FSLR is a solid investment. A lot of institutions and investors love this stock. I like the company, too. And the stock has made a lot of people a lot of money. Having said that, the time to sell FSLR is just about now. That's if you are a short-term trader in FSLR. If you have owned the stock for years, then no problem, just continue to sit tight. But many people trade solar stocks, and if that's you, then stand by to sell.
First Solar has had a nice run for a few reasons. The overall market has been doing very well. The disaster in Japan with their wretched nuclear disaster has taken all the air out of building any nuclear facilities. The high price of oil makes all solar and wind stocks look good. High fossil fuel costs give the grid parity gang a much better chance at finally meeting and beating the fossil fuels head to head.
Now that is all the good news. Here is the bad news. The market is not going to continue on a straight to the sky path. In fact, in case you haven't been watching, the Congress is not agreeing on a budget. This coming Friday there is a distinct chance that the U.S. Government will enter a shutdown for all non-essential spending. That means all sorts of programs, employees, subsidies, student aid, literally thousands of activities that the U.S. Government directs and participates in will come to a sudden hault. Now the economists and analysts out there are watching this, and they know what this abrupt stoppage to the Federal Government will mean for the economy. It will mean a drastic decline in economic activity.
That's the funny thing about all the debates about how much the government should or should not be spending, because government spending is the economy. The debate isn't a bad one, it is just not terribly realistic on a day to day basis. And Wall Street lives on a day to day basis. Wall Street does not care about the long-term $14 trillion in debt or the budget deficits, they care about the ability of 10,000 listed companies to make revenue and generate a profit out of that revenue. If the government stops spending so will many millions of Americans. Some because they will be cutoff from dollars, others because they will be scared silly.
The economists, analysts, big investors, mutual fund managers, and other heavy hitters will quickly figure out that if the shutdown appears imminent it will give the economy another big hit. And another big hit against this already poor economy is not a good thing.
So these people will sell. They will sell all sorts of stocks. They will book the nice profits they already have on paper. And when they start selling, it will include the solar stocks, especially since they are for most part on a high right now. Buy low, sell high. When the selling starts in solar equities it will quickly reach the lower level trader and investor. When the Dow Jones starts losing real ground the computer selling by hedge funds and other technical players will push the stocks down. The "I love to short solar stock" gang will also quickly show up at the party.
Being a fan of solar stocks also means you have to be a realistic trader of the same. There are good times and bad times for companies. The U.S. stock market has done very well since March of 2009. No reason to feel too bad if the market goes down. I believe that First Solar will be heading lower. If there is a last minute budget deal and there is no government shutdown, could FSLR keep rising. Sure. This stock has proven that it can bounce $15 in a day no problem. It could get back to $200 a share, but I doubt it.
I think it is more likely that the market is frothing. Solar companies have had a nice run in their share price. FSLR has run to $160 a couple times now in the last two months, it even touched the $170 level. Maybe it's a mistake, but I got used to FSLR around the $120 region. With the stock market ready to plummet on a serious bad news event (no budget deal) I would rather be on the sidelines than in the middle of a heavy downward slide. Better safe that sorry, right. Or should we say 'bettor' safe than sorry. Solar stocks do have a bit of risk, don't they?
FSLR is a great investment. As stated before, if you are in long-term then sit tight. Two years from today you should be in a better spot. But for anyone else involved in this equity, it's time to look for the exit. As usual I am not going to short this high quality company, anything is possible when you are at the top of the food chain in your field (no other U.S. company can touch First Solar in solar panel production). However, the prudent course of action here is to realize that FSLR will be vulnerable just as any volatile stock to a major bad news event, and herd driven institutional selling.
Sell FSLR on any strength on Monday or Tuesday. If the market keeps roaring ahead and there is a budget deal then you may want to jump right back in. If we get to Friday afternoon and there still is no deal in Washington, then you may want to be on the sidelines for Monday, April 11th. Hopefully you didn't hear it here first. I would look at FSLR again around $130 with some potential, but I would really like to see a break below $120 before I truly get excited again for the company.
