Technology stocks can be hard to predict and the tech sector has earned a reputation for its volatile nature as a single innovation, discovery or new gadget can send a stock through the roof while the wind is pulled out of the sails of another company at the same time. The greatest technology companies are those which stand the brutal test of time in this market where it is truly dog eat dog and competitors are constantly trying to topple the King of the Hill. It can be much easier to recognize which technology companies are on their way out rather than the reverse and these five stocks may have rough outlooks in the future. How much further can these stocks fall and is it possible to profit from their failure?
Yingli Green Energy (YGE) is a leader in the global production of solar modules and has an edge in the industry due to its ability to produce modules for as much as 30% under its competitors' costs. Yingli maintains a majority of its clients in Europe and is making a concerted effort to expand into the United States and China. The United States is already rife with competition in green energy and Yingli may have trouble gaining a foothold. Due to its bearish trend, I would normally suggest shorting this stock but an unusually high volume of trades on January 17 has led me to believe that somebody knows something that I don't.
America Online (AOL) has been in disrepair for quite some time now as consumers move to DSL and cable internet and leave the obsolete dial up company behind. America Online has been selling off its interests the past few years and has mismanaged itself to the distress of its shareholders. One activist shareholder is threatening to rock the boat two months before all eight of its board members face re-election. I don't anticipate seeing America Online go anywhere but down in 2012.
Clearwire (CLWR) is taking on water as it struggles to complete its LTE network while piling on debt. While the company maintains an agreement to build its LTE network as part of a joint venture with Sprint (S), Sprint also plans to build its own LTE network which could threaten the profitability of Clearwire's network. Kaufman Brothers announced a downgrade of Clearwire and estimated that shares will fall to $2 per share. I don't see any evidence to believe that Kaufman Brothers is wrong.
First Solar (FSLR) manages the production of solar modules and turn-key solar systems as a competitor to Yingli Green Energy. The entire solar industry is suffering from a downturn and First Solar saw a loss of 75% of its stock value over the last year. The company may see a turnaround, however, as news has been released of its involvement in a solar and wind farm project that just received approval in California. This news makes me want to hesitate on shorting First Solar and wait to see what develops here.
Research in Motion (RIMM) is quickly becoming old news as its Blackberry phone continues to fall short of its competition and it appears that there is nothing in the pipeline that could return the company to profitability. Rumors were released that the company was due to be bought out by Samsung, which immediately released a rebuttal stating that it had absolutely no interest in the defunct smartphone manufacturer. Research in Motion is the perfect stock to short in 2012 as it continues to fall into obscurity with no prospect of recovery.
At a first glance, I would short all five of these stocks, but special circumstances and new developments have me changing my mind about both green energy companies. Yingli normally sees a volume of 2.5 million shares traded per day but saw 5 million shares move in a single day. This suggests that someone has much more faith in this company than I do and I would wait it out to see signs of a recovery. First Solar also looks to have found itself an opportunity to stabilize its position in the market with its winning of a contract to produce modules for six solar and wind farms in California. It seems that this year may belong to green energy while defunct cellular companies join America Online in a tailspin into oblivion.