Solar Energy Is Hot

The sun rises and falls, predictably. If only the swings in solar-energy stocks were so easy to forecast.

If you look at some of last week's biggest winners in the solar sector, a central theme should bubble to the surface.  

Investors would be lucky to see those heady returns over the course of any given year, yet shareholders in these market scorchers experienced those head-turning gains in just five trading days.

What's with all of the sun worship? Well, higher oil prices are playing a part in the market's warm embrace of alternative energies. The big winners also happened to be emerging players in China's solar-energy market. Even Canadian Solar is in reality a Chinese solar-cell manufacturer that's incorporated in Canada. ReneSola's better-than-expected quarter, fueled by higher selling prices on its solar wafers, helped the rise, too.

However, it's also about time for mainstream solar plays to shine again.

Bellwethers such as SunPower (NASDAQ:SPWR) and Suntech Power (NYSE:STP) more than doubled last year, but they're trading much lower so far in 2008. Suntech will have a chance to earn its rebound when the Rule Breakers recommendation reports quarterly results later this week.

These companies' valuations surpassed their fundamentals at the sector's frenzied peak last year, but that no longer appears to be the case. Companies such as Suntech Power, ReneSola, and Canadian Solar all fetch less than 20 times next year's earnings multiples, yet boast torrid growth.

Now would be a good time to swing open those curtains and let the sun shine in.