After spiking to over $30 yesterday, the stock has tumbled to $22s range today so I purchased the fund's first stake in this name. This stake is larger than I usually begin a position with simply because I have a long (and storied) history with this stock. Now with this said, there are a lot of speculators who are sitting in the stock so they still could be a near term issue as their impatience could cause more selling pressure; so the stock could fall farther from here. However, based on the ability to finally execute a quarter to Wall Street expectations and a host of other positives that this company always "had", but its lack of execution always clouded I am willing to include into the fund.
On the negative side (or positive depending on how you look at it) - Solarfun Power CEO sold half his stake to an outside investor - on the positive end this is a solid investor well versed in the alternative energy area, but on the negative you don't want to see insiders giving up such a large stake this early in the life cycle of a company. Hence I found this to be negative. Further, there is a lot of management turnover in this company - another negative. However I do believe the 'rising tide lifts all boats' situation will help Solarfun and until more info is presented at LDK Solar (LDK) i.e. audit/earnings and a better technical picture arises for Trina Solar (TSL), the choices are relatively limited. Some of the other players, I don't want to touch with your 10 foot pole.
Buying Solarfun ahead of earnings would of been obviously the preferred method but with its track record of earnings implosions you are entering a high(er) risk trade - and I try to limit risk when possible. This is very similar to holding a large stake in LDK Solar (LDK) ahead of audit results/earnings - you can game the system and believe the audit will work out, no issues and away we go to $60 but just as easily you could be down 25% within a few minutes. Hence I'd rather pay up for merchandise once I get more information (I hold a small stake of LDK Solar until more info is afforded to me). Now that Solarfun has (finally) executed to Street expectations, and has a clearer path to projections for 2008 - it should be looked at favorably the rest of the quarter. It does lag its peers with only a 16% gross margin but this should improve with time as well, and is far superior to some other 2nd tiers such as Canadian Solar (CSIQ) and China Sunergy (CSUN). Those might hold more upside potential as speculators love these latter stocks, but Solarfun has at this time proven to be better operationally.
So again, any of these companies mentioned in the preceding paragraph hold much more operational risk than a company such as Suntech Power (STP) but with risk comes some additional return potential.
Today most of the solar sector was down - not sure why; it could be partly due to huge runs needing to be digested or people hand wringing over US legislation for alternative energy initiatives - an issue that is way overblown one way or the other in the near term. While it might help sentiment it means very little for most of these companies who have little to no US exposure (save Sunpower (SPWR)). But this is horde mentality and if the bill passes all these companies (many of which have zero US exposure) should be worth 30% more, or vice versa. This is a bill, mind you, that needs to get through the Senate and an oil man sitting in the Oval Office. Hence the day to day hand wringing is pointless from this viewpoint.
I did take the opportunity to add more to Suntech Power as well here in the $73s range; I am hoping for a pullback to $70 to add more. As for Solarfun Power I started with a 900 share position or roughly a 1.7% position or $20.5K. If fortunate enough to see a pullback to upper (or mid teens) I would add in much larger scale. I do expect to see some panicked speculators to be frightened out of their shares in this name (soon), and this could provide an even better buying opportunity. But if not, we have some skin in the game and a positive result from LDK Solar (LDK) could reignite this sector and vault a company like Solarfun.
Long Suntech Power, Solarfun Power, LDK Solar in fund; long Suntech Power, Solarfun Power in personal account
3 comments:
Hoping to see Trina on the buylist soon :)
Hi Mark, this is completely off-topic...but I was just curious how your traffic/unique visitors have done since you launched this blog. Personally, I check in at least once or twice a day. Just wondering if you'd share how your readership is doing (increasing, decreasing, flat???). One day, I'd like to start my own blog as well. Keep up the good work.
Hi Mick
If you can believe it TSL is the only solar stock NOT above the 50 day moving average. Even dogs like CSUN (and LDK) are better technically - outrageous. But TSL is close $49 is resistance where it has butted past few days. A strong day tomorrow and away it goes. The only main concern is stock dilution to fund the polysili plant. When that happens the stock could get hit, but per recent mgmt release I think they are aware now that Wall St takes that stuff seriously - they kept using words like reduce, etc.
Anonymous - generally uptrend. I was published a few times on real money blog watch very early but he has since stopped reading my blog so that drove traffic early. Now seeking alpha and google search are main drivers. The more content you get the more google search helps. Its been a steady increase - about 500 or so unique visitors, and about usually double that page views, meaning on average people look at 2 pages. The good thing is I read the average blogger stays on a site for like (I forgot exactly) maybe 90 seconds or something - in general I get 4+ minutes. I attribute that to me being so long winded ;) THey say to keep your blog entries very short and to the point, but I break that rule all the time. Also on weekends it drops off a cliff! I did change my feedburner from 'teaser' to full read which means readers dont need to come to the actual website, about 2 weeks ago, so that could be hurting traffic growth to some degree. Before they used to just get like the first few hundred characters and had to come to the site to read the rest of the entry. But in general I'd say its like a step ladder - every 2 weeks or so it goes up to a new level, i.e. 400ish 2-3 weeks ago, 450ish last week, 500ish now, etc.
IF you want to start traffic type stuff like Jessica Alba or Britney Spears in your entries - that will catch a lot of guys via Google! :) Seriously hah.
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