Here is the deal with solar:
Nothing has changed, absolutely nothing. The story is exactly the same as it was one or two months ago. The only difference is that now 2014 demand estimates have gone up to the 45GW - 50GW range, 3 Chinese companies are now profitable vs. 1 last quarter and 0 for the 8 quarters or so prior to Q2, 2013.
The sector is very volatile, especially the Chinese solar stocks. These companies go up a lot and then go down a lot. The reason for this is because these companies have very low market caps and are relatively thinly traded. Therefore the market makers can very easily manipulate these stocks. They make money on the way up and money on the way down, while the pigs get slaughtered. Buy and hold is the only weapon that you have against these guys. There is no way that you will outperform the buy and hold investor in Chinese solars if you try to trade in and out of these positions, when you consider long-term vs. short-term capital gains in the US.
That is the reason I recommend investing in SPWR as the best risk/reward play in the sector. It is a lot less volatile than Chinese solar companies. It has a much higher valuation, but rightfully so. It has a better balance sheet, better technology, years ahead in power plants and residential, etc. SPWR panels were designed for concentrated solar and I hope that they start taking advantage of this very shortly; it will do wonders for the income statement.
As far as Chinese solar companies there are now only four companies worth considering:
CSIQ and JKS. These are the two leaders and best of breed. I would recommend CSIQ as the safer play, because of their geographic diversification. JKS has potential for better returns than CSIQ, but they are mostly reliant on China currently and there is a lot more risk for more potential return. CSIQ is the Chinese/Canadian SPWR, albeit with worse technology, a little less power plant experience, and just starting in residential.
TSL and JASO. TSL is the third best company, but JASO has a lot better valuation and better balance sheet. I recommend researching these companies before investing. I like JASO more than TSL, because JASO has better balance sheet, under-utilization that will end in the next quarter or two at most. Both are cutting costs, but JASO's ASP's are going up vs. flat for TSL. JASO has better quality panels, TSL's are known for defects; JASO also has mono panels that are better for distributed generation. TSL on the other hand has better brand name and recognition, especially overseas. Both are expanding module capacity. Both stocks are very cheap right now IMO.
The rest that you might consider are SOL, YGE, and HSOL. These companies are struggling and are speculative investments. If the solar industry grows very fast then there is a small chance that all of these guys deliver 10-bagger returns in a few years. There is a good chance that some or all of these go bankrupt or wipe out shareholders. Not investment grade, but there is still a small chance for a huge return. I am staying away from now, especially since JASO has similar valuation to some of these guys and is a lot better company.
How to invest in solar:
Buy now when stocks are cheap. I actually think these stocks bottomed out today:
SPWR $28.55
CSIQ $26.94
JKS $26.08
JASO $8.60
TSL $11.57
Speculative plays that might go either way (you can add CSUN, DQ, LDK, and STP? to these):
SOL $2.99
HSOL $2.67
YGE $4.18
If you want to invest in solar then buy these stocks now that they are down 30% or so. Buy more next week if they go even lower, and then more next month if they continue going down. You have to have a long term investment horizon, otherwise don't bother because the market makers are preying on investors that get greedy on the way up. Here is a trend that I spotted on TMC:
I recommended SPWR at $18 in June here on TMC (you can go back to about page 30 or so of this thread to see how I was pimping SPWR) and maybe somebody bought, but most stayed on the sidelines. Then all of a sudden the stock went up 50% in a month and people started buying around $24 - $28. Then post Q2 ER the stock went down to $24 and later to $20, and these people sold for a loss (and the stock exploded to $35 just one or two months later).
Then in July I was pimping CSIQ at $11. People didn't start buying it until it hit $14-$15, before topping around $16 and then quickly falling down to $10.66 or so. A lot of people cashed out at a loss (while I was buying more); and the stock tripled just two months later.
Same thing happened in October, with a lot of people hopping on the solar momentum play close to the highs are now considering cutting there positions at a loss (or already have taken a loss).
There is no reason that you should be losing money in the solar industry. It is by far the best performing industry in 2013, and it will do very well in 2014 also. If you are trying to chase a quick buck in solar stocks then the market makers will eat your lunch.
That is also why I don't recommend buying options in solar. If you want to gamble on these then make sure you are ready to lose all of that money in a matter of days. Buy and hold is the best way to invest in solar.
You really need to have a long term investment horizon when investing in these stocks. The industry is only getting started, and there will be many bumps along the way. If you thought that Tesla has to deal with a lot of FUD and volatility then you haven't seen anything yet until you start investing in solar. It is not an investment for everyone.
Note on SCTY: I don't invest in the company, because it is too volatile and too expensive. It is very similar to TSLA in valuation, but with a lot less clear path than Tesla has to one day justify its valuation. It may turn out to be the best investment in solar, but I doubt it since you could buy every single US listed Chinese solar company with SCTY's market cap. I already have too much TSLA exposure so SCTY is not necessary for me (I have some deep ITM bull call spreads though, but not much at all).
Now is a great time to be buying solar stocks. There might be better times in the upcoming weeks, but you can't get too greedy on the downside either. If you are looking to get in, then don't wait too much longer. The trend will reverse very shortly and you will not see these bargains any time soon. These stocks might go a lot lower, but I don't see it happening. Unfortunately the market makers can manipulate these stocks however they want to, because of the small market caps. I think these are great bargains and the turn around will be swift and violent.
Buy and hold!
...or don't buy at all!