Bookkeeping: Cutting Back on Solar Exposure

As I mentioned this weekend, I got this sector correct but the stocks (thus far) wrong. While neither Trina Solar (TSL) or Suntech Power (STP) has broken support, they also have not made a meaningful move along with their peers. Hence this "could" mean there is some risk to this quarter's earnings (or it could just mean speculators have chosen other names). Too hard to tell in this sector.

Reviewing my top long positions, I am quite confidant in serious earnings upside in all names except for Trina, so to have such a large exposure going into a binary event (could go up a lot, or down) is more risk than I want at this moment in an extended market, so I am cutting Trina by 22% from 900 shares to 700; Trina is now down to a 3.4% position. I also cut a bit back in Suntech Power. Both stocks sit above important support levels but are not really doing much constructive of late other than marking time. So I will re-assess as we move through earnings. The other issue is their American counterpart, Sunpower (SPWR) reports October 18th, and with its massively overinflated valuation, it might sell off post earnings, and that could take other parts of the sector with it - even those parts trading at a far lower valuation such as the 2 names I am selling today. Sort of a baby with bathwater type of thing. So a few things to consider - let's see what Sunpower reports for margins and their take on the polysilicon shortages and go from there.

If these stocks make a move up, there will be plenty of time to catch 'the wave', especially in Trina Solar, as it's so undervalued compared to peers, so buying a few points higher after we get more clarity on the sector and the company itself, will be fine with me. This is more of a risk mitigation move for the portfolio as a whole, rather than an indictment on these names; however if they break near term support my selling will be more serious.

Long Trina Solar, Suntech Power in fund; no personal positions