Solar Stocks Weaken - Our Solar Portfolio Continues to Outperform - J Peter Lynch
New York - February 27, 2012 - Solar stocks commentary; Investor Ideas www.Investorideas.com, leader in renewable energy stock research for independent investors, issues a solar stocks update from J. Peter Lynch for Monday February 27th.
Solar Stocks Commentary with J Peter Lynch at Investorideas.com
J. Peter Lynch
Current Status and Past Stop Loss Levels
Our first stop loss point for our 2012 Solar Portfolio was triggered with YGE trading below $4.20. We did not question our system; we simply followed it and sold the position for a small gain of 1.92% on the YGE trade.
Our second action was to sell ½ of the remaining positions on 2/13/2012 when all solar stocks shot up to VERY overbought levels, which I did not think were sustainable.
On Friday (2/24/2012) two more stocks hit their stop points and were sold - GTAT @ $9.00 and TSL @ $8.50.
This leaves the portfolio with two positions - CSIQ (600 shares) and LDK (500 shares). Of the two stocks LDK is the strongest as this time and in fact is the ONLY solar stock that is trading ABOVE both its 50 day moving average (short term positive) and its 200 day moving average (longer term positive).
The current status of the 2012 portfolio is an unrealized gain of 25.74% on the two positions remaining in the portfolio and a realized gain of 20.13% on the positions we have sold.
New Stop Loss Points
As a reminder below are the stop loss points I have selected based upon technical support levels in each stock. I have set these stop points very close, since, as I mentioned in the last article I did expect the markets to pull back due to the fact that they are short term overbought.
The stop loss points for the remaining stocks in our Solar Portfolio are.
CSIQ - $3.50
LDK - $5.25
If either of these stocks reach these levels I would recommend selling that position.
Remember - the number one rule of investing:
Minimize your LOSSES and Maximize your GAINS.
The HARDEST THING for investors to do is know when to sell. That is why you have to set specific, non-emotional prices to exit if things do not go right. You cannot allow your emotions to get involved and take over your thinking.
Remember: markets fool the majority of investors by "Climbing a Wall of Worry" which is exactly what it is doing now. Once losses start and keep getting worse when investors get on the "Slopes of Hope" and try and hope that their stock comes back - trust me, the "I hope my stock comes back" technique will NOT work. Trust in your system and follow it regardless of what you think "should happen". Once you try to impose your will on your portfolio you will stop paying attention to what is most important - "what is" NOT what you think it should be.
If you looked at the portfolios of the most successful investors you would, in general, see the following pattern:
Approximately 80% of trades would be either small losses and/or small gains and approximately 20% would be very significant gains. This is exactly how we dramatically outperformed the markets in 2010 and 2011 and continue to outperform since the beginning of 2012. We cut our losses when things did not work out and we let our profitable stock run and maximized our gains.
General Market Comments
At the current time the market is very extended above its 50 day moving average - a level which historically results in a pullback in the market closer to the 50 day moving average. As a result of this I have been setting our stop loss points very conservatively in order to make you that when the correction comes we will still lock in healthy profits.
At this point the general market is STRONGER than the solar stocks as a whole, so when the market pulls back and corrects I would anticipate that our solar stocks will move down further than the market correction.
Keep in mind that periodic corrections are normal in the stock market - what is NOT normal is for the market to be sharply up, without a correction since October 2011.
Background Analysis Notes
Keep in mind that there are two basic types of equity (stock) analysis. Below are a brief description of each and its primary purpose:
Fundamental Analysis - this is the analysis of the fundamental financial condition of a company to identify which 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 a stock or sell a stock.
Technical Analysis - this form of analysis will tell you "when" to buy a stock and when to sell the 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 35 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, an early 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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