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Two Ways To Play: Flying Too Close To The Sun?

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Strengthen your portfolio in good times and bad.

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Solar stocks were hit hard in today's session. According to Bloomberg, analysts at Merrill Lynch cut their ratings on two solar stocks on concerns that Germany will cut subsidies by more than expected.

The German Solar Industry Association said the country's politicians are favoring a reduction in solar subsidies by more than 25% over the next two years to counter escalating costs. This was greater than the consensus estimates of a 16% decline.

The news prompted Merrill Lynch analyst Mark Heller to cut his ratings of SunPower (SPWR) and Evergreen Solar (ESLR) to "Sell" from "Neutral" because the move could reduce sales.

Germany is the world's largest solar market. Shares of SPWR and ESLR both dropped 9%.

Read Professor Andrew Jeffery's column Is Solar Sustainable?

From the Bull Pen: Those that remain bullish on the solar space might see this as a gift, especially if high energy prices are likely to continue. Pullbacks in SPWR near the $70 level might seem attractive.

From the Bear Cave: The bears feel the solar stocks are way overvalued and might believe stocks like Canadian Solar (CSIQ) have more room to correct.
No positions in stocks mentioned.

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