John Cordes

The Complete List of Chinese ADR Stocks

You missed quite a number including; FUQI, APWR, FEED, ABAT, CBAK, YONG, UTA, KONG, CGA to name a few. Should call the list, "the incomplete ADR list".

What to Do Now With Solar Energy Stocks

There is such a smorgasboard of misinformation in this article it is hard to know where to start. As pointed out by another poster, LDK announce no need for financing, SOL just recieved large financing facility from the Bank of China, the entire sector took a long overdue swing to the upside yesterday, presumably just offsetting by one day the time between writing the article and seeing it published. Bummer.
You cite concerns with Pollysiclicone supplies then turn right around and talk about over production and cost erosion. Which is it ? Your analysis of FSLR's seems to be running in complete opposition of the opinion of the market, but you couldn't have known about the run up yesterday that preceeded the publication of this article. Most bazaar of all, you talk about the sector weakness and down trending as thought the stock market over all didn't crash in October, as though the sector had an isolated problem. It did, it crashed somewhat harder that the rest, but it will recover somewhat more aggresively too. Witness the near 15% to 20% yesterday in some stocks.

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.

The Trouble with Chinese Solar Companies

Danno: Thank you for your response. Concerning ESLR: I'm not quite sure that unique IP or proprietary advantage is the only criteria or most important way to judge the potential EPG of a company. After all, US steel has done pretty well lately. I do believe that macro-trend, sector potential, upcoming legislation, completion of state of the art manufacturing facilities, booked busines of 3 years, assured poli supply through 2012, and relative valuation are also important indicators of potential share value appreciation. If you were listening to the Democrat convention, the mantra was practically bellowed from the hall, "renewables", "I promise $150B in new investment" etc. Expect more of the same in the upcoming debates.
In short your widget doesn't have to be terribly unique to be successful, you just have to have your widgets well postitioned at the right time and place with plenty of widget raw material available, a brand new widget manufacturing plant, and the growing popular belief that owning your widget or one like yours is the new way to go and might even save the planet. It also helps if the government will offer to pay part of the cost of owning your widget.
As to the Chinese PV group, yes there is similarity, however some or more established, have better balance sheets, more or less likely to create additional convertable senior debt, have greater production capacity in place, have more or less booked business, and have more or less manufacturing efficiencies. These are the reasons I prefer LDK over several others, and for smaller cap more speculative prefer SOL and CSUN. However I have to admit selling out half my position of LDK after the first 14.5pt run last week. I may have been premature it seems. Good luck.

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.