Anyhow, Wed and Fri of Thanksgiving week is the turf of the retail investor - most institutional trading is already going on vacation - so we could get some volatile markets... and I hope that volatility is up. And guess where we are in the S&P 500... (ring ring) 1440. Amazing - what a magical number, eh? Like a magnet we keep getting pulled to it.
I did add to two positions here late in the day - Foster Wheeler (FWLT) is ridiculous here at $130 so I added more there, and Suntech Power (STP) finally pulled back nicely to its 20 day moving average of $59 so I added (missed the bottom but got in, in the low $60s). I've quickly taken this position up from 0.5% to 2.2% of the fund and if I had more cash it would be higher still. Here is one example of don't let past mistakes cloud your future view. I bought a SLEW of STP in the $37s through $39s; sold most of it around low $40s (as I got impatient with the stock not following its peers in Sept/most of October), and other sales in mid $50s and low $60s. In retrospect, a mistake to sell even 1 share, but the company is carving itself as the de facto leader (or co-leader on the PV panel side of things) so I am rebuying a stake. The past is the past; time to look forward.
For those who like Vegas, Trina Solar (TSL) is available in the $47s as an option ahead of tomorrow's earnings, but I went with the tried and true. If you want to hear what is coming for the solar sector and why I favor the big boys over little squirts here is a blurb from a Business Week article I just found.
Trouble is, there's now a group of hungry Taiwanese and Chinese rivals, led by China's New York Stock Exchange-listed Suntech Power Holdings (STP), crowding into E-Ton's territory. "There are too many companies," complains Tsai Chin-yao, president of E-Ton. Barriers to entry are low, since there are plenty of talented engineers with experience in the semiconductor and liquid-crystal-display industries, which Tsai says are not that different from the solar-panel field, so finding capable staff is no problem. This year alone, the number of solar companies in Taiwan has tripled, to more than 20. "It's incredible," says Tsai. "Even some companies, I cannot remember the names. It's really very hot."
So for all the focus on the publicly traded solar names, keep in mind there are probably 3-5 private for every 1 public waiting in the wings. As I wrote this morning, if you are not making money now in this environment - you are going to be in a world of hurt down the road as "profits" attract "new players" and "new players" bring down profits for everyone. Hence size/scale/R&D/technological lead is important. All these "me too" players are going to cancel each other out on the low end in my opinion. Where companies like Solarfun (SOLF) and Trina Solar (TSL) fit into this puzzle is still to be determined, but it's going to be intense down there at the bottom of the pie. On the flipside, stories like that make me more interested in JA Solar (JASO) and LDK Solar (LDK) as arms merchants in this industry...
Long Foster Wheeler, Suntech Power, JA Solar in fund; long Foster Wheeler, Suntech Power in personal account
4 comments:
Wow. TSL is tanked on horrible numbers. I think the market is heading south to test the Feb lows. what are your thoughts Mark especially ater the IWM breaking the support technically? I am in Cash and some selective puts like LMT, which is due for a pullback I think.
CHeers.. AJ
Yes, remember I sold TSL far higher - rather be safe than sorry. This is 2 quarters in a row they disappointed. Gross margins were not that bad, around 20% but they are now going to produce their own polysilicon which is going to cost a lot of money which means dilution or a lot more debt.
No idea on the market - the indexes look bad but a lot of the strong stocks (for now) are sitting right at their 50 day moving average and not budging. the volume on a day like today will be lighter than usual. Hard to read much from it, but the financials are an utter disaster
Maybe Ben will do a surprise cut ;)
Glad I sold my TSL back at 61.80, wish I had held on to more JASO after selling at 44.
Meanwhile - FXP is amazing.
FXP is very volatile
I actually cut it back today since it was up 13%
when the inevitable crash happens in China stock market FXP will be a heck of a position ;)
It is very hard to be short here to be honest as SO MUCH BAD NEWS is out there, sentiment is TERRIBLE and we fall on the same news every day. Something like 12 of last 14 sessions down. Eventually we need to have at least a dead cat bounce. But people have been saying that for many days. (incl me) I keep catching falling knives and buying stocks with great fundamentals for the most part, but even those keep getting hit. No safe harbor except for short ETFs of late.
I am liking JASO and LDK more and more, I thought perhaps their "life" would be short as more companies take their processes in house, but now that we see all these young start ups in solar they will be relying on LDK and JASO. I continue to be blown away at revenue growth at LDK - they just need to get their bottom line straightened out and this bad news out of the way.
Trina I am sure will bounce, and the sector is sexy but why bother when there are so many good companies executing.
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