Monday, April 14, 2008

My Plan with Trina Solar (TSL)

Just wanted to update my thoughts on Trina Solar (TSL) based on this morning's premarket news, which I was very bullish on. The market has kindly rewarded this name, which still remains very undervalued versus peers.

I added substantially in the first 30-60 minutes of the day in the $38, $39, $40 range, taking the position from 1.6% to 5.1% of the fund. I still have some much cheaper shares of course... using technicals we have some resistance ahead at $45. What we want to see from a bullish perspective is the stock to rip right through that resistance level (it's 200 day moving average) and off to the races to about $56 is possible. In this market environment where so many economic reports and earnings reports will cause a lot of volatility, any stock will not trade in a vacuum so my above scenario would have a higher probability in more serene times. So if the stock can make some more movement towards $45 I will let go a good portion of the position and then re-assess. If the stock cuts like butter through resistance than I'll buy back and hold on for a more lengthy ride. If the stock retraces I'll add on a retrace. Either way I want to have a larger position in this very undervalued name that has languished for quarters on end due to the overhang of this polysilicon plant. Now with that removed, it should trade nearer to it's peers valuation and in fact I'd argue it deserves a premium valuation as it probably had among the best quarter of all the solars in the last earnings period. [Mar 4: Long Suffering Trina Solar Finally Gets Some Relief] I now feel much more comfortable holding this name as a major position in the fund over the longer run; but I remain a defensive player in the near term, because this is the type of market where gains turn to losses overnight.

So if not for the day to day thrashing in this market, and potential for large scale sell offs (we have 2 inflation reports coming tomorrow and the day after which could cause some carnage), I'd be more willing to just sit and wait for this stock to trend up to some of my targets. My fair value for this name is now in excess of $60 (just to get Trina at near peer value to some competitors), but very doubtful in this environment we get a straightshot there. So we'll do some trading along the way; and if the stock strengthens into the close today (near $42 currently) I'll probably take some off the table just to protect today's gains, going into inflation reports that might finally knock some reality into the market participants that inflation is real, and even the government reports which understate it by 2/3rds are going to start showing it.

Long Trina Solar in fund and personal account

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