Leading hedge fund and mutual fund managers that have a long-term track record of generating high market-beating returns are severely underweight the solar energy group by a factor of six. These high alpha or guru funds number less than 100 or less than one percent of all funds, and they control almost ten percent of the U.S. equity discretionary fund assets. Their top new buy ideas in the solar energy group are Yingli Green Energy (NYSE:YGE), Trina Solar Ltd. (NYSE:TSL) and Daqo New Energy Corp. (NYSE:DQ). The stocks gurus are least enthusiastic about include: Suntech Power Holdings (NYSE:STP), JA Solar Holdings Co. Ltd. (NASDAQ:JASO) and Jinkosolar Holding Co. Ltd. (NYSE:JKS). The following is our take based on their top buys, sells and holds: Buy Yingli Green Energy ADS (YGE)
: YGE is a Chinese manufacturer engaged in the design, development, marketing, manufacture, installation and sale of photovoltaic [PV] products, including PV cells, PV modules and integrated PV systems, as well as poly-silicon ingots, blocks and wafers. Guru funds aggressively bought a net $173 million of YGE during the quarter, adding significantly to their prior $16 million position in the stock. This includes $189 million bought by Maverick Capital countered by a smaller $16 million sell by SAC Capital Advisors LP. With the increased position this quarter, guru funds now control 15% of the outstanding shares of YGE, and they added to their position in the quarter, making them bullish as a group on YGE. The stock trades at a forward price-to-earnings (P/E) ratio of 7-8, near the bottom of its historic P/E range. Analyst targets are in the low- to mid-teens, almost 50% above current levels; and of the 25 analysts covering the stock, nine rate it a buy/strong buy, 15 a hold and only one rates it at underperform. While there is a concern over declining product margins, we believe that those are already ‘baked’ into the analyst projections and the current price. The upside opportunity outweighs the downside risk, and we would start accumulating shares at these levels.
Buy Trina Solar Ltd ADS (TSL): TSL is a Chinese manufacturer of solar modules. Guru funds aggressively bought a net $67 million of TSL during the quarter, adding significantly to their prior $33 million position in the stock. This includes $98 million bought by Maverick Capitalcountered by $10 million sold by Kingdon Capital Management LLC, $9 million sold by SAC Capital Advisors LP and $8 million sold by Zweig-DiMenna Associates. Guru funds together control 6.2% of the company’s outstanding shares, and they added aggressively to their position in this quarter, making TSL an attractive buy candidate. TSL trades at a forward P/E of 7, in the bottom half of its historic P/E range. Analyst targets are in the $30-$40 range, significantly above the current $20 price; and of the 27 analysts covering the stock, 19 rate it a buy/strong buy, seven a hold and only one rates it at underperform. The stock has been weak recently since it missed analyst revenue and earnings estimates in mid-May due to lower gross margins; however, margins may have stabilized and may even expand going forward due to recently falling poly-silicon and wafer prices. Buy Daqo New Energy ADS (DQ): DQ is a Chinese manufacturer of poly-silicon for use in photo-voltaic products such as ingots, wafers, cells and modules. Guru funds hold $10 million of this stock, including $9 million held by Kingdon Capital Management LLC and $1 million held by Driehaus Capital Management. During the quarter, three guru funds added a total of $4.1 million, including Kingdon Capital Management LLC ($2.5 million), Driehaus Capital Management ($1.1 million) and SAC Capital Advisors LP ($0.5 million). DQ trades at a forward P/E of 3, at the bottom of its historic P/E range, while earnings are projected to increase from $1.96 in 2009 to $2.69 in 2010. Analyst targets are in the $15-$25 range, more than 100% above the current $8 price; and of the four analysts covering the stock, three rate it a buy/strong buy and only rates it at underperform. On Wednesday, the company guided June 2011 quarter revenue and earnings to the downside and the stock gapped down ten percent, but it closed most of that gap at the close. This indicates that most of the downside risk is already priced in and the stock may indeed have put in a bottom in the $7 range and may be safe for accumulating. Sell JA Solar Holdings Co. Ltd (JASO): JASO is a Chinese manufacturer of mono-crystalline and multi-crystalline solar cells for solar modules and systems. None of the guru funds owned JASO at the end of the quarter; the only holder from the prior quarter, SAC Capital Advisors LP, sold out their $5 million stake in the company. JASO traded at a forward 5-6 P/E, while earnings are projected to drop from $1.55 in 2010 to $1.12 in 2011 and $1.06 in 2012. Of the thirteen analysts covering the stock, only five rate it a buy/strong buy, eleven rate it a hold and three a sell. Furthermore, analyst mean targets are in the $7 range, with a range of $4 to $10, indicating minimum upside from current levels and significant downside risk. The company continues to face pricing pressure in conjunction with higher raw material costs, and it will not benefit much from lower poly-silicon costs going forward, as it is locked in to a long-term contract with its major supplier. Suntech Power Holdings ADS (STP): STP is a Chinese manufacturer of photo-voltaic cells and modules. Guru funds sold $1 million during the quarter, but more importantly none of the guru funds holds STP in their portfolio. STP trades at a forward 9-10 P/E, near the bottom of its P/E range. Furthermore, analysts are neutral on the stock, with eight of the 37 analysts covering the stock giving it a buy/strong buy, six at underperform, and the remaining 23 gave it a hold rating. Jinkosolar Holdings Co ADS (JKS): JKS is a Chinese manufacturer of silicon wafers, solar cells and solar modules. Guru funds sold out of their prior quarter $8 million position, all $8 million being sold by Kingdon Capital Management LLC. JKS trades at a forward 4 P/E, near the bottom of its P/E range, while earnings are projected to increase. Furthermore, analyst targets are in the mid-$30s at a modest upside from current levels, and of the seven analysts covering the stock, five gave it a buy/strong buy.
Market Value of Guru Holdings
Guru New Buys
Guru New Sells
Number of Gurus in Stock
Top Buys and Sells
Yingli Green Energy
Trina Solar Limited
First Solar Inc.
Power One Inc.
GT Solar Intl Inc.
Amtech Systems Inc.
Top Guru Holdings
Daqo New Energy Corp.
BTU Intl Inc.
Other Stocks Held by Two or More Gurus
LDK Solar Co Ltd.
STR Hldgs Inc.
Major Solar Energy Stocks Under-Owned by Gurus
Suntech Power Hldgs.
JA Solar Holdings Co Ltd.
Jinkosolar Hldg Co Ltd.
Hanwha Solarone Co Ltd.
Canadian Solar Inc.
General Methodology and Background Information
: The top new buy and sell ideas of high alpha generating or guru funds were generated through analysis of their latest available institutional 13-F and 13-D/G (5% ownership) filings (as recent as ten days old). This analysis revealed the specific stocks the 70+ gurus bought or sold or held in large or small quantities as an indication of their bullishness or bearishness about those stocks.
The argument is that institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When high alpha generating or guru Institutional Investors, by virtue of their fund performance, low volatility and elite reputation in the investment community, invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence or even go as far as constructing a model diversified portfolio based on the guru funds best picks.
Please note that each of the gurus has been carefully selected based on their long-term performance and standing in the investment community. Furthermore, the credentials of most of the 70-odd guru funds that justify their inclusion in this elite group were detailed in our previous articles, many of which can be accessed by clicking on the hyperlinks referencing them in this article.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.
Are you Bullish or Bearish on ?
Results for ()
Thanks for sharing your thoughts.
Submit & View ResultsSkip to results »