The Stocks One Considers

Contrary to what many believe, examining a stock and deciding whether to be bullish or bearish is not a major determinant of investment success. No matter what one does, it’s hard for even the best of the best to have a success-failure rate that’s consistently much above 50-50 (we all have occasional hot or cold steaks that at times put us well above or below that level, but on the whole, 50-50 is the most reasonable expectation). The big difference-maker is how you decide which stocks among the approximately 6,500 issues available now in U.S. you’ll even look at.

I don’t make these decisions based on what’s in the news, and I certainly don’t make them based on what’s trending in social media. I’m also not big on stories, whether casual or in the form of systemic motifs such as those featured by Motif Investing, a competitor to my firm, Portfolio123, in the specialty robo-investing space. I’m into what has generally been called fundamental and/or technical analysis but is now often referred to as factor-based investing. Whatever label one chooses, I look for data characteristics that are logically and empirically related to probable investment success.

Finding FSLR

Considering my approach, I had not expected to encounter solar-panel producer First Solar (FSLR). Solar energy makes for fabulous stories, but not necessarily great investing.

For example, Motif Investing’s Climate Change Motif has lost 12.7% since it went live on 1/10/14, versus an 18.7% S&P 500 gain. A similar motif, Cleantech Everywhere, looked for a while like a big winner, having risen about 190% from its 1/4/12 launch to 3/4/14 (S&P 500: up 54%), but reversed course and gave back all of its gains. By now, it’s up 71.5% since launch, a nice gain, but one that slightly trails the S&P 500(up 76.4% since 1/4/12).

The problem is that solar is a tough business. As much as we want to love it for obvious environmental and renewability benefits, not to mention the age-old and largely accomplished-by-now desire to reduce dependence on Mideast oil, it’s not been good on a dollars and cents basis. Noble intentions tend to recede when one finds that cost per unit of power is above that produced the old-fashioned way. We have enough experience to understand that progress will eventually alter that imbalance, but for now, solar in the U.S, has depended much on subsidies from a socially mined (or not, depending on one’s point of view) government.