Solar, backers both got burned

by Peter Hodson, Financial Post
Excerpt: There are many lessons to be learned here:
1. Just because something feels good (being green) doesn’t mean you will make any money from it.
2. When there is euphoria on any sector, use extreme caution. Most investors, given the chance of losing 93% for the chance to make 100%, would likely do nothing instead. That’s a great policy when faced with a euphoric sector.
3. Watch out for financings, as usual. Investment bankers strike when the iron is hot and they can sell deals. This in and of itself implies solar stocks were peaking when all the financings and IPOs came out. Basically, it’s the age-old rule. When everyone else is buying, maybe you shouldn’t.
4. Watch out for industries that rely on government support. Far better to invest in a sector that is self-funding without subsidies. The government has enough hidden surprises for you on the personal tax level, so don’t double-up on your government risk by buying companies in need of government help to meet their business plans.

One thought on “Solar, backers both got burned

  1. Right on, Peter.
    The South Sea Bubble and the Dutch “Tulip Craze” [qv.] come immediately to mind.

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