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Definition Of Luck: When Preparedness Meets Opportunity

|Includes:First Solar, Inc. (FSLR), S, SPWR, SUNEQ

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, SUNEQ