This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Watch Out For Zombie Solar Stocks

NEW YORK ( TheStreet) -- Last night, based on my wife's suggestion, we watched the first episode of AMC Networks' (AMCX - Get Report) The Walking Dead on Netflix (NFLX - Get Report).

The Walking Dead is no Breaking Bad, in my opinion, but has a captivating plot. If you haven't watched it, the show is about an apocalyptic world filled with hungry human zombies that are willing to eat anyone who isn't already infected. Once infected, the victim becomes a zombie and the cycle continues.

I couldn't help but make the connection between The Walking Dead's zombies and solar stocks LDK Solar (LDK), Suntech Power (STP), Yingli Green Energy (YGE - Get Report).

Instead of death from a virus, these walking-dead stocks are infected from a deadly dose of debt. Suntech is behind in payments for months, and last week LDK received a one-month forbearance on interest payments for a note due next year. Confusing the issue further is these are Chinese stocks and investors should consider the home field advantage the companies will have in bankruptcy over shareholders.

Bond holders may get little, but buying shares in walking dead companies is little more prudent than buying lotto tickets. First Solar (FSLR - Get Report) is a possible lone survivor and SunPower's (SPWR - Get Report) prognosis is questionable.

Unfortunately for First Solar's shareholders, LDK's interest payment forbearance results in lower margins, revenue and profits. In a normal non-apocalyptic zombie-free market, when companies fail, they're buried and the survivors prosper and grow. Until the dead are finally put out of their misery, stay exceedingly cautious and conservative in your approach within the solar space.

Both LDK and Suntech Power are under $2 a share, and I can see the attraction to buying a few shares hoping for a hit-and-run double or more. In fast and out fast for quick cash works if you're sitting at a dozen monitors with a Bloomberg terminal and an audio news alert service. Otherwise, don't expect to pick-pocket Wall Street's finest traders successfully.

If you're thinking the newly announced Chinese solar related tax credits will save the companies, you may be partially correct. The problem for equity investors is that what is saved will likely go to bondholders and other creditors, leaving shareholders out in the rain.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
LDK $0.00 0.00%
STP $0.53 0.00%
AMCX $76.13 0.49%
FSLR $62.91 -0.01%
NFLX $566.11 0.01%

Markets

DOW 18,003.61 -34.36 -0.19%
S&P 500 2,100.81 -8.11 -0.38%
NASDAQ 5,029.1870 -31.0590 -0.61%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs