Ok guys, oil is high, and the rise in oil prices has brought about some huge gains in solar stocks.

However, at some point in the next 3-6 months (barring an Israeli attack on Iran), I think the oil bubble is going to pop, and solar stocks will get hammered when it does. 

Canadian solar was trading at around $17-$20 in February and March, for example, and now it's trading at $45-$51.  According to google, it's trading at at P/E of 64.42.  Between March and May, in the span of about 45 days, the stock more than doubled in price.  Of course, my reading indicates that they did have a great Q1, but a freaking double??? 

The puts are expensive, but I'm debating making a play on this one.  I mean, I can't really see the stock getting much higher.  It would seem to me that this one is going to come crashing down to at least $30 or so, perhaps as low as $25.  The question is when.  Predicting when the oil bubble is going to bust...could be a tough call.  And, of course, I'm just assuming that the stock will crash when the oil bubble pops. 

thoughts anyone?

edit: anyone see the haircut that RIMM is taking this morning?  ...think they'll bounce back next week or will continue to drift lower?  ...with the iphone competing....i'm thinking a drift lower.

I wouldn't short solar or anything else that's an alternative energy.  part of the reason these solar stocks are jumping up is due to various countries across the world starting to subsidise solar based equipment and anything else related to solar.  I believe the jump in price and the high P/E reflects the huge jump in earnings that will be seen over the next several years.   Do a google search on "solar subsidies" and you'll see what I mean.  

The US also gives tax credits to homeowners who switch to solar power.  Check out this article:

http://www.oregonlive.com/business/oregonian/index.ssf?/base/business/120547590618800.xml&coll=7 

I'm with Upod here...The surge in solar and other alternative energies is being pushed to the forefront because of higher oil prices, but it doesn't mean they are overvalued and wn't stay where they are or go higher. The recent proposal by McCain offering a huge monetary 'prize' for better battery technology is just the start.

The switch will between oil and alternative energies will be carfeully manipulated and regulated so that both retain value. The manipulative legislation just has to catch up on the alternative energy front first. If you're looking to short something you may want to consider potash stocks as they seem to go up directly in line with a downward trend on oil prices and vice versa. Just my opinion.

You may get lucky on a short solar play, but I wouldn't do it if it were my money. Hope this helps you.

Nanosolar is going to impact all the rest of the solar companies.  Too bad it is currently private.

www.nanosolar.com 

I've attempted to short solars many times. Most of the time I barely walked away with a profit before I realized it was heading way higher, or in the case I am in right now- I'm still short and it's gone up 10 points since I shorted (ENER). My suggestion is to just stay out of the solar sector if you want to short it.

Upod is right, subsidies are whats propping up a lot of solars- just recently Japan announced more subisidies for solar (last week I think).

 I'm hoping to get of ENER soon for a loss. :)

Guys, you all make good points, but when I see stocks trading at 65x p/e ratios, I tend to believe that they stand a great chance of getting knocked down.  With that said though, I'll be waiting because I think they have a chance of going even higher if oil keeps going up (which it probably will, at least through the summer).

I thought the same thing about high P/Es for a while.  I wouldn't get too caught up in the theory that stocks with high P/Es have a great chance of getting knocked down.  Look at  Amazon over the past two years.   When I first started trading two years ago,  it was right around $40 with a P/E around 90.   If there was ever a short,  I thought that was it.    We all know how that one ended.     In the two years I've been trading,  I don't think I've ever seen Amazon with a P/E below 60.   RIMM dropped 12% today and it's still has a P/E of 55.   Yes, there are times stocks with a high P/E rations have drawn in a lot of speculators,  but many other times,  there are very legitimate reasons for the high P/E (e.g., future growth rates ).

If I was looking to short something right now,  it would be airlines.

I guess what makes me think that this (Canadian Solar) is an obvious short is that it over a double in less than 45 days time.  It saw explosive growth in the last month due to rising oil prices and a good earnings report.  One shaky earnings report and the bubble bursting in oil...Canadian Solar could see a dramatic drop. 

My original thoughts were based on that stock's rapid 150% gain ($21 in April to $51 in June) in such a short time span.  I know that growth companies often trade at a high p/e ratio, but I'm still betting that high oil is the driving force behind this double...and when high oil goes away (eventually, it's got to come down a little...eventually...) I think we're going to see some selling here.  You guys are right. it's not time to short right now, and if there are enough subsidies, it may never be time to short..but I'm still going to keep my eye on this one.  

The real question here is.."Was it undervalued before?"

Sometimes other factors in the market and a good earnings report bring out the good stocks and they do jump up 'suddenly', but in reality they should have been higher long before the jump anyway. The new $51-ish price may be where it deserves to be.

Of course it may not, but figuring out the EXACT reason for the jump is the key here if you ask me.

JM2C (Just my 2 Cents)

If you are looking to short solar wait for it to break.  When they become unfavorable there will be a lot of money to be made on the way down.

Leading up to the election, you may be making donations if you go short now.