Hi David, There has been some notable movement to the downside in the Solar industry in the last 2 weeks, particularly US based companies. Some of the movement screams capitulation. This is a sector you both regularly comment on, and David Brown, also supports investment in the sector. Do you see this as a buy opportunity?

David Fuller's view

The main reason that Eoin and I comment on solar power, or David Brown to my knowledge, is because we are convinced that it will be the most successful of the renewable technologies.  However, I suspect that companies in the solar industry will remain highly speculative for many years to come.  The reason - it is all but impossible to know which will be the most successful and enduring companies in this comparatively new and rapidly evolving technology.  Moreover, there will be many candidates but most will ultimately fail. 

The same can be said for companies which pioneer any other new technologies, and this has always been the case.  The best example concerns the US automobile sector.  Here is Wikipedia’s List of defunct automobile manufacturers of the United States.  There are hundreds of them, most of which I had never heard of.  Only a handful survived, including Ford, GM and Chrysler.  

Therefore, I assume that solar industry shares will remain highly speculative.  Consequently, they should also be regarded as no more than medium-term trades.  Unless one is a genuine expert in this field the only way to play it, I suggest, is via price charts. 

In other words, following the downtrend mentioned in the email above, I would look for relative strength which may occur when the price of crude oil rallies more than briefly.  If you buy relative strength coming off a low in the solar industry, I would hold on until that relative performance wanes.