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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
Yingli Green Energy(YGE).
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.