Bookkeeping: Adding to LDK Solar (LDK)

I am adding to my LDK Solar (LDK) position today in the upper $33s (added a small touch yesterday in $32s) - the stock is building a nice base after making a spike higher last week (which I sold down the position at). Much like Trina Solar (TSL), I believe this name to be trading at far below fair value, but with risk down to the $30 price point. I'd like to see it break over and above its 200 day moving of $38, at which point I will add more. Or a drop to $30 where there is a small "gap" in the chart which still needs to be filled. Either scenario is fine by me. The closer we get to the election and the longer Americans are paying for gas @ $3.50+ the more I think alternative energy is going to get a push (of all types). I like to say, compared to our current administration even McCain is going to look like a tree hugging liberal. For the 50th times, why we are not employing Americans to build 10 x 10 sq mile solar farms throughout deserts of AZ and NV is beyond me. Now that would be a worthwhile use of our tax money... with some true benefit unlike what we are spending most of it on now.



Almost every position I want to add to has had a huge run, so it is very hard to find candidates to buy on the long side that have not appreciated materially in the past week or two... so I continue to sit on a huge horde of cash, awaiting "a pullback" that has yet to come. I still remain cautious ahead of this Google (GOOG) report, as the only thing that appears to get the Kool Aid bulls down nowadays is surprises - everything else they shrug off as "priced in", no matter how bad. So Google would be a surprise if it disappoints.

Sunpower (SPWR), one of the 2 major American solar companies reported this AM and I actually liked this report, unlike most previous editions of SPWR's results. I really don't care about the current quarter, the commentary about the future is what interests me with all these solar companies. Valuation for SPWR is very high relative to it's Chinese competitors, but the guidance to 30% gross margins, if legit, would be impressive. I still have my doubts, but even holding the line in the mid 20%s would be very positive. I also am liking what I read about their increases in efficiency and thinner wafers - very similar to Trina Solar (TSL). Anything that uses less polysilicon is very important in this environment.

• Excluding special charges, SunPower earned $39.1 million, or 39 cents per share. Analysts, on average, had been expecting 35 cents per share, according to Reuters Estimates.
• Revenue rose 92 percent to $273.7 million.
• Solar power products maker SunPower Corp. on Thursday raised its second-quarter and full-year profit outlook above Wall Street expectations on expectations for strong demand. SunPower said it expects to earn 48 cents to 52 cents per share in the second quarter, above Wall Street's average forecast of 46 cents per share, on average. Analysts' forecasts range from 41 cents to 58 cents per share.
• SunPower said it expects second-quarter revenue of $330 million to $350 million. Analysts predict $295 million, according to Thomson.
• For the full year, the company said it now expects 2008 profit between $2.10 and $2.20 per share on revenue of $1.3 billion to $1.38 billion. In January, SunPower predicted earnings between $2 and $2.10 per share. Analysts expect 2008 net income of $2.07 per share and revenue of $1.27 billion, according to Thomson.
• "We expect SunPower's silicon supply costs to decline by approximately 10% during 2008 compared to 2007," continued Werner. "This cost improvement will amplify our silicon utilization benefits achieved through higher cell efficiency and thinner wafers. We are on track to achieve our planned improvements in our cost structure, and therefore we expect to reach our target financial model of 30% gross margin, 10% operating expenses and 20% operating margin, on a non-GAAP basis, no later than the first quarter of 2009.

If gross margins increase like this, than analysts estimates are going to be shown to be far too low in out years...

Long Trina Solar, LDK Solar in fund; long LDK Solar in personal account