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Investors Really Get Hot And Bothered Over Solar Power
from the sunburned dept
As we noted last week, one of the hottest sectors on Wall Street these days is the solar energy business. Chinese solar power companies alone have raked in over $1.1 billion so far this year through IPOs. It's starting to look like investors are going a bit crazy over these companies, as solar shares rallied hard across the board, following a few deal announcements. It's common for customer win announcements to be catalysts for an upward stock move, but there's something a bit disturbing about the way that so many solar companies moved sharply higher yesterday. Basically, what it means is that investors are being indiscriminate about what they're buying. This, more than the spate of IPOs, is a worrisome sign, since it looks a lot like a buying panic, the type commonly seen near the top of bubbles. One day's action doesn't make a bubble, but if you see more of these days, where every company in a sector moves in perfect concert, then it should be seen as a warning sign.
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Why Buy?
Do you have any reasoning for screaming "BUBBLE!!!" besides your perpetual pessimism? The solar runup is not based on some bubble of speculation, but real increases in the efficiency, aesthetics and usability of solar panels for both consumer and corporate applications. The companies have real innovative products that are in production and on the market and making a healthy profit.
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Re: Why Buy?
When investors don't even look at the companies they are buying into bad things are on the rise.
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Maybe not so crazy
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shortage
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Largest solar plant in the US
http://www.cleantechamerica.com/projects/
Projects like this require huge amounts of capital, so it's not surprising to see a large influx of cash into this field. Also, let's keep in mind that the role of VC's and other early stage investors is to take risks, part of that risk being the risk of setting up a new industry. And it's only really worth taking the risk if there is a high reward..
Part of the issue here is that SarBox has killed of the IPO market for small issues (under $100 million), a market which would traditionally include a lot of software companies. So investors have been looking to invest in industries which can command larger issues. With solar requiring large capital investments, it's a perfect target.
Besides, there is a huge public policy shift right now, one which is enabling a whole new industry. With the total energy market in the US alone around $200 billion, it makes sense to invest heavily when policy moves the goalposts...
Chris.
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Solar IS more affordable
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Re: Maybe not so crazy
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it's not about solar energy
The other point to think about - in general - is how little the price of any stock has to do with the real value of the company.
Stock prices are pumped and dumped in many ways.
The Dow is up/down a point in early trading - meaningless. It's an average of 30 of the biggest companies. What does that mean to you on an hourly basis? Nada - but you hear it that often on the radio.
and on and on
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Solar Bubble?
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