Bookkeeping: Tax Loss Selling in ReneSola (SOL) and Life Sciences Research (LSR)

Well unlike most mutual funds and institutions if you invested in this (future) mutual fund you will see what I do every week. So unlike "them", many of which are stuffing their portfolios with the best performers of the quarter or year as we speak (we call it window dressing), so they can say to you "yes I somehow lost 40% this year but look I've owned best performer ABC and best performer XYZ all quarter!" you can see the wins and losses in near real time.

I am going to book two positions for year end tax considerations to offset gains (although many mutual funds have a year end of Oct 31s not Dec 31st) - one in solar and one in contract research organizations.

While I have 40 or so positions I really have far less; I buy mini baskets in a lot of sectors - that is 2-3 stocks from the same sector so I curtail company specific risk... i.e. if I want a 6% exposure to coal, I bought 3 coal stocks, or 7% exposure to solar, I bought 3 solar stocks, etc. That way if one blows up I don't take the full hit on the entire sector exposure.

(A) Solar has been one of our worst performing "bets"... I predicted a lot of consolidation in this space as it is a commodity but I thought it would come later - 2010/2011. It seems to be coming much sooner than I anticipated and I expect 2009 to be a rough one for solar [BusinessWeek: Clouds Over Solar Sector] I honestly fear for the viability of some of these names - keep in mind for every 1 public company listed in the US there are 10 counterparts (usually of smaller ilk) operating in China or Hong Kong - many of those shall perish. The credit contraction and drop in oil from $140 to $40 has destroyed this sector - I was hoping Obamamania would drive up these stocks but aside from yesterday and election day there has been nothing. With that said, what I talked about above (business issues) are facts, and you know when Obama comes out with his energy policy and specifics the lemmings will drive up solar stocks at some point. So I want to have some exposure for those moments. Ironically the Chinese stocks have reacted better to Obama then the American stocks, but the only reason that is... is there are no facts on the Obama energy policy and its just speculation driven gambling by investors - and the Chinese stocks have the lowest prices and thus are the easiest for daytraders to run up. It's all about thesis, not facts.

I have 3 stocks in the space and am going to jettison ReneSola (SOL) which is incredibly reliant on JA Solar (JASO) - who in and of itself has announced a series of somewhat frightening news releases the past 3-4 months. LDK Solar (LDK) faces the same issues, but I just booked a 30% gain in SOL yesterday (offsetting some losses) so it's the easier candidate to cut at this moment. Trina Solar (TSL) is my 3rd stock, and I want to keep it on my sheets to remind me each day to stay humble and even guys with great blogs make stupid stock decisions ;) Trina is my biggest loss and has lost us 4% of return just in this 1 name - so I want to stare at it each day when I look at my account to remind me I should of used discipline and cut my losses earlier when I had a chance.

I restarted ReneSola (SOL) in August [Aug 12: Some Adjustments to Solar Patch & New Position in ReneSola (SOL)] in the mid teens; we actually booked some serious gains on this name after a great earnings report [Aug 19: ReneSolar - the Sun Shines On] but it's been all downhill from there. The stock fell from $15s to near $2! Thats a 87% drop - it has since "rebounded" with yesterdays huge spike to near $5. Thankfully we had booked those early gains and did not have a huge exposure (position size) on the way down (we did not catch the knife). Again when Obama says anything about solar this type of name could double overnight but I'm not a speculator, I'm actually one of the remaining few who like to invest. And we have other names in the sector when Obama time comes.

We were able to offload 75% of our position yesterday just under $5 and the remaining 25% today in the $4.60s. Even with the huge move we still took a $10K loss but considering the stock is still down 70% from where we entered the position I am fine with that. As I wrote yesterday, I added back some of this solar sector exposure into LDK Solar (LDK) since it did not jump yesterday, but I have little to no conviction based on "business" - again I am very worried about solar stocks in 2009. This is all about sentiment. I do still believe in solar as a long term trend but much like microchips I expect it to be a very vicious business with a lot of cannibalization.

(B) I also own 3 healthcare contract research organizations. This is the one area of healthcare that has failed me [Oct 28: Contract Research Organizations Taken to the Woodshed] - ICON (ICLR), Kendle (KNDL), and Life Sciences Research (LSR) was our "basket". ICLR is best of breed but the stock has been in free fall for months, Kendle we've actually made some money on due to some well timed trades and LSR is the smallest of the bunch and we've never had a chance to even make a nice trade or two - it's been straight down since we've owned it. The fear here are twofold (a) as credit dries up a lot of smaller biotech type of companies will go out of business and (b) the larger drug companies will be conserving cash in this credit deficient world. For the US based CROs the other fear is a stronger dollar hurts earnings - which is a problem for all US multinationals who have been goosing earnings the past 7 years with the awful dollar.

I created a basket of these names in August [Aug 13: Creating a Basket of CROs] and LSR was began around $33. The stock is now around $10 but more troubling the past 6 weeks, while the market rebounded the stock has been in a narrow range of $8 to $10... no real rebound. It is building a huge base - from which a very large move shall commence. If that move is up or down I don't know; but if its up we can jump in at a later date. I am selling the 1.2% stake we still have for a $16K loss.

I am keeping Kendle due to the relative strength - in a group that is now much hated its been the best performer; and ICON is ironically Irish so the strong dollar concerns should not be an issue - but the chart is saying something is amiss; so I'm keeping it but not in large exposure.

This brings us down to 37 total positions but again much of these are ETFs to hedge on downside (or upside), some are cash ETFs, and some sectors we own multiple names in a basket - I want to be lean, mean and in the green in 2009 in what I expect to be another extremely volatile year where trading dominates over "buy and hold". The less positions to manage, the easier.

Sorry, no charts today - will add them to this entry later.

Long Trina Solar, LDK Solar, ICON, Kendle International in fund; long LDK Solar in personal account