Invest in Cleantech

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Friday, January 02, 2009

Solar Stocks Collapse in 2008- When Will the Market Turn ?

Solar Stocks Collapse in 2008- When will the Market Turn ?

(full article with charts - )

January 2, 2009
Renewable and Solar Energy Perspectives with J. Peter Lynch
Exclusively for and

I am sure that EVERYONE is happy that 2008 has come to an end. Not many folks I know would list 2008 as one of their favorite years. In fact, 2008 was the worst year for the stock market since 1931 and as the table below clearly shows, solar stocks with their very high beta’s* did about twice a poorly as the general market.

*Beta – is a financial measure of correlation to the general market. A stocks Beta that is equal to 1 means that a stock moves exactly with the market. A higher (than 1) Beta means the stock moves GREATER in BOTH directions than the market. This also implies greater volatility.
Solar Stocks Brief History
If you look at Solar Stocks and the year they had in 2008 and put it into perspective, you will see that it is another stage in the development of a new industry. New industries DO NOT just spring into prominence instantly, their road to maturation is almost always a very bumpy, volatile and hazard filled path. The solar industry will be no different.
If we look at the very short history of solar stocks through past headlines of stories I have written it would look like this:
2005 was “The Year of Solar Stocks”, solar stocks outperformed the general averages by 20 FOLD, gaining an average of 134% versus the major indexes average gain of 6%.
2006 was “The Year of the Solar IPO”, a year in which the largest number of solar related companies, to date, came public though IPO’s.
2007 was “The Year of Thin Film Solar” this was the year when the industry and the general public really seemed to focus in on thin film technologies and their longer term potential.
2008 was “The Year of the Solar Stock Collapse”, in which the general stock market had its worst year since 1931 and solar stocks were down 76% on average.
What is my Outlook for 2009? I will cover that in the next article, but first I would like to repeat some information that I think is worthwhile for investors. In columns in September and October of 2008 (see below) I spoke about WHEN a market will historically turn around and HOW aggressive investors can use a simple technique to try and increase the timing accuracy of their trading:
When the Market will Turnaround
“However, now that we are in this horrible market the best thing to do is to prepare for the time when it turns around to the upside. Keep in mind, that this turn will ALWAYS take place at the darkest hour and when the word "recession" is everywhere.”
“Remember, in the short term the dominating factors are primarily psychological. In the long term it is always reality”.
How to use a Simple, but effective Trading Technique
“How can an investor prepare when it comes? Well that is certainly something that can very difficult to predict and mostly likely would require some measure of luck. But one of the simplest short term methods I have used over the years to determine trading points for stocks (and the market in general) is the 50-day moving average. To summarize:
If a stock is trading OVER its 50-day moving average it is in an uptrend.
If a stock is trading UNDER its 50-day moving average it is in a downtrend”.
The Market Situation Today
If look at the general press today, you will see the word “recession” and maybe even the word “Depression” everywhere - T.V., magazine covers and newspapers. Psychology is dominating the market and the primary element of this is FEAR. If you remember from prior articles there are TWO KEY ELEMENTS in the stock market – FEAR (at bottoms) and GREED (at tops).
Keep in mind that media is looking thru the REAR VIEW WINDOW and the stock market is looking out the front to the future. The market is looking out 6 months or more and that is what will be reflected in stock prices NOT what is happening now.
Isn’t it strange that you very seldom ever hear that the market is UP over 20% in the last month or so?
Take a look at the table below. Eight of our stocks are above their 50 day moving average versus only ONE stock being above its 50 day moving average in September, October and November of 2008. This certainly tells you that the group as a whole is looking more “technically” healthy and starting to (hopefully) form some meaningful bases for future advances.
Solar Stocks Snapshot 2008 Year End

Please keep in mind that there that there is no way to know the perfect time to buy stocks and that there is no perfect system for predicting stock movements. However, all that can be said is that stocks ABOVE their 50 day moving average tend to have a better chance of moving higher and probably indicates that these stocks are among the stronger stocks in the sector.
Also remember that the solar sector has a very high Beta and is extremely volatile and one must be a nimble trader and constantly stay alert in order to make money in this emerging market segment.

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: Please visit his website for the promotion of solar energy –

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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®, 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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