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Solar Stocks Offer Risk Not Growth

Jun 10 2009

Solar Stocks Offer Risk Not Growth

Solar ETFs moved 4-6% higher on Wednesday as Oil prices continued to climb making alternative energy more attractive. But not all solar stocks are worth holding, in fact many are too risky for most investors. The Claymore/MAC Global Solar Energy (TAN) moved 6.2% higher while the Market Vectors Solar Energy ETF (KWT) moved 4% higher. The Market Vectors Solar Energy ETF (KWT) tries to duplicate the Ardour Solar Energy index while the Claymore/MAC Global Solar Energy (TAN) holds a number of solar stocks including First Solar, Suntech and Trina Solar.

Stock Pickers Sector

Some solar stocks are increasing revenue and earnings while some are losing revenue and earnings, therefore the sector is only for stock pickers. For instance, JA Solar Holdings Co., Ltd. (JASO) moved 4.35% higher today but the company is losing 50% of the revenue it had last year while earnings are dropping over 100%. Evergreen Solar Inc (ESLR) looks like one of the winners with a price/earnings ratio of 25.10 even after a 30% jump in trading today alone. The company is growing revenue 158% compared to last year and increasing earnings 31%. But the stock has been slammed and trades less than $5. Showing even growth doesn’t equal stability in the solar industry.

ETFs Somewhat Safe

Owning one of the two ETFs is the safest way to be in the sector but the sector itself should be considered speculative and only hold a smaller percentage of your portfolio.

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