So far so good. Our thesis has lately been that as long as the general markets are accomodating, the solars would shine. The fundamental and earnings news coming out of most of them is just too good to ignore.

However, when the markets are gripped in panic selling, the solar sector is one of it’s first victims, because somehow they are lumped under “high risk” and “expensive”. We don’t think that’s correct at all, but it’s hard to fight the markets.

For instance, are they high risk? We don’t think so. Most of them have already sold most, if not all, of their 2008 output, and have contracted for most of their raw material (polysilicon, in most cases) well into next year. This gives considerable visibility with little room for large (nasty) surprises.

The only parameters that could have an impact are the average selling price (asp) of the modules, and the spot price of polysilicon, especially for those that have not covered their needs with long-term contracts.

Although spot prices of polysilicon recently reached a record of over $500 per kilo, there doesn’t seem to be a whole lot of buying from solars at spot prices. So we wouldn’t classify most of the solars as “high-risk”. You have to look at individual companies, but unfortunately, in a sell-off, they get lumped together.

We have already argued here that there are a few really cheap solars, most prominent of which is our favourite play, Trina Solar (TSL). It’s once again doing nicely this morning, and we had quite a run up till now. We are reaching the 200 day moving average, so it could be wise to take some money off the table around 45, as we might not break that after the strong rally we had already in a short time span.

But if we break it convincingly (on high volume, with a close above), buy some back. Don’t worry, it’s still dirt cheap, just a little less so than last week 🙂

This morning, it seems to be STP’s day in the sun, up strongly.