Fredric Ruffy from Optionetics.com has written a cautionary article about investing in Alternative Energy stocks.
If alternative fuel companies made lots of money, there would be no energy crisis today. Unfortunately, most of these companies don’t.
You will start to see more and more stories about this sector now that gas prices are starting to cross the $3 per gallon mark and head even higher. As I said in a previous article, this sector is currently in a trading market. While he cautions investors that are looking for the long term viability of this investment, he can certainly see trading opportunities.
However, before taking a position in an alternative fuel company, investors will want to mull over the company’s long-term prospect carefully. Many fuel cell companies are struggling enterprises, solar start-ups are risky investments, and there are not many choices among the wind power companies either. Yet, at the same time, many of these stocks also have options. Therefore, it is possible to create trades that can profit from the long-term appreciation in the share prices, but limit risks (or even create profit opportunities), if the alternative fuel stock takes a trip southward instead. [ more ]
This is where I differ from his opinion. I do believe in the long term future of these stocks. However, I do believe that if your going to start new positions or are thinking of adding money, you should wait for better buying opportunities ahead as the mania of this sector settles down.