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Avoid Every Single Solar Stock but One

I also want to add one caveat to insiders buying and selling: It doesn't take long for someone paying attention to the markets to read "insiders sell for many reasons, but buy because they believe the stock is undervalued." That's only partially true. Insider selling is valuable information and it's a mistake to totally discount it.

Selling shares may not mean insiders believe the shares are overvalued, but it does indicate they don't think the price is so undervalued that they'd better hold on. Investors don't create alpha (gains above the market average) because they're buying at a fair price; alpha is created when you buy at a discount.

I found a total of 1,000 First Solar shares bought by insiders during the last 12 months compared to 220,000 shares sold. Say what you will about the various reasons why insiders liquidate shares, this paints an abundantly clear picture in my head of the overall outlook for the operation by the people running the company.

SolarCity may have a model that at some point becomes operationally profitable, but it needs to do so before subsidies are cut. Fossil fuel prices are stable to falling, and it's hard to imagine a catalyst reversing record low natural gas prices in the foreseeable future. You may have also noticed that it doesn't cost as much to fill up your tank at the pump as it did a year ago.

As long as we have abundant cheap domestic energy, the urgency of consumers to invest in low return solar projects becomes overcast. Also, any bear thesis on solar would be incomplete without addressing the fact that you can't trust SEC filings by Chinese companies. The only difference between buying Chinese solar stocks and placing a bet on Black 15 in Vegas is a casino will give you free drinks and a meal comp for playing. Yes, either one may pay off 36 to 1, but there are so many better opportunities with less stress and risk for you to prosper with.

After leaving Chinese stocks LDK Solar, Yingli Green, and Jinko Solar to gamblers and the uninformed (sorry, but if you're offended you're not paying attention), investors have few significant solar companies to select from. The first is SolarCity, which is the flavor of the week due to Elon Musk's Midas touch. SolarCity isn't profitable and isn't expected by analysts to become profitable anytime soon.

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