Many solar company shares shot skyward in 2007, making them among the hottest stocks .
IBD's Energy-Other group, heavy with solar companies, currently ranks No. 1 of the 197 industry groups tracked. The 75-company group is up 70% since mid-August. Rankings are based on stocks' price performance in the last six months....MORE
When I disclosed that I was short First Solar in the first installment of this series, I received an incredulous comment soon after the article was syndicated on Seeking Alpha: "OUCH!! You have a short position in FSLR? I hope it doesn't come back and bite you!" I'm sure the commenter is not alone in his conviction that First Solar's rise will continue. The fact that First Solar has risen so far so fast only because people like the commenter have been purchasing the shares like hotcakes all year.
Shorting is inherently more dangerous than being long, because in a long position you can not lose more than you initial investment. Shorting a momentum stock, even when it is overvalued, can be especially risky, because momentum tends to be a self-fulfilling prophecy, with more investors becoming interested and driving the price up as they try to buy the stock. For all those reasons, shorting First Solar deserves to be the #1 riskiest of my 10 speculations for 2008.
Why did I decide to short at all? What makes me think that 2008 will be the year that First Solar's bubble pops?>>>MORE