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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerUsually as the year winds down we get an endless list of recommendations for the next year which generally are just a rehash of the previous years hottest stocks. Taking a different approach, my short of the year for 2008 is First Solar (NASDAQ: FSLR).
First Solar makes solar-power modules with a thin-film semiconductor technology that doesn't use silicon. The stock is up 809% YTD, and with everyone jumping on the solar energy bandwagon, a lot of people think it's going to rise another couple hundred percent in '08. Well, with earnings estimates forecasting 65-70% growth in EPS for '08, the stock is far too expensive. With a PE nearing 200, this has bubble written all over it.
I am not saying it's a bad company, just a bad investment for investors looking for stock ideas. Based on valuation, the stock has gotten too far ahead of itself and should drop. The real kicker could be if the price of crude oil drops in '08. A drop of 10-20% in the price of crude would send all these solar, ethanol and other alternative energy stocks dropping faster than saying the words "there is no global warming."
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position long or short in any stock mentioned as of 12/31/07.
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Reader Comments (Page 1 of 1)
12-31-2007 @ 4:07PM
Michael said...
I do not believe your article. The solar bublle will not burst. Further to say fuel prices will drop is ridiculous. Pakistan, Iran, Iraq, OPEC, and the Republicans will not make the oil drop. Then of course Democrats will be all for clean energy and then Solar will be good as always. Further the P/E for FSLR is 1.49 currently at trade. The estimates are 1.29 and FSLR has slaughter each and every quarter these estimates.
12-31-2007 @ 2:01PM
John Shelnutt said...
Go ahead and be aggressive with some major short sells on FSLR. You will get your head handed to you in your lap. Other tried at $100 and $200 and went to debtors prison for their efforts.
12-31-2007 @ 4:54PM
ii2000426 said...
The biggest vulnerability of FSLR is a global shortage of tellurium will bring down the business of FSLR altogether. It is not just over valued, it is actually going to be OUT OF BISINESS in 2 years:
Read here:
http://www.seekingalpha.com/article/55959-the-tellurium-supernova
12-31-2007 @ 5:33PM
Michael said...
Let me get this straight about Tellerium. FSLR used 2.7 tons on 2005 and 8 tons in 2006. We have 400 tons per year. If FSLR comes close to using up 400 tons than the stock should be worth $1000.00 per share. Even if FSLR goes to 20 tons that is 5 % of the supply and FSLR would be at $500.00 - $600 since they doubled thier production. That article contradicts itself. FSLR will use more Tellerium and so much that the stock will remain the same but the production will be 10X its current. Yeah right.
1-01-2008 @ 12:56AM
stb1228 said...
what will sink most of these high flying solar stocks (and their investors)will be when the realities of new technologies coming on stream soon which will render many of today's darlings unprofitable or marginably so by making their process and product obsolete. the question is not if, but when and new discoveries are rendering todays techniques inefficient and uncompetive with break neck speed- and it is the speculator who puts his or her money on "the current cost leader" or even compnies who already appear to be a "dead man walking" that could bet right on solar cells but end up with last years darling and this years bust
1-01-2008 @ 12:31PM
Shorty said...
The question is when in 2008...
1-02-2008 @ 10:34AM
Steve said...
If your top short is FSLR, based on PE ratio, then you should also short SPWR with all your money, which is a lot more expensive than FSLR. Not to speak a host of other stocks that trade at astronomical P/E, like BIDU. Any taker?
1-04-2008 @ 11:30PM
Fred said...
agree w/ shorty. Definitely a "when". I don't think I'm going to short fslr anytime soon. stocks have tumbled recently but a lot of it is speculation and people cashing in their year's profits. Compared to SPWR's p/e of 600+, FSLR's p/e is hardly anything. It's a leader in its field, and solar power is a major energy source in third-world countries where power plants are not very cost-effective. solar is the way to go.