Solar stocks as represented by The Guggenheim Solar ETF ($TAN) have been consolidating in the past few months, after a brutal 90%-95% plunge from the highs in 2007/08. While solar installations broke records last year, and the long-term outlook for the industry remains promising, the manufacturers have seen prices on their modules, and consequently their profits, plummet due to lower demand in their primary European market, and over-capacity at most China-based manufacturers.
In this article, we analyze the investing activities of the world largest fund managers, managing between $100 billion and over a trillion dollars, such as Fidelity Investments, Goldman Sachs, and Vanguard Group, who together control almost a third of the assets invested in the U.S. equity markets, but number just over 30 out of the tens of thousands of funds that invest in the U.S. equity markets. Individually, and collectively, they pack enough firepower to move stocks based on their trading activities. In this article, we examine based on our research of their latest available institutional 13-F filings, the stocks in the Chinese technology group that they are most bullish and bearish about.
Most of the information is based on the latest available Q3 filings, but when Q4 filings are available, as in the case of three mega funds that have filed Q4's to-date, (Vanguard Group, Bank of New York Mellon and Eaton Vance, all of which we have recently analyzed), we have instead used the more recent Q4 data for those funds. Taken together, these mega managers were bullish on the group, adding $96 million in Q3 to their $2.59 billion prior quarter position.
The following are the major solar companies that these mega fund managers are most bullish about (see Table):
First Solar Inc. (FSLR): FSLR manufactures and sells solar modules using a thin-film semiconductor technology for residential and commercial markets in the U.S., Europe and Asia. In addition, it also designs, constructs, and sells photovoltaic solar power systems. Mega funds added a net $132 million in Q3 to their $1.28 billion prior quarter position, and together they hold 35.8% of the outstanding shares, greater than their 26.2% weighting in the group. The top mega fund buyers were Morgan Stanley ($143 million) and Vanguard Group ($36 million), and the top holders at the end of Q3 was Capital World Investors ($460 million).
FSLR shares have been in a multi-year slide since their peak in 2008, now down about 85% from the highs. Its shares were down 74% just last year, earning it the ignominious merit of being the biggest loser in the S&P 500. Generally, however, the down-trend in FSLR mirrors the general trend in the average solar stock during that period, as the average solar stock has collapsed about 90% during the same time period, based on a concern over falling prices due to over-supply in the industry as well as a cut-back in subsidies in key markets. The stock, however, maybe among the safer bets in the solar group; it trades at a respectable current 7.5 P/E on a TTM basis, and at 1.0 P/B, compared to averages of 7.3 and 0.6 for its (mid-cap) peers in the solar group.
Yingli Green Energy (YGE): YGE is a Chinese manufacturer engaged in the design, development, marketing, manufacture, installation, and sale of photovoltaic products, including PV cells, PV modules, and integrated PV systems, as well as poly-silicon ingots, blocks, and wafers. Mega funds added a net $16 million in Q3 to their $38 million prior quarter position. The top mega fund buyer was Credit Suisse ($29 million), a new position for it; and the top holder at the end of Q3, besides Credit Suisse, was Invesco Ltd. ($13 million). YGE shares have been consolidating nicely in a narrow range at the bottom, after a crippling 90% loss from the highs in 2007/08; currently, they trade at a current 3.4 P/E on a TTM basis and 0.5 P/B compared to averages of 5.6 and 0.5 for its (small-cap) peers in the solar group.
JA Solar Holdings (JASO): JASO is a Chinese manufacturer of mono-crystalline and multi-crystalline solar cells for solar modules and systems. Mega funds added a net $7 million in Q3 to their $27 million prior quarter position. The top mega fund buyers were Fidelity Investments ($3 million) and Invesco Ltd. ($2 million), and the top holder at the end of Q3 was Fidelity Investments ($16 million). JASO continues to bleed losses, while shares have fallen over 90% from the early 2008 highs; the stock meanwhile is consolidating in a tight range at the bottom, and it trades at 0.3 P/B and 0.15 PSR compared to averages of 0.5 and 3.0 for its (small-cap) peers in the solar group.
Sunpower Corp. (SPWR): SPWR is a San Jose, California-based integrated solar products and services company that designs, manufactures, and delivers solar electric systems for residential, commercial, and utility-scale power plant customers worldwide. Mega funds added a net $8 million in Q3 to their $56 million prior quarter position. The top mega fund buyer was Vanguard Group ($14 million), which was also the top holder at the end of Q3 ($11 million).
Trina Solar Ltd. (TSL): TSL is a vertically-integrated Chinese manufacturer of mono-crystalline ingots, wafers and cells to the assembly of high quality solar modules. Mega funds added a net $2 million in Q3 to their $111 million prior quarter position. The top mega fund holders were Fidelity Investments ($37 million), AllianceBernstein ($16 million), Morgan Stanley ($15 million) and Deutsche Bank AG ($14 million).
The following are the major solar companies that these mega fund managers are most bearish about (see Table):
Suntech Power Holdings (STP): STP is a Chinese manufacturer of photo-voltaic cells and modules for worldwide distribution. Mega funds cut a net $33 million in Q4 from their $71 million prior quarter position, with the top mega fund sellers being T Rowe Price ($22 million) and Fidelity Investments ($6 million).
LDK Solar Co. (LDK): LDK is Chinese manufacturer of multi-crystalline solar wafers that are the principal raw material used to produce solar cells. Mega funds cut a net $7 million from their $79 million prior quarter position, with the top sellers being Citigroup ($7 million) and JP Morgan Chase & Co. ($4 million).
Satcon Technology Corp. (SATC): SATC is a manufacturer of utility-grade power conversion solutions and system design services for the renewable energy sector, primarily for large-scale commercial and utility-scale solar photovoltaic (PV) markets. Mega funds cut a net $2 million in Q3 from their $13 million prior quarter position, with the top seller being Invesco Ltd. ($2 million).
Renesola Ltd. ADS (SOL): SOL is a Chinese manufacturer of mono-crystalline and multi-crystalline wafers for solar power products. Mega funds cut a net $4 million in Q3 from their $19 million prior quarter position, with the top sellers being Credit Suisse ($3 million) and Invesco Ltd. ($3 million).
Energy Conversion Device (ENER): ENER is engaged in the design, manufacturing, and sale of thin-film solar laminates that convert sunlight to renewable energy for commercial and industrial rooftop applications, as well as for residential applications. Mega funds cut a net $4 million in Q3 from their $10 million prior quarter position, with the top sellers being Invesco Ltd. ($2.2 million) and Vanguard Group ($1.5 million).
click to enlarge
General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet they control almost half of the U.S. equity discretionary fund assets.
The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors 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.
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.