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 all popped today as investors bet that Europe will solve its debt problems and the solar market sees a surge in demand. Highlights include First Solar
So what: The debt uncertainty in Europe and Solyndra debacle have been clouds over solar stocks for a few months now, and with markets climbing in Europe and the U.S., some of that uncertainty has been lifted.
But investors are also jumping in as we start to see signs of demand picking up in Germany and Italy, two of solar's largest markets. Yingli Green Energy said it had seen demand pick up in September and October because of low prices for modules and more certainty about what feed-in tariff rates will be. With conditions in Germany improving, installations expected to be 2.5 to 2.5 GW next year in Italy, and the U.S. market booming, solar doesn't seem quite as bad.
Now what: Today's jump is probably a bit of a dead-cat bounce as investors try to find a bottom for solar stocks. The real driver in the long term will be what companies report when they announce third-quarter earnings in the next few weeks.
I've been bullish on U.S. solar companies and cautious of Chinese solar companies for some time now, and I still think that's the way to invest in the industry. Chinese manufacturers have very little differentiation from each other, and SunPower should get a boost from feed-in tariffs favoring rooftop installations in Europe, and First Solar will be helped by the growth of utility scale solar.
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Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.
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