Investorideas.com Solar Stocks Commentary with J Peter Lynch; The Stock Market and Solar Market Sector Outlook

Investorideas.com Solar Stocks Commentary with J Peter Lynch; The Stock Market and Solar Market Sector Outlook

Point Roberts, South Salem, New York- May 13 2009- Investorideas.com a leading green investor portal, presents solar stocks commentary with J .Peter Lynch, a solar expert and frequent contributor to Investorideas.com.

The Stock Market and Solar Market Sector Outlook
J. Peter Lynch
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As I have said many times over the years solar stocks have a bright future, a very bright future. But investors have to understand a number of things about the current stock market and solar stocks in particular in order to fully take advantage of this long-term trend.

Markets go up and markets go down and these moves usually occur when it is least expected. At the present time solar stocks, the energy industry and the market in general have been in a totally amazing rally since early March 2009. Unfortunately the market and solar stocks have put on the equivalent gains two excellent years (NOT average years) in the past 8 weeks and in my opinion this is simply not sustainable.

As I said in early March in my previous article:

“The Dow Jones Industrial Index recently recorded a twelve year low and the media is FULL of doom and gloom. This terrible news was all over the financial press, accompanied by scenarios of more of the same to come. In fact, the recent survey from the American Association of Individual Investors (AAII) had fallen to the most bearish level in history – 70% of those surveyed felt that the direction of the market would be DOWN over the next 6 months”.

“Nothing is 100% for sure, as we all know. But I think we are either at a significant bottom or very close to it. Everything is so “oversold” at this time, that I think the worst case is that we get a significant rally in what could still be a bear market”.

“Keep in mind that ALL the bad news out there is in media now. We already know all the bad news. Remember that the stock market IS actually a discounting mechanism which looks out 6 to 9 months into the future. We do not need GOOD NEWS to turn the market around, only LESS bad news”.

Well in retrospect that was certainly prescient insight and the market took off with most of the major indexes being up over 25% and some of the foreign markets being up over 35% percent and the solar sector of the market being UP over 70% in JUST 8 WEEKS more than triple the general market indexes.


Symbol
Current Value
%Change Since 3-12-09
%Change Since 1-1-2009
AKNS
1.28
88.2
-25.5
ASTI
5.55
63.2
47.6
CSIQ
8.23
131.8
27.4
CSUN
3.39
111.8
-14.2
DSTI
0.86
-33.2
-8.4
EMKR
1.11
48
-14.6
ENER
16.41
-7.1
-34.9
ESLR
2.28
88.4
-28.5
FSLR
190.65
50.7
38.2
JASO
3.72
74.6
-14.9
LDK
9.42
133.1
-28.2
RSOL
2.28
33.3
-37.5
SOL
3.8
65.2
-13.8
SOLF
5.2
92.6
3.8
SOLR
7.22
85.6
149.8
SPIR
7.13
56.0
38.7
SPWRA
27.25
17.9
-26.4
STP
16.45
141.2
40.6
TSL
17.5
139.1
88.4
WFR
16.53
6.6
15.8
YGE
9.23
119.2
51.3
Solar Average

72%
12%




S&P 500
908.35
20.99
0.56
Dow Jones
8469.11
18.12
-3.5
NASDAQ
1715.92
20.32
8.81


The Solar Stock Market Sector Then and Now

Then

In March solar stocks had been doing terribly since the second quarter of 2007. Just like the general market, we need to look a little deeper, past the media hype, and see what is actually happening with solar stocks in the market. One of the measures (tools) that I utilize when looking at individual stocks is their 50 day moving average and whether the current price is above (bullish) the 50 day average or below (bearish) the average. It is not the only way to look at stocks and may not be the “best”, but it always seems to give me an idea of which way a stock is heading in the short to medium term and when looking at a specific market sector, what sort of condition that sector is in.

At that time, 3 of the 35 solar stocks I follow are ABOVE (Bullish) their 50 day moving average. On the other hand 92% of the stocks (32 of 35) are BELOW (Bearish) their 50 day moving average. This clearly told me that the solar sector was deeply OVERSOLD and that while it could go lower, it was probably due for at least a “technical” bounce.

Now

At the current time 34 of the 35 solar stocks I follow are ABOVE their 50 day moving average and only one stock (DayStar Technologies – DSTI) is trading below it 50 day moving average. Even in this case, DSTI’s decline was due to an announcement that it is basically running out of cash and will need more financing.

This situation clearly tells me that the solar sector is approaching a condition of being very OVERBOUGHT. It is possible that this is the dramatic of a HUGE new bull market for solar stocks, but as I said in the March article:

“To put it a different way, I do not think ALL the bad news regarding the solar sector is out yet and that there will be future negative surprises, such as earnings disappointments (ENER earlier this week for example), inventory write-offs, and possibly even bankruptcies. The solar sector will probably get carried UP when the general market rallies, but since they will have to work out some additional problems; I do not think their rally will be sustainable”.

However, I DO NOT feel that this is the case and I think there will be a significant correction and the industry will have to digest further bad news that will be coming BEFORE it turns around and moves up in a more sustainable manner.

Numerous opportunities will come, but investor patience will be required to wait out this tough period and for sector volatility to “settle” down. This is still an embryonic industry and it is going through a painful retracement and consolidation phase.


Rewards come to those investors who are patient and do not follow the crowd

Aspiring investors need to acquire and nurture patience. Historical data clearly shows that more money is made MISSING the downside than catching the upside. As I read my e-mails from readers, I get the feeling that people really want to buy solar stocks and ride them into a bright future. Many times I get the sense that they are afraid, that if they delay, they will miss the chance to profit from the solar industries bright future. This is NOT true. There will be plenty of time and many advances and declines in the future. Be patient, look for the strongest stocks and try not to get swept up in the crowd, because the crowd is always wrong.


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: SOLARJPL@aol.com. Please visit his website for the promotion of solar energy – www.sunseries.net


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