New York-based Weinger, 36, now sees the possibility of juicy short returns in solar-panel makers such as Suntech Power (STP), Q-Cells (QCE.Germany) and First Solar (FSLR). A producer-by-producer analysis of the supply of polysilicon versus regional demand for solar power leads Weinger to conclude that price could soon be at or below the marginal cost of production. Producers with high costs, leverage or both are headed for trouble. The solar industry isn't alone. "The market is afflicted with the most bizarre case of amnesia. Our short book is filled with irrationally overvalued companies that would qualify as financially distressed in a normal credit market," he says.

Q: What kinds of risks?

A: In the first quarter, Suntech created an off-balance-sheet entity called GSF -- for Global Solar Fund. In their SEC filings and on a conference call, they described this as a separate entity that is buying Suntech panels. However, what they said shortly thereafter in questioning was that Suntech has an 86% interest in GSF. Suntech basically took modules out of its inventory and put them into the inventory of this off-balance-sheet entity and then recognized revenue on those modules. Beyond that, Suntech's costs aren't as low as those of the other Chinese module manufacturers. It has the largest commitment to purchase polysilicon at prices above where this material is trading today. Unless they renegotiate those contracts, they are at a structural disadvantage to guys like Yingli [YGE] and Trina Solar [TSL], which didn't sign long-term contracts at these predetermined prices. Another issue: To make a solar-power system, you take polysilicon, put it in a wafer, make solar cells from this and then assemble those cells into a module that can be installed on a roof. Trina and Yingli are vertically integrated all the way up through the wafering process; Suntech outsources its wafering. It's more expensive to do that.

Bullish on Solar

growth and solar energy

Solar energy is definitely growing in china

"These should be moving with oil this high. I'd still say (FLSR Quote) is my favorite, but if oil hits $80, then these should start going higher. " "Lightning Round," Aug. 25

made some money before barron started to slam all the solars

Best of Chinese Solar

Suntech will likely participate in all of the high-profile solar installations, said Cramer, and the company has many of its supply and distribution problems now behind it.

clean energy

Solar??

Not enough info.

Solar marginalized by cheap oil

is my favorite for long term

loss 52%

Not so hot anymore

Walking a tight rope w/out a net

short

solar technology is the future
Great market = demand is just at the beginning.