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Investing in China Solar Stocks

Written By Jeff Siegel

Posted August 18, 2015

Last week, I wrote the following words in regards to China’s solar industry …

cchhiinnaassoollaarrAnother reason China has been so aggressive on the solar front is because the country’s entire solar industry has been shouldered by the government.

Without significant state support — in the forms of mandates and massive cash infusions — it’s likely that nearly every solar company in China today would be floating downstream in the industrial waste- and sewage-filled waters of the Yellow River.

Earlier this year, as we began to see the cracks form in China’s stock market, I sent out an alert to let readers know it was time to dump China solar stocks. Since that email, all but one have tanked.

Between the fact that most Chinese solar companies live and die by how much the government supports them and that China is just an extremely risky bet right now, it made no sense to hitch our wagon to China solar stocks when there are plenty of U.S. solar stocks that are much more valuable.

Well, this morning I awoke to more bad news from China.  As reported in Bloomberg …

Chinese stocks tumbled the most in three weeks as traders reduced stimulus bets and speculated the government will pare back efforts to prop up equities.

The Shanghai Composite Index sank 6.2 percent to 3,748.16 at the close, the biggest loss since an 8.5 percent rout on July 27. About 35 stocks fell for each that rose, while more than 600 companies plunged by the daily 10 percent limit.

I’ll be honest, I really don’t understand the methodology behind China’s market intervention strategies. But here’s what I do know: If your investment strategy relies on unsustainable market supports, you’re taking on a hell of a lot of risk.

I’m not saying there’s no opportunity in China. In fact, this morning we’re seeing a number of China solar stocks doing quite well.

Trina Solar (NYSE: TSL) just announced some impressive results for Q2. That stock is up about 8% in pre-market. JA Solar (NASDAQ: JASO) is also up this morning.

Still, risk remains quite high in China. So just know that if you’re looking to score a few gains in the Middle Kingdom’s solar industry, you’ll have to be nimble. This is not a place where I’d be looking for long-term investment opportunities.

If that’s what you’re looking for, you’ll be better off sticking with these U.S. solar stocks:

  • SunEdison (NYSE: SUNE)
  • SunPower (NASDAQ: SPWR)
  • First Solar (NASDAQ: FSLR)
  • SolarCity (NASDAQ: SCTY)

Israeli-based SolarEdge (NASDAQ: SEDG) is also loaded with profit potential.

As for China solar stocks, at this point, we’re only looking to exploit the big dips, like the one we saw last month with JASO after the stock fell below $7.00. That was a bargain!

Check it out …

In below $7.00, out at $8.00

That was a very quick 15% gain. Nothing wrong with that!

Just don’t be greedy on these. Remember, pigs get slaughtered. If you’re going to dip you toes into China’s solar industry, be sure to take the money and run!