Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of solar module manufacturers finally got some good news about prices stabilizing and have responded by exploding higher. Canadian Solar (Nasdaq: CSIQ ) , SunPower, and First Solar (Nasdaq: FSLR ) have all jumped at least 10% in trading today. But the big movement has been in Chinese manufacturers where JinkoSolar (NYSE: JKS ) is up 40%, Hanwha SolarOne (Nasdaq: HSOL ) has risen 37%, and Suntech Power (NYSE: STP ) climbed 26% today.
So what: Solar stocks are exploding because module prices are finally stabilizing on high demand in Germany to end the year. Deutsche Bank analyst Vishal Shah said that channel checks show record low levels of inventory and a rush to install modules in December before a feed-in tariff cut went into place.
Earlier this week, Germany said solar installations had reached a record 7.5 GW during 2011, helped by a mad rush to install modules in December. Reports are that 3 GW of solar was installed in December alone, almost double what the U.S. installed in all of 2011.
Now what: This is the first good news for solar stocks in quite some time, but before you go buying the jump consider what this means for the future of German demand. A 15% feed-in tariff reduction went into effect at the start of 2012, the reason for the mad rush of installations, and another 15% cut is likely in mid-2012. That could lead to a rough second half of the year in solar's largest market.
For now, the news is good, but solar stocks have popped before on positive reports. This is a bit of a dead cat bounce for some of the stocks rising most today because they are down so far in the past year. Be careful what you buy right now and stick to quality solar stocks instead of leveraged manufacturers because when the market gets rough again, only the best will survive.
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