LDK Solar (LDK) Up 17% on Multiple Announcements

LDK Solar (LDK) has been a stock I have stuck with, to my detriment (1st or 2nd biggest paper loss in the fund since inception). Despite the constant attacks on it's accounting or fears it is some sort of hoax company, I've stuck with it, because (a) I like it's place as an arms merchant in the fast growing industry (b) visibility of their business and (c) end customers of high quality, especially European established players, continue to place large orders with LDK Solar - so I assume these companies have done the due diligence and would not risk their own business with a "hoax" supplier. Again, thus far I have been 100% wrong on this position and the stock has simply gone down nearly every week for months on end. Once anyone raises an accounting issue, even if false - it is like a scarlet letter - you walk around with it, and people assume guilt no matter what. So in almost every press release this company has to issue some statement defending themselves, which other companies are not forced to do.

Due to this stock action I culled the position to 1% or so of the fund. At "some point" I expect this name to be materially higher, but thus far despite constant reassurances given by the company, all this does is pop the stock up for a few hours/days and then a new selloff resumes. It appears to be a stock the bears have used as a personal playpen. Today, more news both on their sales and inventory "issues". Speaking to the larger issue of solar in general, I don't think sales (demand) is an issue anytime in the near term - it is more a cost of goods/margins/supply situation that has potential to hurt the bottom line. And potential oversupply of end panel makers. But that should not affect LDK Solar - the more customers the better. But the market lumps all solar companies together, most of the time.

• LDK Solar Co., Ltd. (NYSE: LDK - News), a leading manufacturer of multicrystalline solar wafers, announced today that based upon its current backlog of contracts, it has almost sold out 100% of its solar wafer capacity for 2008 and has sold more than 90% of its solar wafer capacity for 2009. The long-term nature of its contracts enhances LDK's visibility for its business.
• In preparation for the growth of its 2008 wafer production and as noted on its fourth quarter conference call, LDK increased its inventory to $380 million at the end of 2007. Inventory in transit represented the most significant portion of the increase, growing from 263 MT to 752 MT during the quarter as the Company purchased silicon material from around the globe.
• Approximately 8%, or $30 million, of LDK's inventory at year end was classified from an accounting perspective as non-current due to the expectation that these materials would be consumed over a period longer than one year. The materials included in the non-current category represent usable silicon materials, which, due to the current virgin polysilicon shortage can only be used and blended in smaller quantities. The Company expects that the blending ratios of the non-current inventory will significantly change, increasing consumption of the non-current inventory as LDK Solar ramps production of its own polysilicon, and as more virgin polysilicon and higher resistivity feedstock become available. The higher inventory balance is an important factor in present and future cost reduction strategies at LDK Solar.

Long LDK Solar in fund; no personal position