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.

Although short selling -- the practice of selling borrowed shares with the hope of repaying the loan by buying back the shares at a lower price -- goes against the American belief that stocks always go up, I have long been fascinated with it. Short Stories discusses what works, what doesn't, and what some of the leading lights in shorting stocks think about its opportunities and threats. I describe possible short trades and I seek your comments and questions for story ideas. I don't offer any investment advice and I don't trade on any of the posts I write.

Monday the Wall Street Journal noted that two of the worst performing stocks in the first quarter were NovaStar Financial, Inc. (NYSE: NFI) and Bally Total Fitness, Inc. (NYSE: BFT) -- both of which I suggested shorting last year. Looking for some new short ideas? Last month I was in Florida where the real estate market is tanking.

Reading about a busted residential real estate development there in the Sarasota Herald-Tribune gave me another idea for short stories: Coast Financial Holdings, Inc. (NASDAQ: CFHI). Although its market capitalization has tumbled 59% to $44.9 million in the last year, CFHI could file for bankruptcy. How so? In a nutshell, Coast lent money to Florida real estate developers who are going belly up. As a result it's at risk of not having enough cash to pay a $12 million portion of its long-term debt which is due this year.