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I used to run a limited partnership, boutique hedge fund in the 90s. Retired in 2000 and moved from New York City to Toronto, Canada, got married, raised a family and basically settled down. After a few years in Toronto, my wife got tired of the city’s 8 months of cold weather and insisted that... More
  • Definition Of Luck: When Preparedness Meets Opportunity 0 comments
    Jan 6, 2013 12:15 AM | about stocks: FSLR, S, SPWR, SUNE

    The dean of American motivational speakers, Mr. Earl Nightingale defines "luck" as when "preparedness meets opportunity."

    The move in one of my portfolio stocks this past week was a perfect illustration of Mr. Nightingale's definition...

    WOW! What a week...The eye-popping move in SunPower's share price on Thursday was truly impressive and also justified.

    When I allocated $4,000 (40% of $10,000) of the portfolio to buy SunPower's March 16th, 2013 CALLS with a strike price of $6.00, I was absolutely expecting a move to at least $9.00 per share.

    But certainly not in 1 day!

    I was expecting the move in incremental steps stretching over the next two and a half months, but certainly before my options' expiration on March 16th, 2013.

    Thanks to Mr. Warren Buffett's MidAmerican Renewables' $2.5 Billion purchase (yes, that is a Billion with a capital B) of just a slice of SunPower's business, the company's stock (symbol: SPWR on the NASDAQ) made a 47%+ move on Thursday and the options that I had purchased at an average price of 48¢ closed on Friday at $2.77 (bid price). That is more than 5X my purchase price, including brokerage commissions) in just 1 week...

    The reason for the move is simple: solar stocks are ridiculously undervalued and the markets suddenly took notice.

    In an insightful article published right here on Seeking Alpha, Eric Wesoff, puts a much needed spotlight on the markets' glaring miss-pricing of solar stocks. If you want to take advantage of this pricing anomaly, I suggest that you read the article:

    tinyurl.com/bewed5q

    So how does the pricing action in SunPower's stock this week relate to Mr. Nightingale's definition of "luck?"

    Well...

    I had done my due diligence on SunPower and had come to the realization that the market was not properly pricing-in the recent global trends in the solar business. And by buying CALL options in SunPower's shares on Monday and Wednesday, I had basically prepared my investment to take advantage of this (off)pricing opportunity. So when MidAmerican Renewables decided to spend $2.5 billion at SunPower (opportunity), it was "luck" that allowed my investment to profit from my due-diligence (preparedness)...

    Therefore...

    Luck = Preparedness meets Opportunity (Q.E.D.)

    It is worth pointing out that even after the BIG move this week, SunPower's entire marketcap today is only $1 billion. Should SPWR be afforded a market cap of a paltry 1X sales, then this $2.5 Billion sale alone would justify a stock price north of $20!

    SunPower's stock price, imho, still has a lot of upside remaining...

    kp

    P.S. I will write another post a little later to update my portfolio's status after the first week...

    Disclosure: I am long S, SPWR, WFR.

    Stocks: FSLR, S, SPWR, SUNE
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