5 Solar Short Plays From Gabelli's Segrich

NEW YORK (TheStreet) -- John Segrich, portfolio manager at Gabelli Funds and of the Gabelli SRI Green Fund, is one of solar sector's biggest short investors.

Even with many stocks in the group already down 30% to 50% this year, Segrich sees further weakness ahead. In a recent interview with TheStreet, he laid out his continuing bear case for the solar sector.

"There are still relatively good shorts, but we are looking more upstream, at wafers and polysilicon," Segrich said.

Solar Short Target No. 1: The Wafer Makers

With solar wafer prices falling dramatically, and polysilicon prices not falling as dramatically, Segrich sees continuing pain for wafer makers like ReneSola(SOL) and LDK Solar(LDK) .

"LDK should be losing money on wafers at current pricing," the Gabelli manager says. "Wafer prices really only started to break last month and I don't think we are at the bottom."

Solar Short Target No. 2: Polysilicon Producers

With the steep declines in solar module, cell and wafer prices already occurring, the current bottleneck is at the level of the sector's key raw material, polysilicon. Segrich thinks polysilicon will break from $50/kilogram to $20/kg in the next year, pressuring the margins of polysilicon players.

There is an LDK Solar(LDK) angle here, too, with the company rumored to be looking to spin off its polysilicon business for more than $1 billion. Segrich thinks this will be tough for LDK to accomplish when pricing comes down.

Segrich said the polysilicon producer cash costs are at $12 to $15 per kilogram, so at $50/kg, they are still making huge profits.

"I don't think we reach bottom until everyone in the supply chain is completely squeezed," he said. "The poly guys are still making too much money and no one is slowing down capacity. If there is no more demand, it only gets worse from here."