On Tuesday, I took the last of my Suntech Power (NYSE:STP) off the table as I believe solar stocks are firmly in bubble status. Much like my sales last week of Google (NASDAQ:GOOG) and Baidu.com (NASDAQ:BIDU), I am not calling a top; I am simply taking my profits and reducing risk - I'd rather own these much lower.
While Suntech Power is still "undervalued" compared to its US peers, the whole group stinks of overvaluation in my book. At it's core this is still a commodity business with low margins - investors are falling in love with revenue growth without worrying about the bottom line. So on Tuesday's surge back to $60, I am exited and cosed down this (currently less than 1% of fund) position held from day 1 of the fund.
My thesis for crude is we could get a psychological sell off once it hits $100, and signs are appearing that this is finally the price where some demand destruction is finally happening - small signs, but signs. I don't profess to know how much of this run in solar stocks is due to crude rising and how much is due to pure speculation. All I know is they are running detached from fundamentals, which increases the danger. Especially with earnings for this group coming.
While the market ignored the weakening margins in Sunpower (NASDAQ:SPWR), we have a lot of the little fry companies in this sector reporting and thus far their track record has been pretty abysmal - so that could also weigh on the sector as a whole.
I'll look to add back to Suntech Power on a meaningful pullback. All my purchases of this stock were in the $37-$40 range from Aug 3 to as recently as Oct 3rd. 50%+ profit is never a bad thing. I will let the momentum lemmings take it from here.
Disclosure: No positions
STP 1-year chart