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On July 13, 2008, I worried that skepticism in the high price of oil, as demonstrated by the surge in short interest in USO, would translate into a further sell-off for solar stocks. While oil topped at that time, solar stocks experienced a resurgence. Earnings news and major contract news provided the latest catalysts even as shorts increased bets in many solar stocks. Almost all the major solar stocks that I follow on the American stock exchanges are trading at prices above their mid-July levels. Five solar stocks are even trading more than 25% above those levels. It seems that solar stocks have broken their dependence on oil, at least for now. The table below demonstrates the action since oil last peaked on July 11, 2008:
This latest turn in events should be very encouraging for us solar enthusiasts. With an American presidential campaign featuring two candidates who profess to support heavy investment into alternative energies, there might just be enough momentum to keep these stocks levitating through the lingering uncertainties around 2008 subsidies. Solar stocks may even survive further slowdowns in the global economy that would presumably drag oil prices down further. But do not for a second forget that the path from A to B for solar stocks will remain full of deep depressions amidst the rallies. Most solar stocks still remain well-below 52-week highs and many carry high valuations despite on-going macro and company-specific risks. The health of the solar industry and its stocks are tightly tied with the popularity of long-term thinking for energy planning. Solar projects are capital intensive and generally still cost more than conventional sources of energy. All this means that solar stocks will deliver a lot of investment risk for a while to come. If, for example, energy prices drop "low enough," I suspect solar technology could become tomorrow's problem all over again....waiting for the next phase of the planet's energy crunch.
Stay tuned, and be careful out there.
Full disclosure: Long ENER, LDK, SPWR. Short STP, TSL. For other disclaimers click here.