NEW YORK (TheStreet) -- Long-term solar stock investors (ignoring traders and speculators) fall into one of three categories. You have the lotto ticket buyers buying shares on the cheap and hoping the company doesn't fail.
The second group believes in solar as a replacement for fossil fuels and nuclear. This group knows solar doesn't make economic sense but they don't care. Even if solar power costs more, they are focused on CO2 emissions and other real and imagined benefits solar may provide the environment.
The third group is short sellers who understand the first two groups are using emotion in their decision-making and not proper risk vs. reward analysis. Only one group over a period of three years has made money.
As you can probably guess, the only long-term winners in the solar space are short-sellers. There's a reason I repeatedly write that short-sellers are the smart money and investors should always check short interest before investing. Not only has the "smart money" made a killing shorting solar, it's been obvious enough that many solar stocks were making the most-shorted stock lists month after month.
Unless you can determine and articulate the key pieces of information that well-funded hedge funds are missing, you may want to reconsider buying a stock that is heavily shorted. Take a look at some latest solar short interest numbers:
- LDK Solar (LDK) 4.25%
- SunPower Corporation (SPWR - Get Report) 32%
- SolarCity Corp (SCTY - Get Report) 23.27%
- Yingli Green Energy Holding Company (YGE - Get Report) 19%
- First Solar (FSLR - Get Report) 15.89%
- JinkoSolar Holding (JKS - Get Report) 9.67%
Short sellers aren't the only smart people in the room. I think it's a fair assessment to say insiders have their fingers on the pulse of a company. I examined insider buying and selling to gauge their true outlook in the solar space. Regardless of spin and optimism from the C-suite talking heads, nothing speaks louder than actions.