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TheStreet Open House

Solar Stocks: What's the Best Defense in 2011?

Stocks in this article: FSLRPWERSATCLDKSOLFSOL

(Solar story updated for Credit Suisse downgrade of solar sector)

NEW YORK ( TheStreet) -- Investors are stepping off the gas after a healthy run for the solar sector in the latter part of 2010. Few of the solar supply-chain points have been getting much new investor money as a result of beat-and-raise quarters. Is there a way to play solar on a sector basis as opposed to company-specific basis that might give investors a read into more protected strategies even in a slowing market?

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For all the solar company attempts to show that demand and pricing remain stable for the first half of the new year, investors seem content to wait on actual evidence to show up in December. Whether it's an inverter company beating and raising, a module maker, or a solar cell or wafer player benefiting from current pricing strength, doubts persist about 2011.

The latest negative sign for solar in 2011 came courtesy of Credit Suisse on Wednesday morning. Credit Suisse solar analyst Satya Kumar downgraded the solar sector from overweight to market perform. The headline of the Credit Suisse analyst's 2011 solar thesis report said it all: Strong supply growth appears set to overwhelm demand trends.


"From a cyclical standpoint, we are unable to reconcile the supply growth with our still optimistic demand expectations, and hence we think there has to be a period of stock weakness," Credit Suisse analyst Satya Kumar wrote on Wednesday morning.

It's at least worth noting that Credit Suisse was out ahead of the last bullish call on the solar outlook, projecting a 2010 market of up to 12 gigawatts at a time when the market sentiment was bearish on the sector. Credit Suisse had the 2010 bull outlook right, and solar stocks sold off broadly on Wednesday morning after CS called for a reversal of the supply/demand balance in 2011, as the intra-day chart above of the solar index shows.

So is there a defensive posture in solar?

Vote Now on Solar Stock Picks 2011
Solar Stocks: What's the Best Defense in 2011?

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