Here's Why We’re Buying the Stocks Wall Street Hates

One of the biggest dogs of 2016 is getting its bite back.

This beaten-down sector is down more than 30% year-to-date. But it’s finally starting to show signs of life as dismayed long-term investors throw in the towel.

That’s bad news for them—but a shining opportunity for your trading portfolio. Right now, you have a shot to scoop up these discarded shares for double-digit gains…

I’m talking about solar stocks.

While almost every other industry on the market has enjoyed at least a couple of days in the sun this year, the skies have turned black for solar shares.

After topping out 15 months ago, the solar industry became trapped in a nasty downtrend. Since mid-2015, solar stocks collectively lost more than 50%. Investors wanted nothing to do with them. They were treating the solar industry as if the sun was about to burn out.

Of course, solar’s prospects have never been better. The sector had simply fallen out of favor with skittish speculators. All it took was some bad news over the summer to send the entire industry into a tailspin…

SunPower Corp. (NASDAQ:SPWR)—a company that earlier this year was at the very top of our solar comeback list—dropped a “guidance bomb” just a few short months ago. The company alerted shareholders that it expected to lose $175 million in 2016. Analysts were expecting earnings approaching $50 million.

This massive miss turned the entire industry on its head. At the time, we told you SunPower’s flop would kill any hope for a quick recovery rally in solar. The damage was swift and brutal. SunPower’s stock dropped as much as 50%. But it wasn’t the only casualty. Sellers whacked the entire solar industry again in September when volatility returned to the markets.

But the sun is beginning to peek through the clouds this week…

Solar stocks are starting to bottom out. That means we have a shot at hopping onboard for a powerful snapback trade.

Just look at this beautiful bottoming pattern taking shape in the Guggenheim Solar ETF (NYSE:TAN):

turningonthelights-dr

This ETF’s September swoon perfectly tagged the June lows and set the stage for this week’s rally. Once the last seller was pushed out last month, TAN marched back above $20. This small breakout has been months in the making. Now it could set the stage for an even larger run.

Solar continues to stir up attention all over the map. It’s impossible to block out all the hype around Tesla’s SolarCity acquisition, a company that’s recently teamed up with Airbnb to get hosts to equip solar energy.

Solar initiatives are also hitting ballots across the country next month. In just a few weeks, Nevada voters will decide whether or not energy will be purchased from their choice of suppliers.

Sonnen— a major German manufacturer of solar energy storage devices— is gearing up to go public after major breakthroughs in top-growth markets.

Solar shares may have taken a vacation this summer. But fresh hype is creating a huge opportunity for new profits on low-carbon energy.

Sincerely,

Greg Guenthner
for The Daily Reckoning

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