I am speaking at the Financial Advisor Symposium in Las Vegas on April 18 at the Mandalay Bay Resort. I believe the other people I am paneling with are Tom Lydon, Richard Kang and Carl Delfield. You can click here for information.
Over the last few days I had two articles up at theStreet about investing fads and my belief that the solar stocks have evolved into a fad (the fad, or if you prefer mania obviously started last year). I got torched in my email account many times over in a very humorous manner.
Despite my saying so repeatedly many folks thought I meant solar technology was the fad when I was referring to the stocks. I for one hope solar catches on in a big way. I made a comment on the blog a long time ago about why they don't turn the entire state of Nevada into a solar panel (someone then said that idea was stupid but anywhoo). I would love to cover my roof with solar film (or whatever its called) and have no electric bill but it doesn't make economic sense yet (does it?).
The action in the solar stocks, again I am saying the stocks, has been very typical of other fads; a lot of euphoria, huge gains and now some big drops. Like many past manias people feel the solar stocks are different, I got a lot of emails telling me how much some of the publicly traded companies earn and what their future contracts look like and so on.
There is nothing new. Past industries have started up, offered great promise AND delivered on that promise but this all occurs with many successes and failures in the formation of the new industry.
Compaq Computer comes to mind as an example of a company that was a game changer, made a ton of money and for a while (mostly in the 1980s) was a rocket of a stock. I think the nature of capitalism is such that new things come, there is heavy competition in these spaces and the landscape of players looks much different a few years or so after the start.
History is littered with great companies that for one reason or another fell very from their peak. As one reader reminded me Cisco was at $80 once. While we're at it Yahoo was at $105 once, Dell was $59, Microsoft was also at $59 and Juniper was $244. This has happened in other industries too and that the current crop of solar stocks will be different seems like a repeat of the same mistakes made in every other mania or fad from the past.
I'm not sure why this fired people up so much but so be it. The context probably makes more sense for anyone who has read the blog for any length of time that emotion is playing some role in the solar stocks and the combination of a monster 2007 combined with being late in the stock market cycle probably means moderation is very warranted for people who want exposure to the solar stocks.
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20 comments:
Hey Roger, I wouldn't lose any sleep over the reaction to your article at thestreet. I think a lot of their readers are momentum traders and you rained on their parade. More broadly speaking, I think alternative energy presents a viable but long term investing opportunity for patient investors.
no sleep lost, the point was that the this time is different emotion is a repeat of some very poor thoughts and decisions and that while a couple of folks think i am part of a conspiracy, those who are more rational will realize the price action and human behavior and not repeat past mistakes.
putting 2-3% in a solar stock that one way or another blows up is not a horrible thing but 20-30% into solar that blows up would be.
I am currently reading a nice book on this very subject invesment manias, by Ron Insana - Trend Watching.
I believe your post on solar was correct.
Those using common sense instead of the Luddite Global Warming Whacko School of Thought can spot environmental stock bubbles a mile (or,is it a few degrees and one Polar Bear on an ice flow?) away.
Solar is a good thing, but not at current extraordinary prices.
T
it really would be great to see solar adopted en masse. i know electric bills down in Phoenix are hundreds of dollars per month, same thing in Hawaii. our most expensive bill in prescott is usually in Jan and it was only $67 (down from $72 last year, the new lightbulbs really do cut the bill!)
At some point, i hope soon, the panels or more likely film will only be a few hundred or couple of thousand instead of being a lot more than that.
Odd, why would your most expensive bill be in January and not July or August?
i live on a mountain that does not get very hot. we usually have one week that is uncomfortably hot--we don't have/need AC.
winter we do more laundry and leave a light on in the utility room so nothing freezes.
Remember Gateway Computer? Anyway, some people think that the Democrats will clean house in November and good coal stocks that actually make money but pollute will be replaced by alternate energy stocks in a lot of portfolios. It could be, but I don't think the technology nor consumer acceptance is here yet for good earnings in these companies. I think it takes too long to hit the break even point on purchase to energy savings cost due to the high cost of the equipment now, especially if it's financed.
FLSR may have some some speculative room to go but I may consider GEX, the global alternative energy ETF instead just for giggles.
JackS, interesting the GEX.
Wind seems to be further along than solar for now and GEX has some exposure via Vestas Wind, Gamesa and one or two others.
A friend of mine at LORL says they make the blades for the wind turbines. I told him I still wasn't going to touch his stock - lol
Roger.
I found out about Vestas Wind on FT.com about a month ago and I wanted to invest a little in it, but I don't think it's traded in the US.
Is there anyway to buy this security in the US?
http://tinyurl.com/2dmbnw
there is an ADR on the pinks.
maybe try VWDRY.pk on yahoo.
for compliance purposes this is not to be construed as a recommendation.
FSLR has 5+ Plus years of booked revenue. but 36x sales and 100+ plus P/E is not for an investor and more for a momentum trader in my opinion
Thanks Roger.
GS751. I agree with you that FSLR is a pure momentum play along the lines of SIRI a few years back. The price now for the stock is absurd IMO.
I think solar is starting to make sense. Between the tax subsidy and cost reduction if you are rather patient it will pay for itself in 9 years or so in Florida if I believe some of the thing I have read.
Personally with risks of hurricanes , length of time you live in one place, and community restrictions I do not see it catching on yet. But, if the can continue to bring the costs down this will start being very compelling in years to come and solve a lot more of the energy crisis than people are planning on IMO. As opposed to ethanol which does not make sense now and never will.
I think solar is where personal computers were in the 70's. Lots of promise but it will take a little while to become main stream. So I think Roger's stock analysis is correct at current prices, but this is an area with lots of potential.
I spent some time researching solar companies and found the most promising were not publicly owned. The company with what appears to be the best technology( as you noted, film based) was Nanosolar, owned by a handful of wealthy silicon valley businessman. I agree with you, the majority are speculative in nature, and the best will not shake out for a while. Hope you continue your blog; I read it almost daily and learn something new or see things differently with each of your postings.
Sam
I've thought for some time that solar-panel and wind power made more sense in the middle, at the community or township level, than at either the national grid or individual user levels. A town or county could add and maintain a solar array as normal infrastructure fairly easily, reducing electrical costs to citizens or, during periods where net power use in the community was negative, using the funds in any number of ways a community might wish including rebates.
The folks at iTulip seem to think alt-energy may become the next bubble but right now it just looks like narrow market breadth has too much cash searching for a home in not enough places and that's momentum territory: Trade it but think twice before trying to establish a long-term buy-and-hold position. JMO
Re: Friday's last hour of trading: What happened to "sell the rumor"??
The AMBAC $2bn (or so) "bailout" comes nary 4 months after the "SIV bailout". We know where that ended up.
Does the added rumor of BoA buying UBS further fuel the appetite for an "all clear" signal? (And XLF will lead us out of the wilderness...)
I get that the market is, by historical standards and traditional measures, severely oversold. The put/call ratio and the bullish/bearish ratio etc etc. But the "snap back" seen in that 243 point reversal in the last 40 minutes of trading smacks of some very nervous shorts (SKF is nearly a vertical line down).
With the volume (and amplitude) of the "noise" it's getting very hard to hear the real heartbeat. I'll stick with the macro view. (But it really is incestuous: the rating agencies are conflicted - if February runs out and there is no solution for the bond insurers, they'll have to act. And then, more writedowns, and more lawsuits and finally, the spotlight may turn on them: why DID they keep the AAA ratings on even as the insurers stock prices, market worst-to-call yields on debt (and accordingly the agencies own market implied default models) were signaling, well, something lower than AAA.) It is to the rating agencies benefit if the bond insurers can keep their AAA, and like the proverbial cop at the scene of a truly horrible accident, they can simply say "Move along... nothing to see here... business as usual."
LOL! Your wife must be one in a million, Roger. If we had to leave a light on in the utility room, I'd be a bachelor.
Great post.. as anon@9:22 said, global warming has every possibility of being the next fad. Where was the media when global warming was identified about a decade ago? While being responsible is good, cutting carbon emission by reducing your consumption is meaningless.
BTW, does any one know of any Private equity cos., with a track record have invested in such "clean energy" thingy? Not warburg pincus.. http://www.warburgpincus.com/industries/energy/InvestmentsHistoric.aspx
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