Why Solar Stocks Got Crushed Today

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 stocks are being crushed today, particularly shares of SunPower (NASDAQ: SPWR  ) , Suntech Power (NASDAQOTH: STPFQ  ) , and LDK Solar (NASDAQOTH: LDKSY  ) , which are down 11%, 20%, and 12%, respectively.

So what: The big drop in solar stocks comes with little news out of the industry, or from these companies, but it does follow a big week for solar last week. SunPower led the industry higher last week after Berkshire Hathaway (NYSE: BRK-B  ) bought a large project for its energy subsidiary. This was followed by an analyst upgrade, and shares went nuts.

Often, when shares rise like this, there can be a pullback in shares because investors take profits, and some of the emotion that drove the big move wears off. But for some perspective, SunPower is still up 38% so far this year, LDK Solar is up 31%, and Suntech has only lost $0.03 per share in value. Not bad gains for less than a full week of trading.

Now what: It looks like this solar rally was really overdone in the first few week of the year, but that's not all that surprising. Last Thursday, I warned that buying on rallies like that can be dangerous because a pullback is likely to follow. The move was also fueled by news that shouldn't drive a huge reaction from the market. SunPower selling a project is a normal order of business for the company, and the move Thursday was fueled by an analyst upgrade. Even though I agree with the analyst's new opinion on SunPower, an upgrade isn't the fundamental improvement in the solar sector that should drive stocks higher, and it's no surprise that some of last week's pop has become a big drop in the stock today.

This is why Foolish investors will take a long-term view of solar instead of being worried about the pops and drops on a daily basis. I'm still looking to add to my SunPower position, but I'll wait for a better price and less-panicked market. Like I told a friend recently, "When they're talking about solar on CNBC, it's the absolute worst time to buy into the industry." Today, CNBC has moved on, and long-term investors are getting a better deal than they could have gotten Friday.

Interested in more info on SunPower? Add it to your watchlist by clicking here.

Interested in more info on Suntech Power? Add it to your watchlist by clicking here.

Interested in more info on LDK Solar? Add it to your watchlist by clicking here.


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  • Report this Comment On January 08, 2013, at 6:51 PM, longline wrote:

    I Have heard China is in a Bull Market and their

    commitments to be a world leader in Solar will

    happen,energy independence and increased

    employment are goals worth spending money

    on.Solar stocks all rocketed today.Worldwide

    Solar is on the move,Germany has a Green Party

    I have heard that Japan has Solar going into

    new construction after the Tsunami,India and

    Australia are turning green,in the U.S. Warren

    Buffet is in the mix.

    This is like building a railroad,you have to lay

    down the tracks first,The upside is unlimited

    so is your risk if you play it short.

    I .

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