It has now pulled back 30% from its high of $52 two weeks ago, and this appears to the be the market's current favorite - the only chart I can find in the sector where the stock has not broken the 50 day moving average. This is not my favorite name in the sector fundamentally - a huge amount of their last earnings were nothing more than currency gains - but the market doesn't peek beneath the hood to realize that, so we'll go with the market. And frankly, all that I've gained from buying the names I liked fundamentally are very large losses. So in this one sector, it appears momentum and favoritism mean far more than trying to squirrel out the best values - so you have to buy the "popular kid". Ask Meena Polar (TSL). (it shall not be referred to by it's official name until management begins to act like they care about their investors) That said, when last I checked a few weeks ago Canadian Solar was still the 2nd cheapest in the group (that could of changed since then since many names in this group have lost 30-40% of value)
So with that said, and my style of trying to pick the best fundamentals SLASH value - NOT working in this sector, I'm adopting a "buy a much bigger basket and put less into each name". The other two I've considered are Solarfun Power (SOLF) and LDK Solar (LDK) to add to this basket.
I'm still keeping my 2 very unpopular kids in this sector (added a touch to each in fact as they have been demolished the past few weeks) but simply am going to have a target in mind as to what % of the overall portfolio I want in solar - and stuff multiple companies into that piece of the portfolio. Perhaps I am recreating the wheel and I should just buy the solar ETF but what fun would that be. [Apr 16: A One Stop Shop for Solar - get TAN] Personally I am finding it amusing that with oil at record prices, the solar stocks are being decimated - but I do realize the type of investors who own these names are not really "strong hands". Which is why, while I was tempted to buy them last week, I waited.
Canadian Solar (CSIQ) is sitting just above its 50 day moving average @ $37 which is a similar area to where it has dropped in the past month, multiple times. While I would hope it would hold this level, if the market weakens, it surely won't - as it's the last survivor in the group clinging to this support level. CSIQ is a 1.6% stake in the fund, and the 3 amigos in this group are now 4.1% of the portfolio as a whole (I am considering them "one stock" if you will, not knowing which the market will bless with a 30% move and which will get trashed in the months to come). I still think Meena Polar (TSL) is the best value in the group but apparently I am the only one in America and the portfolio has suffered for it.
Long Canadian Solar, the artist formely known as Trina Solar in fund; long the artist formerly known as Trina Solar in personal account
6 comments:
What do you think about TS downgrading TSL to conviction sell based on "cash flow concerns"? It has rubbed off on the entire sector, but do you think it's overblown?
I meant GS.
It would be like TSL to issue a downgrade on itself.
Well the same issues apply to everyone in the polysilicon side of things.
TSL has been the only one not to dilute their shareholders - almost everyone has IPOd and then gone back to the market at least once (sometimes twice) in their very short public lives. TSL probably needs capital in 2009 and will issue shares but they could of done it in the 40s, 50s, 60s. If they are forced to do it lower obviously they will need more shares to generate the same dollars.
That said, almost everythinG GS raised was not TSL specific.
I have to tell you I've been in many stocks where management surprises analysts constantly and analysts retaliate by doing these type of things. They hate to have egg on their face constantly - so they use their only powerful tool. The fact the "most undervalued" stock did not have analysts out defending its valuation anytime in the days/ weeks after its earnings shows this. I truly think the management has harmed their reputation on the Street - I've seen it many times - stocks of superior fundamentals trade at discount because of lack of trust by institutions and lack of support by analysts. So until TSL starts putting back 3-4 quarters of real results without fooling the analyst community with new surprises I doubt they will get a peer valuation. But this 50%+ type of discount is extreme. I assume it now assumes a massive amount of dilution.
Thanks, Mark. You're right about losing credibility on the Street. It takes several quarters to regain that kind of trust. I think the solars are oversold but to be honest I am concerned about Thursday, and whether to hold through. I'm expecting a lot of volatility.
"TSL has been the only one not to dilute their shareholders - almost everyone has IPOd and then gone back to the market at least once (sometimes twice) in their very short public lives."
Actually I believe TSL did a secondary last June. Because I remember it was at around $44 and since it didn't go down initially I bought because it was a sign of strength and then it eventually made a classic run from 39 to 73 in a month and a half.
But anyway, you said everyone has "IPOd"
Is there a good way to play this IPOd thing occuring. Do you think AAPL is a good play on this IPOD thing??
Or perhaps AAPL is a good play on TSL's potential Iphone (Initial Public Harassment Offering which NEVER ENDS) This iphone thingy has been in existence since TSL has been public (harassment by analysts) Once again, do you think AAPL is a good play on this IPHONE thing for TSL?
Thanks.
Bill, It would be right up TSL's managements alley to announce a new and innovative business line - mP3 players! Of course they'd tell us as a surprise. And the stock would drop 40% within 3 weeks.
You are right on the offering - they did a tiny one, I think 3M or so last summer. Compared to competitors it was a drop in the bucket.
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