John Cordes

The Trouble with Chinese Solar Companies

TIRED;
I have recently tripled my holdings in ESLR because it is a value play insofar as it is valued very low in relation to future sales, i.e. 3.1Billion in new sales in the first half of the year. Also, ESLR should directly benefit from the eventual passage of a renewables energy bill, as their business lends itself to retail installations from residential to large commercial scale, which will be precisely targeted by legislation as tax credits to end users and supplemental support to local incentive programs. In addition, ESLR has remained quite cheap for the good reason that it has not shown a positive quarter in some time, but having tripled it's manufacuring capacity to meet the newly booked sales, further capital expense items will have already been expensed and priced into the stock. You can expect that the first quarter that shows a profit will send the stock off on a run. That, however may or may not be the upcoming 3rd quarter report due out Oct. 27th, but should occur at least by the next. Meanwhile you can count on legislation to improve enterprise value of the stock until then. If the Democrats do well in Congress this is guaranteed, regardless of the Presidential outcome.

The Trouble with Chinese Solar Companies

Richard;
I wrote this article Tuesday evening, submitted Wednesday, published Thursday. At the close Tuesday most Chinese Solars were off between 5% to 7% for no apparent reason. However one reason offered was the affect of the strengthening dollar which is a factor in the foreign currency exchange for some of the companies mentioned; From a Reuter's article August 18th regarding TSL and YGE: "Monday quarterly earnings more than doubled on strong demand for solar energy, but its shares fell as results missed. Wall Street estimates due to a foreign exchange loss and the company said it has yet to sign contracts for all of its 2009 output." And: "Results were hurt by a foreign currency exchange loss of 24 cents per share and a loss of 8 cents a share associated with the discontinuance of its Lianyungang polysilicon project."

Thus one of the several explanations for Chinese Solars failing to reflect their large quarter to quarter and year to year sales and profit improvements in share price has been thus offered on the arguement that a stronger dollar and weaker Chinese Renminbi might be a key factor. Hence my comment that the 6% drop on Chinese Solars Tuesday cannot be accounted for by this alone or even in significant fraction. Keeping most investors guessing why the Chinese solars lost 5% to 7% across the board on Tuesday.l Therefore one is left with speculation from these reports, that share price should be discounted due to the affect of the pricing of contracts, silicon supplies and energy on the dollar. However each Chinese Solar company is different and it is difficult to ascertain how sales contracts are written at each and every company. Despite this fact, all of the Chinese Solars remain extraordinarily volatile and undervalued relative to their earnings performances, and all of the solars took an average 6% percent loss Tuesday, and erstwhile a substantial gain today. So I ask you, not withstanding the article above, do you have a better explanation for this than the one I proposed? Or do you have more thorough research you'ld like to offer?

What's Up with the China Solar Stocks

Irrational. Like oil futures. Demand decreases, production increases, prices increase on rumor. Did the dollar go up 6% yesterday? That doesn't account for the sell off levels. Will the trend toward solar subsidies increase world wide in spite of a given country's rumored pull back from subsidy levels? Of course, it's a macro-trend. More solar support is invevitable especially by 2010. Perhaps even the US Congress will finally pass a bill by then.

So why are the Chinese solars undervalued compared to American solars like FSLR? Why are they so volatile in spite of consistent earning and sales improvement? It's similar to oil in my opinion. Many investors do not quite understand the near term dynamics of the situation, so they trade on rumor and momentum, even though the long term has a seeming inevitable outcome. Is China a reliable economic and political environment for business? Or will they somehow nationalize or confiscate the ownership of these businesses? (Answer; No, China's never looking back again from this economic success. They have taken the lesson of the Shanghai experiment and the abosorption of Hong Kong to heart and it has shown the path. China will broaden theses effects throughout the country.) Even Cramer has irrational bias against China for this fear and lack of understanding. Although, admittedly, its more opaque by American standards, without GAAP reporting and SEC filings. Any China investor has to take a little bit of a leap of faith that the numbers are real. (I recently explained to a friend that I don't consider this as big a problem as he did because the penalty hanging over the head of a publicly held Chinese company CEO or BODs is most likely more onerous than anything the SEC is likely to do to malfeasant American CEO's and BOD. Unlikely you'll see any ENRONs in China. In the United States, a CEO is more likely to get a "golden parachute" than go to jail for gross negligence or fraudulent insider activity. The penalty in China is likely a bit more draconian after all.)

Will inflation kill the goldern goose in China? (Possibly, but how can analysts constantly predict the China slow down and simulaneously tout inflation as the biggest problem?) China's problem is similar to ours, as oil explodes up, so does inflation, if it's pulling back, at least for awhile then we and China will also feel relief on most of the COLI indices, along with the rest of the world. In the United States, we don't quite believe the solar revolution is going to happen, even though Europe is already in the throws of it. After all, Congress has had the renewables bill blocked or defeated 8 times this year, one candidate keeps talking about a nuclear reactor in every back yard, and our current energy policy is the product of oil company CEO's meeting in the back room. Therefore there is yet an element of unreality to Solar in this country. (Because of this I consider the best current play to be ESLR, constantly beat down for lack of net earnings, yet increasing 2008 sales by a factor of ten and manufacturing infrastructure to go with it. ESLR has the one advantage that no Chinese Solar has, it's American, and any likely renewables bill will undoubtedly favor American companies over Chinese. Ergo, the value play and the future momentum play is in this stock.)

Finally, volatility begets volatility. Burned once, you'll be very careful in the future, prepared to pull the trigger on any hint of implosion. When the stock seems to be moving in either direction, you don't want to be left behind. It may be trading for undecipherable reasons, but the direction is clear. All this means is trust the fundementals and your own analysis. If LDK has beat estimates by 200%, increased earnings out look, never failed to surprise upside, has planned and completed vertical intigration, manufacturing capacity and secured raw material, then it will be a winner in the end. (So trust your own analysis.) Argueably the smaller company's may dillute holdings to underwrite expansion, but even CSUN and SOL have shown that they can do this without ruining share value. Some might notice, that unlike many American companys in start up, in the first year mode undergoing extreme growth demands and vast new financial wealth through IPO offering, the Chinese companys will quickly show positive earnings, and reasonable M & A components, and option gifts and insider trading is not a significant line item expense at the end of the year. (Compare that concern with virtually any new American pharmaceutical or hot sector IPO on the OCBB. Such greedy malfeasance is not likely to be tolerated in China, and the CEO and CFO are not likely to be building an offshore bank account, unless their family lives in another country and their tolerance for a labor camp is very high.)

Chinese capitalism seems to be an oxymoron, and solar hasn't yet been bought into by many investors. Chinese inflation is a subject of constant speculation and the European market for Chinese wafers is the only tangible measure many analysts can identify. What's left to trade on? Momentum, that's what. I say trust your own analyis, trust the reported numbers, trust in the macro-trend, and (this may be a bit harder to do) trust in the fact that the new China miracle is not going to go retro because of some ressurection of Communist self immulation. How do I know? How about the biggest two week display of new found pride and affluence paraded before the world in what was suppose to be the Olympics, but actually turned out to be a Chinese coming out party. Or did anyone fail to notice that.

Recapping My Great Calls on Oil

Ok, lets see, what will todays oil bulls put out, hijacking of oil tanker, hurricane danger, pipeline disruption, Israel fly over in Iraq? If you believe these daily concoctions then you accept the fact that oil is/was trading on rumors not market numbers. If you think they were concoctions meant to pump the price in time for settlement, then there is no arguement. Oil speculation simply means that price momentum is disconnected from reality and driven by cynical price manipulating forces more or less artificial in nature. Peak oil is a reality of course, but has little to do with futures contracts two or six months from now. It's fair to say that commercial space flight is a reality, but no one is buying space suits just yet. It's a tad early to corner that market.

6 Ways to Profit from a China Investing Strategy

FSLR is American based in Arizona. LDK would be a Chinese Solar with with similar earnings but trading at a P/E of 18 versus 91 with eaqual growth potential.

Solar Cycles and Stocks: The Sun Also Rises

Interesting correlation. Do you have a comment on valuation comparisons between LDK, roughly 17 P/E compared to the jaw dropping PE's of FSLR and SPWR besides xenophobia and mistrust in Chinese stock, which alone cannot account for the differences of 500% valuations??

Obama vs. McCain on Fiscal Responsibility

So apparently six years of Republican controlled congress and Whitehouse has brought about all the affluence and job creation they promised while being responsible stewards of a budget surplus handed to them? And we should be concerned with free loading immigrants and ignore the trillion dollar pre-emptive war? With corporate pension funds going bankrupt and jobs being outsourced to thirdworld countries I find little comfort in either your analysis or McCains penchant for answering serious questions with one liners. Perhaps we would have all been better off following the Bush prescription of investing social security assets in the stock market? Oh yeah that would have bankrupted the government and the people. Never mind.

Bob Moriarty: Gold is Safe Haven for Looming Crash

Doom doom, gloom gloom, fall out shelters and canned food. Gold gold good old gold, this story is old. Peak oil and unfertile soil, dust bowls and soup bowls. FDIC bankrupt, greenback is worthless, buy your guns and stow the water. I know Smith & Wesson, oh yea never mind, the stock market won't exist. See you after the apocalypse. Blah blah blah.

Parker Drillng: Flying Under the Radar

Actually that is precisely why I purchased this stock weeks ago. It is under the radar and is precisely the type of service company with consistent and loyal customer relationships which will bolster it's continuity and growth. Besides it's affordable for the sector with room to grow.

Insiders Preparing for Major Drop in Oil Prices

I think the point of the article is provide indicative evidence that refinery stocks may be a momentum play in the near term. Apparently the idealogues of "peak oil" were offended. Peak oil is a long term macro-economic fact that no one seriously denies, but the key words here are "long term". Short term seems to point to a significant pull back in crude prices, which means the beaten down refiners might just be a pretty good investment near term. By the way, do serious investors really believe that crude prices are not affected by speculators?

Majority of Americans Support Ethanol

And... If this was nothing more than a farm bill, sold as an energy bill, why do we impose a tariff on cellulose and sugar cane ethanol from Brazil, (around 57cents I think) which is cheaper, has less impact on world food and commodities and performs better as a fuel supplement. Perhaps Monsanto wrote the current bill.

Majority of Americans Support Ethanol

In addition, this situation is contributing to the largest dead zone in the gulf from New Orleans to Galveston and below due to the effluent of nitrogen and phosphates in the Mississippi river, which naturally is destroying the shrimp and crab industries in this geography.

Historic Financial Collapse Underway?

Wow, sounds bad. I think you should start investing in fall out shelters and rain barrels. But just to be sure I understand your solution, you're for renouncing all health care subsidy, and hoping for house prices to fall 75%, (so everyone can afford them?). Umm! Falling prices made everything accessible during the great depression huh? Would that be card board houses next to railroad tracks?

Oil: If It Looks Like a Bubble...

The following report illustrates why the US is not paying attention. We (the Congress) once again failed to pass the renewable energy incentives, still held hostage to opening Anwar and the Bush energy policy. The new tech industry of the 21st century is being captured by our competitors while we dither and emphasise one wobbly leg on the stool. www.energy-base.org/fi...

Oil: If It Looks Like a Bubble...

So the Saudi's agreed to add 200,000 barrels and American demand has dropped. Brazil has uncovered vast, albeit difficult to retrieve, supplies offshore. Drillers and rig companies are ginning as never before and recession threatens to actually reduce demand with airlines cancelling schedules and public transit seeing all time ridership highs, yet the price of oil continues to set all time records.
Meanwhile CNBC never misses an opportunity to state that it's not a speculators bubble but genuine supply issues. No doubt the long term peak oil theory is true but the short term, mid term thesis is debunked. So what will prick the bubble? Only Congress can have an impact now. Of course they have done little besides cesation in adding to the strategic reserve, which is near an all time capacity high anyway, and purchasing additional reserves would seem counter intuitive at the current price levels. Will they act before inflationary oil wrecks what's left of the economy?
My guess is yes. The battle over off-shore drilling, Anwar, extending green energy incentives, regulating oil futures trading, (requireing higher margin percentage), and actually releasing supplies from the strategic reserves represent the arsenal of measures that could and should be utilized. Yet nothing happens, unless you call endless hearings effictive energy legislation. Now Congress will recess until after the July 4th holiday, leaving the real possibility to $150 oil during the interim, and further market equity losses into panic territory.
What's the hold-up? Why is Congress so inept and frozen in inaction? Partisanship of course. But the upcoming shock of the next week may actually shake the tree and begin to end the speculative cycle in oil futures trading. It's not hard to imagine Congress will make the grand compromise and agree to off-shore leases opening, renew the green energy incentives and pass some modified measure that cools off futures trading with higher margin requirements. They might even release supplies from the strategic reserves. Don't look for capitulation on Anwar, but in comparison to offshore leases, this is not that significant. Recovery and production lag time is similar anyway.
So look for a dismal week with market calamity followed by legislation in July. The grand compromise that will finally pop the bubble. When the selling panic begins, the 30% froth in oil prices will finally dissapear. Get thee to the seculars and the shippers or if you must, hang with the oil service companies. The next chapter is written, barring the big unforseen.