Solar Sinking and Other Transactions

To raise cash to take advantage of these bargains I had to sell something - I decided to close a minor position (less than $5K) in Intercontinental Exchange (ICE) - the position was not large enough to have any material impact on the fund so I wanted to use that cash to add to other positions.

I also reduced my Garmin (GRMN) stake - the reasoning here is mostly because I need cash but also because Garmin looks to be locked into a bidding war for Tele Atlas - until this is resolved the stock could have some overhang. Further, if they do win, while it would be good for the long run, it would hurt 2008 estimates by a pretty significant magnitude.

With this cash I added to Mechel (MTL) the Russian/iron ore/steel play which until today had held up incredibly well, more Mosiac (MOS) [I was debating Potash or Mosaic], and Shaw Group (SGR) - the trio of Foster Wheeler (FWLT), Shaw Group (SGR) and Chicago Bridge & Iron (CBI) had the most impressive earnings results in this last quarter so they should face the least headwind going forward over the next 90 days. Hence when they are marked off on sale like this I get more interested. I already have a 4% stake in Foster Wheeler, but if I had more cash I'd be a buyer there too. Despite some damage today all these charts are still technically in decent shape with the stocks holding their 50 day moving averages. That said, if we get a 'waterfall' type of climax selling event, it won't matter much what the charts are doing or saying.

One might ask, why not solar as those stocks are down very heavy today as well. I just think the valuations in that sector are STILL stretched (aside from Trina Solar (TSL)). It is interesting to watch Yingli Green Energy (YGE) sell off the hardest since its earnings. My thesis back in August was once this company reported a full quarter in public life, while its operations are very good, it has a very large share count for its size and its earnings PER share would suffer. So despite a strong quarter, it was only able to book $.18 EPS, which in no way should support an upper $30s type of stock price it had last week - it is now in the upper $20s. My call was much too early, but it is nice to see reality hit some of these stocks. The other issue is the continued pressure on margins from polysilicon shortages. This is part of the reason JA Solar (JASO) is seeing pressure despite outstanding results. And with some of the weaker names in the group set to report I don't want to be very exposed to this sector until more info is available. Last, the 'type' of investors piling into these stocks of late do not lend to stability. Hence, I'd rather focus on my 2 favorite groups, agriculture and infrastructure - all the companies hav reported - we have seen who is doing good and who is doing great and now we have a chance to buy those doing great at lower prices. Could they go lower? Certainly - we are in baby out with bathwater time. But despite the hit being taken short term, these are the 2 groups with the best fundamentals (to me) in the go forward 1 year period. And unlike solar I don't see any margin pressures. Hence why I am not stepping up any buying of the solar stocks at this moment.

All that said, with my overweight in these areas the fund is going to take a serious hit today.

Long all names but Yingli Green Energy and Intercontinental Exchange in fund; no personal positions