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 U.S. residential solar leader SolarCity (SCTY.DL) jumped nearly 11% Monday as investors pile back into energy stocks. But the reason for the move may not be what you might think.
So what: Solar stocks, led by SolarCity, are charging higher Monday because oil is rising again. After closing about 7% higher on Friday, crude oil prices have jumped another 2% today and WTI crude is now over $49 per barrel.
What's crazy is that crude oil has little to nothing to do with the solar industry, yet solar stocks are sharply higher Monday. But this isn't a one-day phenomenon. You can see below that SolarCity stock has been crushed over the last six months as oil has fallen. Monday is just a reversal of that trend.
Now what: While Monday's move for SolarCity stock may be illogical from a fundamental perspective, it will likely continue if oil prices continue to rise. Traders, who move the market on a day-to-day basis have made a correlation between oil and solar and that's what will drive short-term movements.
What long-term investors should be focused on is SolarCity's earnings growth and the Feb. 18 release of fourth-quarter results. Continued installation growth is what will drive the stock higher over the next decade, not the price of oil's short-term movements. That's where long-term investors' focus should be, not on oil markets, despite the move today.
