These 5 Solar Stocks Are Rated to Crash and Burn

As an investor, it doesn't pay to follow the crowd.

In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.

Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.

If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.

In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.

That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (akin to a "buy" call) or underperform rating (akin to a "sell" call) in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.

The top 5 solar underperform calls
So, with that methodology as prelude, I present to you the 5 one- and two-star solar stocks with the most CAPS community member underperform ratings (I used a minimum market capitalization of $100 million and the proviso that it must be listed on a major U.S. exchange). Remember, stocks are rated on a five-star scale by our CAPS community, so one and two star stocks are consensus underperforms.

Company Name

Market Capitalization (in millions)

52 Week Price Change %

Price-to-Earnings (TTM)

CAPS Rating (out of 5)

Underperform Picks

First Solar
(Nasdaq: FSLR  )

$11,026

4%

17.7

**

694

Hoku
(Nasdaq: HOKU  )

$145

38%

NM

*

212

Trina Solar
(NYSE: TSL  )

$1,779

84%

8.1

**

184

Solarfun Power
(Nasdaq: SOLF  )

$620

101%

12.2

**

95

China Sunergy
(Nasdaq: CSUN  )

$180

(12%)

9.6

**

56

Source: Motley Fool CAPS. NM= not meaningful. As of Aug. 29, 2010.

These solar stocks have collectively had a pretty good run over the last year. Solarfun Power has doubled. First Solar's stock has been basically flat but is a recommendation of our Rule Breakers service. There may indeed be value there, but the CAPS community is skeptical.

More CAPS members think the two-star rated First Solar is an underperform than any other solar stock. Do you think it deserves this lack of love? Make your thoughts known in CAPS by clicking here. Or just go there to do further research on one of these stocks.

Anand Chokkavelu doesn't own shares of any company mentioned. First Solar is a Motley Fool Rule Breakers recommendation. The Fool has a disclosure policy.


Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 31, 2010, at 8:16 PM, pj1 wrote:

    When were these star ratings assigned???

    You don't have to be "smart" to realize that star ratings assigned three months ago when the world thought the Euro would collapse no longer apply.

    The outlook for the entire solar market has done 180 to the upside this earnings season. Perhaps you should review the age of your data ("stars") prior to spouting negative press.

  • Report this Comment On September 14, 2010, at 11:22 AM, topsecret10 wrote:

    Solarfun was 2 stars when It was 4 bucks. I have done several blogs on this one ,and I have been screaming at my fellow fools to buy It. Sorry,the fools have this one wrong. This stock will be 20 bucks or higher within a year. Why would they crash and burn when they keep beating estimates EVERY QUARTER. TS

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