Trading update on top short '08: First Solar (FSLR)

With First Solar (NASDAQ: FSLR) stock getting hammered, I have been asked by some traders if I would recommend that they close their short position in First Solar. To remind you, First Solar was my top short recommendation of 2008, and since the first trading day of '08, the stock is down about 25%. While there may be a short-term bump up in the stock in the next few days (how many days in a row can the NASDAQ drop?), the reasons behind the short trade are still in place, and I wouldn't be in a hurry to close the position. The stock is still trading at a high valuation, and I still think that the "alternative energy" bubble is in the midst of bursting. With earnings estimates forecasting 65-70% growth in EPS for '08, the stock is far too expensive. With a P/E nearing 160, this has bubble written all over it.

The stock has gotten crushed with crude oil prices still near record levels. If crude prices drop 10-20%, all of these alternative energy stocks will continue to fall rapidly.

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 1/09/08.