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TraderMark
249 Comments
Further Thoughts on Trina Solar and the Solar Space
Further Thoughts on Trina Solar and the Solar Space
They only made $18M so $8M came from others net - don't tell me that is the currency adjustment; if so that means 44% of their profit came from currency. Which makes me even more peeved at TSL :)
re: China
The sad thing is not only is the US behind W Europe and Japan, it has a good chance of falling behind China very soon in solar. We have leadership attaching windfall taxes for big oil on top of renewable act - pure stupidity. Our leadership is a complete failure.
Really sad to see some of the things happening here - all victories must come from the bottom up since the "top down" solution is not an option in America anymore.
Profiting from Panic-Selling in Trina
Generally I cut back into earnings. But I felt Trina would have a very good chance to not only beat, but smash earnings. Which they would of (67 cents vs 48 cents) if not for the currency adjustment. No one on the planet except Trina management knew about that adjustment. So I cannot predict things like that.
I also dont think expectations were sky high; the amount of attention Trina Solar gets versus First Solar or LDK Solar is about 1/100th. Expectations were not that high.
Anyhow its water under the bridge and it is what it is... it is impossible for someone not in the management team to guess they would of done what they would of done. Everyone was blindsided. I honestly though they'd get a few cents currency BENEFIT since all their peers got one. Not only did they not get a benefit, they lost a whole lot of money from this adventure. My guestimate was they would do 60-65 cents versus analysts 48... this would of easily of led them to a path of $4 EPS. So to say a company traded at about 12x forward EPS has "sky high expectations" is taking it a bit over the top. TSL is probably the most ignored co in the space.
Further Thoughts on Trina Solar and the Solar Space
That said, I still like growth at value so to complement the TSL I am probably now returning to CSIQ - I like the UMG factor and the 2nd lowest valuation and frankly it has 1 thing you cannot measure - sentiment - on its side - chart is holding up very well. SOLF is the 3rd choice - might do both as complements and reduce TSL. I believe now looking at all the information there could be an uncertainty overhang to TSL similar to SOLF in spring/summer/fall 2007... people uncertain about management, uncertain about secondary, knowing another 3M currency loss is coming, and knowing an OPEX spike is coming because their annual bonuses are due. That is a lot of uncertainty - that does not mean they cannot beat their number but they will hand away 15-16 cents or so due to currency once again next Q) So even if they beat they lose a lot of upside they would otherwise have. Then the quarter AFTER that might be their quarter to finally (one can hope) shine but that is nearly 6 months away. In the meantime the next time solar runs CSIQ and SOLF will probably trounce it (along with every other major name even with higher valuations) You know in the short run 1 thing matters - sentiment. TSL does not have it -they COULD of had it very easily if they just sat on their hands with this darn currency thing.
p.s. I also believe as we move closer to Nov 08 election solar will see a large move simply due to talk of alternative energy... especially if Obama looks to win - so you can have a big sector move from that. That said McCain will look like a tree hugging greenie compared to the current crew plus he is anti corn ethanol. Things are looking a lot more stable for the next 12-15 months than I earlier feared (thought ASPs would be dropping hard by 2nd half 2008/early 2009 - doesnt appear so) and polysilicon should be stable to falling. Can't predict out more than a year with all the moving parts, but next 12-15 months should be more stable than I anticipated.
TSL will probably make its move late in the calendar year, we have another 90 days of hand wringing now.
Further Thoughts on Trina Solar and the Solar Space
Sincerely,
A graduate from "up north"
;)
Profiting from Panic-Selling in Trina
other than the cash burn rate every concern FBR raised could be applied (sometimes 10 fold) to others in the space. It is not like polysilicon is a Trina Solar issue - I find it amusing how "concerned" everyone is that TSL might not be able to maintain margins of 25.8% when each and everyone of their peers would sacrifice their left leg for those margins.
So I guess the FBR case is these margin issues will only hit Trina and the rest of the sector will sing along merrily. Ironically their integrated models and least exposure to spot pricing should shield them more from any polysilicon price impacts.
Further, I think we've been seeing spot poly drop of late (I've been reading closer to $400 on spot from some spikes in Q1 to $500ish) so why all this hand wringing is beyond me. Especially since the way it is being couched is as if Trina will get hit by this but the rest of those fine companies are just fine.
Talk about cash flow - yes, I can understand that as a concern, but the rest of it (recycled or not) is misleading in terms of the "outsized" impact to Trina Solar - its an industry issue and many would argue Trina is among (if not THE) most insulated. But we can't let facts get in the way of a good analyst report.
Bottom line - if you rely on analysts over the long run, you will lose money.
Further Thoughts on Trina Solar and the Solar Space
Now at this point I have to guess how high their OPEX charges will be next quarter since they will have a big 10 year anniversary party and their annual bonuses. Why not disclose their estimate for the charges? Like a Non 1st year MBA student. Same old, same old.
Further Thoughts on Trina Solar and the Solar Space
Sadly about 90% of investors would never go to this length to dissect anything - if Reuters says its a 3 cent beat, well then its a disappointment! The fact some of these companies are now making 20-33% of their "profits" from currency is not something that "investors" can be bothered with - they just clap like seals and say "they beat they beat! BUY BUY BUY!" Trina performed far better operationally than most of these now "high fliers". But this is the sophistication of the market - the longer you are around it, the more you realize it is a very much "keep it simple stupid" market even with all those MBAs running around moving trillions of dollars.
I think one key point was this one
"TSL told us that their non-silicon panel costs were $1.17/watt this quarter (down from $1.28 last quarter), and that they expect to exit 2008 at $1.05. Please note that in this cost per watt, TSL, as an integrated manufacturer includes ingot, cell and panel-making."
So you cannot compare apples to apples with MOST of the others. Interestingly the 2 most integrated co's (YGE being the other) hav e been taken to the woodshed the hardest the past 3 sessions. Any thoughts on the horrendous action in YGE? I am just always fascinated by the relative outperformance of these stocks versus one another.
Profiting from Panic-Selling in Trina
Let me get ahead of the peanut gallery and say this was a bad short term call. I took some of what I bought Friday off the table at 44ish, but still getting hit hard.
I am perplexed than not 1 analyst has come to the defense. I can only assume they are as sick as we (shareholders) are of this "surprise a quarter" whack a mole. I've been in similar stocks in the past and the analyst community does not treat them well.
Oh well, I guess we now can catch up to DryShips for the lowest PE in the entire index - below 10 on forward basis, here we come.
Profiting from Panic-Selling in Trina
Profiting from Panic-Selling in Trina
Decent points but the German and Spain subsidy reductions are a white elephant they trot out every 9-12 weeks as a reason to sell off, just like everytime the solar subsidies (minor as they are) are threatened in US congress. Just a fly on the butt of the elephant in my book. For the stock it did hold the moving averages Friday and basically gave back what it gained Thursday so no serious damage there. The problem is both the overall market and sector, both of which could be prone to further selloff - solar tends to move in a group so if one sells off they all sell off most of the time. I agree if you wait to buy on a breakout it would be 'safer' from a capital preservation standpoint.
Also agree with the comments about management and secondary. #1 TSL now has a permanent management discount in my book. Ironic, they took that from ENER - it appears when companies report their first good earnings report the market says, show me one other before we trust you - ENER reported a good quarter 2 quarters ago not rewarded, but then the 2nd one they got a huge boost. TSL would of had the 2nd good one in a row here if they did not decide it was time to switch currencies out of the blue. Frankly if they hedge the currency I could care less what currency it is in but the fact they dont communicate with Wall Street effectively and "surprise" them is not a good thing and they deserve the discount. Further, this discount might be due to the Street anticipating a secondary but I'd see at most 20% dilution, whereas now they are being priced for 40% discount. But with this management who knows what they will decide to do, perhaps a garage sale to raise funds - since they love to think outside the box.
Alphameister, I agree its good to spread bets among multiple names - but the discount here to peer group is so severe its hard to buy other names that are trading at 140% of Trina valuation.
Dr Duru could care less about the mgmt guidance - Apple says the same thing every quarter than beats the number soundly - TSL said last quarter to expect 23-25% gross margin and came in with 25.8%. As polysilicon pricing begins to falter it should only help them. They are being conservative and I would not be surprised to see 25%+ in the next few quarters
buystocks, they are ramping production in 2nd half (capacity expansion) you cannot straightline this Q and multiple by 4. If gross margins hold up, in fact, or exceed 25% they could do more than $4. BUT that assumes no dilution from an equity offering which might also be coming our way. And from this management it will be a "surprise" to everyone :)
As Coal Skyrockets, Analysts Are Late to the Party
Just like taking profits in December 2007 was prudent considering the January 2008 correction
Taking profits doesn't mean close down a position.
Intrepid Potash: Strong Quarter but Questions Remain
My next hope would be that it opens somewhere in the $35 range (the IPO price kept getting moved up) which I would also buy at. But as you know it opened immediately in upper $40s which was a very rich valuation based on info at IPO.
I am now looking at $3+ EPS so easy back of envelope $3+ x 20 PE = $60+
Anyone who got in at IPO would indeed of had the "hottest IPO of 2008"
I wish I had been one of those people.
Why I'm Not so Bullish on Joy Global
So far it appears any price increases are not keeping up with the rising costs of inputs. They lost 7% of gross margin in 12 months; that should make one take notice.
Again, I did not say bad companies, bad sector or anything of that nature. But if you ramp sales, and costs ramp over and above your price increases you lose margin. That seems to be happening increasingly across equipment makers, whether mining, agriculture or just about anything.
4 Stocks in Trouble
This was a purely technical call on a sector I've been bullish on, probably far longer than all the people in the comments section who are demeaning the call. It was not a 1 day call, and when the fertilizers have a new move, I plan to be in it; they have been very range bound for about 5-6 weeks (I sold most of my positions at what I call the Intrepid Potash top), and I got yelled at then too. About 10% higher.
I notice a lot of emotion, and when you sell people seem upset. In the ire of the commentary people seem to miss the point that if things reverse, I'll change course too. I am not ready to change course after a 1 day change and nothing works 100% of the time. In a general sense when companies break below their 50 day moving average, on a closing basis, you need to be wary. I still see a gap around $110 in MOS which I can see being filled in due time.
I sold some of my coal today today - ANR up 60% in a month - I can only imagine the ire that will draw when Seeking Alpha announces it ;)
As someone else says, its too soon to tell; I'm not a daytrader and we'll see soon enough. I think the commodity complex is ready for a pullback and fairly or not, fertilizer gets thrown in that mix. We shall see how it plays out the next few weeks.
Apparently I am the only person who when they sell a stock, it reverses - everyone else must have some incredible portfolios - I am just slogging along, trying my best. :) I'll check back in a few weeks on the group and/or if we see a nice solid breakout (up) on volume, I'll pay up and get back in.