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Also helping solar returns (just look at the performance of the MAC Global Solar Index ETF above) are:
  • 2. Expectations that the Chinese market finally takes off in 2012.
  • The CEOs of Suntech Power ( STP) and Trina Solar ( TSL) recently told the press that China will grow to as big as 4 to 5 gigawatts this year -- recent Wall Street estimates forecast the same growth -- meaning China might be the largest market globally for solar in 2012.

    Remember Chinese solar companies revised guidance lower throughout 2011 after beginning the year with some heady expectations. Chinese government support for solar demand has lagged its manufacturing support historically, but that might be about to change.

    Responsible for creating the current glut in the sector through its generous lending to solar manufacturers, China should start absorbing more of solar supply if it wants its solar manufacturing sector to thrive, and right now, simply survive with slim margins .
  • 3. Solar stocks being oversold based on last year's crash.
  • There are some stocks in the solar sector, whether U.S. or Chinese stocks, where balance sheet concerns are so serious it's hard to rate a stock as oversold when equity shareholders could still be wiped out long after the short-term demand pop has fizzled.

    TheStreet recently spoke with Morningstar's Simko about three U.S solar stocks and two Chinese solar stocks that have recently rallied and whether they are solar stocks for 2014 -- once all the short-term pain in the sector is sorted out -- or whether the rally in these companies to start 2012 will sooner or later result in pain for shareholders and possibly doomsday for these companies.

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