. It requires buying and selling utilizing some form of system and to be constant. The system can be as simple as buying when a stock goes ABOVE its 50 Day MA and selling when it goes BELOW.
What you should NOT do is to buy stocks because you "think" or somehow "know" what they should do. That is a system that will, without question, leave you with far less money than you started with. You have to remember to look at "what is" and NOT what you think should be and always remember the words of Warren Buffer "Never lose money"
..if you find a system that works it will minimize your loses and let your profits run.
When will solar stocks turn around?
Solar stocks will give us a signal when they are starting to turn around. Stocks 50 Day MA will move ABOVE their 200 Day MA and stock's prices will break above their 50 Day MA. It will happen right before our eyes and also, at the same time, you will probably read in the press how hopeless the solar sector is and that it will never get better. At that point, the final group of sellers will finally give up and through in the towel and all that will be left will be buyers. That is the way it has always worked and I certainly believe it will happen this way again.
Keep in mind that there are two basic types of equity (stock) analysis. Below is a brief description of each and its primary purpose:
Fundamental Analysis - this is the analysis of the fundamental financial condition of the company to identify which stocks are stocks you may want to buy when the timing is right. This form of analysis will give you NO indication of the best time to buy the stock.
Technical Analysis - this form of analysis will tell you "when" to buy a stock. It will do this by showing you (in chart format) the basic interaction of supply and demand and when the two change and shift which will indicate a time to buy or a time to sell.
Mr. Lynch has worked, for 34 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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