Why I'm Restarting Yingli Green Energy

I'm still not a huge fan of the solar space, but I am going to restart one position in the sector. Yingli Green Energy (YGE) has been one of the better operators in the space, and has one of the better combinations of size and scale in the Chinese solar space. There are more speculative names that might return more, but this whole group moves together; unfortunately traders treat this like group like a derivative to oil, but that's the nature of the beast nowadays.

Yingli has had a huge run, and recently topped out at $16 before pulling back to the $12s; it priced a share offering Wednesday at $13 and has held that level, which is a good sign. It also had some positive things to say about the sector earlier in the week. This is another "flip a coin" sector, as all the names tend to move together.

I was also considering ReneSola (SOL) which also had a good chart; a few others have decent charts, but Yingli is a clean play here as it sits right at its 20 day moving average with no gaps in its chart. And it is one of the better fundamental stories in the space, but I am buying more on chart than fundamentals nowadays. It's been almost a year since we last held this name [Aug 6, 2008: Closing Yingli Green Energy] - we sold in the mid $16s then.

I started a 3.2% stake at just over $13.00. This is a speculative play, and if the market breaks down, this will swoon... fast. I will set my stop below Wednesday's low of $12.49, so $12.45 since there is a huge amount of "air" between support levels here.

Here is what they had to say earlier this week

• Chinese solar panel maker Yingli Green Energy Holding Co Ltd (YGE) on Monday said it has seen a substantial increase in demand since the beginning of the year.
• In a statement, Yingli forecast shipments would be up 70 percent in the second quarter from the previous period, citing progress in government solar incentives in the United States and China, improved weather conditions in Europe and "a visible change of industry sentiment" since the Intersolar trade show in Germany last month.
• The solar industry has been hit hard since the end of last year by a lack of available financing for big projects and an oversupply of solar panels that has sent prices into a freefall.
• Yingli, which is based in Baoding, China, said better market conditions combined with lower polysilicon prices gave the company confidence it could meet its second-quarter gross margin target of 18 percent to 20 percent. (we used to aim for near 30% 12-18 months ago, but the bar is much lower nowadays)
• In recent weeks, however, solar players including U.S.-based SunPower Corp(SPWRA) and top Chinese panel maker Suntech Power Holdings Co Ltd (STP) have said they see encouraging signs of a recovery in the solar market.

They had 128M shares [ADS] going into the offering so 18.6M is meaningful, but not a game changer. Three of the 18.6M were from a shareholder however.

• Yingli Green Energy intends to use the net proceeds from the offering, after deducting underwriting discounts and offering expenses, to repay certain existing indebtedness, including repayment of approximately US$50.0 million in a loan facility provided to its subsidiary, Yingli Energy (China) Co., Ltd., by Asia Debt Management Hong Kong Limited, and for general corporate purposes.

Disclosure: Long Yingli Green Energy in fund and personal account

Comments

[gebby:]

it was a speculative play at 4 now it is a risky play at 13 . the stock did not hold its secondary which is a bad sign. the whole group may be under pressure due to analysts fears about earnings disappointments. not enough evidence of an uptick in bank financed orders. the new data point in the running commentary. but i am bullish long term . the market here like you said is a coin toss. risky

Jun 18 09:08 AM

[TraderMark:]

Yep, which is why I have 50 cent stop loss and I'll be out if it begins to fail.


On Jun 18 09:08 AM gebby wrote:

> it was a speculative play at 4 now it is a risky play at 13 .
> the stock did not hold its secondary which is a bad sign. the whole
> group may be under pressure due to analysts fears about earnings
> disappointments. not enough evidence of an uptick in bank financed
> orders. the new data point in the running commentary. but i am
> bullish long term . the market here like you said is a coin toss.
> risky

Jun 18 09:52 AM

[je:]

YGE will pull back to the low 11's in the next couple of weeks I believe. No it is not a risky play at 13 -Mark is just a little early

Chart a comparison of YGE and the S&P and this is only going to become more profound as we move up in this rally.

With all of the stimulus and "green being the next bubble(howerver brief)YGE will surprise many with just a forward P/E of 13 and less than 33% held by institutions this guy has a lot of room to run.

Jun 18 03:56 PM

[Daryan:]

50 cents? This stock moves by the dollar intraday! The only way to play solar is via options and a stomach to endure when the going gets tough, and the foresite to get the heck out as the spec money comes flying in and begins to top. Take today's action for instance as the spec money runs for the hills despite improving fundamentals, especially in the China-based companies.

Jun 18 04:34 PM

[TraderMark:]

My stop loss actually missed by 1 penny today
12.45 and low was 12.46

the reason I have 50 cents(ish) is if it breaks down its going to head to that red line at minimum and red line most likely. Lemmings in / lemmings out.

I'll rebuy perhaps there, or if it gets back north of 13 and holds. The area between 13 and mid 10s is a big white noise area and I dont really like to lose 25% just so traders can jockey around.


On Jun 18 04:34 PM Daryan wrote:

> 50 cents? This stock moves by the dollar intraday! The only way
> to play solar is via options and a stomach to endure when the going
> gets tough, and the foresite to get the heck out as the spec money
> comes flying in and begins to top. Take today's action for instance
> as the spec money runs for the hills despite improving fundamentals,
> especially in the China-based companies.

Jun 18 08:06 PM

[James Wilson:]

China can begin placing Solar power stations in that huge desert of thiers. Suddenly there is a shortage of Solar Panel.

With Solar and Wind power genenerated from the Desert they could cut the amount of coal the burn too.

Jun 18 10:07 PM

[buyforeclos...:]

Lets see you didn't buy at sub 4 but your buying at 13?

Jul 02 11:14 AM