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:LDKYQ), 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.
Travis Hoium manages an account that owns shares of Berkshire Hathaway and SunPower Corporation and personally owns shares of SunPower Corporation and is long SunPower $5 and $7 2015 calls. 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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