Trading on Obama Hopes: Alternative Energy and Stem Cells

Investors are trading the Solar and Stem Cells stocks like crazy in hopes that Barack Obama and the Democratic Party win big in the upcoming election.  The only issue for these stocks is, how long can the rally last before the profit takers cash in all the gains?

The momentum in Solar and Stem cell stocks has been unstoppable this past week:

• Evergreen Solar (NASDAQ:ESLR) up 18% today and up 73% in the last 5 days. 
• First Solar Inc (NASDAQ:FSLR) is up 12% today and up 29% in the last 5 days.
• StemCells Inc (Nasdaq: STEM) up 43% today and up 100% in the last 5 days.
• Geron Corporation (Nasdaq: GERN) up 12% today and up 59% in the last 5 days.

Nothing big has happened with these stocks lately, nothing to warrant a 100% move in 5 days, its all coming from the hopes that Obama and the Democrats run Washington in the coming year and these 'alternative' companies will benefit greatly.

However with the way traders cash in and cash out of stocks these days, could the Obama Factor already be priced in these stocks?

That is a question that won't be answered until we finally know who will be the next U.S. President. 

Investors hoping to make a quick buck this late in the game on solar and stem cell stocks should be wary that if they ran up this fast in the last week, think how quickly they could come back down on any 'bad' news. 

Betting on stocks that will benefit from Obama's influence is a respectable trade at this point, but consider the traders that beat you to it, how much more in the short term can you gain?  Worse yet, how much could you lose?

You can always play the sectors with ETF's rather then bet it all on one company, consider the Claymore/MAC Global Solar Index (ETF)  (NYSE:TAN).  If you think Solar is going to take, you can even buy Puts on the ETF, same goes for Calls, that info. thanks to Yahoo Finance:

View By Expiration: Nov 08 | Dec 08 | Jan 09 | Apr 09

Strike Symbol Last Chg Bid Ask Vol Open Int 7.50 TANKU.X 2.50 0.00 3.90 4.50 70 105 10.00 TANKB.X 2.15 1.00 1.90 2.35 14 344 12.50 TANKV.X 0.85 0.45 0.60 0.85 9 175 15.00 TANKC.X 0.13 0.00 0.15 0.25 5 230 17.50 TANKW.X 0.05 0.00 N/A 0.20 3 131 20.00 TANKD.X 0.60 0.00 N/A 0.20 0 136 22.50 TANKX.X 0.25 0.00 N/A 0.20 0 224 25.00 TANKE.X 0.45 0.00 N/A 0.20 0 6

Claymore/MAC Global Solar Energy Index ETF (the Fund) seeks investment results that correspond to the performance, before the Fund's fees and expenses, of an equity index called the MAC Global Solar Energy Index (the Index).

The largest holdings of the TAN make up the following:

Happy Safe investing to all of you and may the best man win for 2008.

Disclaimer: No positions in any of the securities mentioned in this publication.