John Cordes

The Sweet Smell of Solar Values

Nice concise artcle, easy to follow and straight forward.

Solar Stocks Up, Anticipating Obama Victory

Being as how your last article entirely missed the massive two day run up in this sector, and your strong opinion was for more contraction and doom, I find it quite amazing that once again you poop out yet another article spreading caution and more negativity without even mentioning your negative analysis and advise was a bust. Could you be wrong once again? or what, trying to cover shorts?

More Downside Ahead for Solar - Barclay's

A gap between writing the article and publishing can be a bummer sometimes. GS downgraded the sector three weeks ago and I mentioned then that the crooks at GS obviously were preparing a large long position before the elections and earnings. More of the same, but a day late this time.

Goldman Turns Cautious on Solar Sector

Booked business, take or pay contracts, deposits extending out for years, applicable to ESLR, LDK, SOL etc. yet GS is down on Solar. American subsidies now in place, Octobers earnings a few days on many Chinese solars, I'm going to take a stab here and say, GS is accumulating while encouraging the public to dump. I believe I'll ride this out.

Has the Sun Set on Solar Energy Stocks?

Your thesis is somewhat erroneous. Solar stocks, particularly the Chinese solars are suffering because of commodities decline. Pollysilicone in this instance is being treated like any other commodity. Of course, as commodities go, oil is correlated. The world wide slump in commodities indicates demand destruction for oil. Try charting against commodity prices and see what comes up.

Solar Breaks Oil Price Dependence

Also, relative to the comments about Henry Ford: You are quite correct, that if you believe in "peak oil", regardless of the time frame, then you must accept the notion that a pradigm shift is inevitable. In other words, much as prior to the turn of the previous century when whale oil was relied on to illuminate homes and horse traffic was such a sanitation nuiscance in big cities, the paradigm shift built around petrolium oil. Obviously in hindsight it was enevitable, but at the time it seemed a stretch. What would run on oil? where was the infrastructure to deliver it? and how would acceptance drive the cost of building the necessary industry to bring it about. People were quite fond of their horses and smokeless whale oil. Petroleum oil was smokey and smelly by comparison. The industry and wealth in many of our North Eastern port cities was built around whaling, and people were reluctant to abandon this. When Ford delivered a low cost vehicle that ran on petroleum oil, the paradigm shift was complete. When some car company can deliver an affordable electric or hydrogen car, then the pace of things will pick up and oil will be headed for the anachronisms of history a hundred years from now.

Solar Breaks Oil Price Dependence

I am completely befuddled as to why any discussion of Solar stocks is so controversial and so political. I follow these stories and commentaries regularly, and the level of vituperative has increased dramatically. Everything from conspircacy theories to good old name calling fills up half of the submissions.
So lighten up. We're not on SA to round up votes, we're trying to garner useful investment information. If politics is a component which influences that, then try and be rational about it. (Go find a political blog site to rant on.)

By the way oil has at times had linkage to solar stocks, but has become less of a factor. When oil was running up very dramatically, solar benefitted from the belief that this would more quickly deliver more subsidies from various countries and create comparative cost efficiencies. Subsequently, oil prices began to influence the cost of smelting polysillicone and transports costs which then cause solar to actually link inversly with oil, pretty much like all equities did. The author is certainly right that if oil recedes to much lower levels (under $60 or $70), legislative incentive for passing the renewables bill will undoubtedly become less driven and consumers will be disincentivised to purchase with paybacks that require twenty plus years. On the other hand, it is widely accepted that the trend in polysillicon, which cost is influenced by available refining capacity, is toward cost errosion. We have two presidential candidates spewing many promises about renewables, albeit the Democrats have a good more emphasis. So perhaps the upcoming legislation has become bullet proof. Individual Solar companies are not all the same for sure, while Chinese Solars are almost all undervalued relative to their American counterparts. I personally submitted an article about this; "What's the Problem with Chinese Solars?". Relative symbols, CSUN, SOL, LDK, and ESLR, FSLR.

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.