Since I am quickly reducing my cash position (and thus losing it as a hedge), I am going to keep the short positions I just added so I have some offset when (someday, perhaps in 2008) when Ben lets the market go down again.
Until then, I took the opportunity to restart my position in LDK Solar (LDK). I sold LDK Solar on September 24th as it touched $70, but on this shakeout the past few minutes, it was taken down to $60, so I am buying back in (by the time I got the order in, it already rebounded to $61s), and this time I will buy in a bit more scale. After I sold at $70, the stock went on to peak at $75, and is now down 19% from that peak and 13% from where I sold it. Talk about volatile. And this is one of the quiet Chinese stocks ;) LDK Solar is the 60th position in the fund with an initial stake of 1.3%.
I also added in decent size to my favorite solar name, Trina Solar (TSL) as it was whacked down below $58 or 10% below yesterday's peak of >$64. The volatility in these names is breathtaking. But in 'bull market full party mode' these corrections are generally steep and swift, and occasionally narrow. I've pushed Trina Solar up to 3.25% of the fund. I have a VERY aggressive 1 year price target on this name, but I will need to see some gross margin stabilization in the next 1-2 quarters to see if my targets can be reached.
I am now back up to 3 solar names, with these 2 along with the 'slow but steady' Suntech Power (STP). I have avoided the 2 US names in the sector, Sunpower (SPWR) and First Solar (FSLR) because bluntly their valuation is out of this world extreme. Not that the Chinese names are cheap.... and not that 'investors' in these names care much about valuation. I still like to see good valuations for the 'safety net' reason, even if the market is currently ignoring them.
Hopefully things start to slow down, as these manic short term moves are more for the day trading crowd.
Long LDK Solar, Trina Solar and Suntech Power in fund; no personal positions
9 comments:
LDK falling fast! Wow!
Yep. A lot of speculators and those who know nothing except 'solar' and 'china'. Weak hands.
Let's see if it spreads to other sectors - buying on this sort of speculative nature that we have seen is all about confidence. The momo guys flee at the first sign of weakness so it wont take much to make them leave a lot of 'hot names'. Let's see how it shakes out - I am surprised FSLR and YGE were not hit 'that bad'.
Article on LDK: Piper Jaffray made comments on the stock this afternoon. The firm said, "We have confirmed that the LDK financial controller recently left the company. We are also aware of the former controller\'s allegations of poor financial controls and a 250MT inventory discrepancy; allegations were made to both the SEC and the external auditor KPMG. We have spoken to the LDK CFO about these claims and have found no reason/proof to dispute management\'s claim of 1000MT of polysilicon in inventory/WIP. News of the departure may pressure the stock near term."
Yep you beat me to it!
Wow what a dramatic move - should provide an opportunity. One thing you cannot lie about is cost of goods sold or if you do, wow might as well not be public.
I still think this is a precursor to China as a whole - standards in accounting are different than US GAAP so when people say China is cheap on 50 times earnings, I'd like to know if they realize that 50 is not the 50 we expect here. Anyhow, glad I sold at 70. Not so glad I bought at 60, but what can you do.
I'd like to know why TSL fell on the LDK related news, strange eh?
massive amount of google searches for "LDK" hitting the blog. Interesting to watch this internet work from the back end analytics.
YGE after hours is down nearly 7% too. Seems like a delayed reaction for that particular stock - it only fell about 4% during the day.
I've been very wrong on YGE but I am curious how it reacts once it has an earnings out.
Last earnings were based on 70M shares
This next one will be based on 120M shares with more possibly to come in the coming quarters. I don't think investors realize that, but with that said, I left 100% return on the table BY REALIZING that. Sometimes ignorance is bliss.
Hmm. I've been really liking LDK for some time now. I've made money off of them, and I wasn't in today. I don't think this is going to have a long-term affect on Chinese Solar Stocks. They are simply growing too fast, manufacturing too much product, and bringing in unparalleled margins.
On the other hand, I'm wondering if this bad news from LDK, in driving down all Chinese Solar Stocks, creates some nice opportunities to buy into some of the others (I'm most familiar with Trina).
In the long term, I suspect that LDK is going to keep going strong, but buyers ore going to be paranoid for awhile.
I decided to buy more on this paranoia. I like what the company had to say this morning ... more in a post.
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