An admirable side of a great business is the ability of Management to overcome challenging times and the determination of corporate culture to keep the yellow jersey of leadership despite unfortunate environment. I am talking about strong character, willingness to go forward, while everyone is about to give up, and ability to make foresight decisions.

Getting acquainted with First Solar

Whilst studying First Solar (FSLR) a couple of years ago, I realized that this was the most prominent company in PV (Photovoltaic) industry:

* The largest company with the market capitalization of about 11 billion USD. Interestingly, the company had low level of debt, as implied by an EV of about 10-11 billion USD.

* The most profitable industry player with the following 3-year averages: Operating Margin at 38%, Profit Margin at 28%, ROA at 20%, ROE at 26%. It is Important to note that ratios over 3 years were sustainable and averages provided a fair overall picture.

* The largest Research & Development capex between 3% and 4% of Revenue, which is greater than that of competitors' 1%-2%.

* The last point, key for surviving, is that FSLR's Debt to Assets ratio stood at 5.5%, while at the same time competitors' ratios were between 23% and 50% (which ended badly for a bunch of now bankrupt PV companies). The amount of PV-cell producers prior to the industry's overproduction crisis was around 150 or more. By now, only half of them managed to survive.

Brief coverage of the market surplus crisis

In 2008 price per kg of polysilicon (raw material for PV-cells) was 400-450 USD due to lack of raw material for photovoltaic cell production. However, everyone knew back then and still knows that mankind will be developing sources of renewable clean energy. For instance, according to Solarbuzz (specialized information agency), the global solar power market, as measured by annual volume of solar modules delivered to installation sites, grew at a compounded annual growth rate (CAGR) of 73% from approximately 1.75 gigawatts (GW) in 2006 to around 27.4 GW in 2011.

People put two and two together and started investing into polysilicon and PV-cell production so that available amount of poly and cell increased by n-fold. At the same time, pace of global PV-installation slowed down in 2010-2011, which caused massive surplus. Therefore, prices for poly and cell declined dramatically. Currently, the cost of poly is about 17 USD per kg, and cell costs about 80 US cents per watt. Back then, in 2009-2010 the cost was 4-5 US dollars. By now, I believe more than half of producers are lost, and those that survived are now more or less unprofitable. Huge losses and consolidation are the scourges of the PV-Industry.

Nothing lasts forever

Technology is currently more advanced than it was before: PV-cells are cheap and efficient and PV-generated electricity now could cost as much as from the traditional fossil energy sources. US, China, Saudi, Australia and South Africa are replacing Europe as a primary market for solar energy industry players. Global installation of PV-modules still grows at 25-30% annually and this pace might increase. I have noticed positive changes on balances - inventories have stopped rising and prices on polysilicon went up 12% since Dec 2012.

I have expressed my admiration for excellence of some businesses. FSLR is one of them. Despite all the troubles, the industry has come through; FSLR is standing firmly on the ground, being perhaps the only large company that managed to upturn its business in the time of troubles. Currently, FSLR is not just a PV-cell producer, but it is a project company that produces PV-cells, builds solar-farms, maintains them and provides other services. It has obtained 2.8 GW projects in California, Arizona and worldwide for execution in the next couple of years. Thus, FSLR is probably the only PV company that is not in desperate struggle to find customers.

Ability to transform the business from just production to full-service operations during challenging times is unique! I admire FSLR's Management!

In 2011 the company's executives stated: "… our goal at First Solar has always been to drive. And to do that, we must find a way to grow dramatically, notwithstanding a challenging environment." - I believe in it, as the management has already proved that FSLR can overcome challenges.

Currently the company looks good:

* Still the largest company with the market capitalization of about 3-3.6 billion USD and EV of approximately 3 billion USD.

* Slightly unprofitable, yet in a better shape compared to huge losses of other industry players, with 3-year averages, as follows: Operating Margin at18.65%, Profit Margin at 7.21%, ROA at 4.32%, ROE at 5.6%. If there were no restructuring costs, FSLR would be still profitable.

* The largest Research & Development capex at 4.2% of Revenue.

* Debt to Assets ratio at 8.86% vs. competitors' 36%-70%.

Conclusion

By and large, I believe that solar energy is a major clean-energy source and that over time technologies will bring more efficiency and the overall acceptance to the industry. The crisis will not last forever, and if some companies have a chance to regain profits and increase them n-folds then First Solar could be the first one to do this.

If I am at least 30% correct then FSLR will bring more than 100% of return over 2014-2015 to its stockholders. A perfect storm has just finished or about to end, it is time to pick the best solar-energy stocks.

I am a holder of FSLR since the stock traded 26 USD per share and I plan hold it until maturity. :D Just joking. I will hold it for a very long time.

FLSR common stock prices (volume weighted average per annum) were as follows:

2007 - 270

2008 - 134

2009 - 133

2010 - 130

2011 - 33

2012 - 30

Now - 40-45

This is far better than any other PV company that I have looked at. The only risk is in the employed cadmium telluride ("CdTe") technology - it may not have the future. But this is yet a vague question

Damir Babanazarov

Disclosure: I am long [[FSLR]], [[INTC]], [[TSL]], [[UA]], [[SBUX]]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Brave new year lies ahead us, doesn't it? Start was powerful marketwise, but whilst fundamental economic accumulator is "born to die" I don't feel ok about 1H of 2013, however it is how things worked-out for the last 4 years.

If S&P500 is still a good indicator of market direction (worldwide), than feels like we're being dragged to slaughterhouse.

What do you think, might it happen in an old pattern manner (weak Spring and Summer, than kind of good news in the Autumn) or there are serious discrepancies that might lead to something new?
I don't sense much of a change: there still US-govies, still US-dollar and safe-heaven stuff like precious metals and undervalued assets.

Since Pension system in Kazakhstan is being reformed, local FI-market has gone to coma. I keep reversing big assets onto International markets, and significant macroeconomic risks is there coupled with better profits. Countries like Ozzy, Canada, Malasya, Brazil and China still hide some value, however not much at the moment.

Brazil could be the Catch if the moment is ok:
Unemployment went down from 7.5 to 4.9 over 3 years
Huge infrastructure projects are being developed over the great country
Retail sales YoY are very positive = 8%
Low-base (low GDP growth in 2012 - 0.9%) effect for GDP to rise in 2013
Public debt on it's way down (40% of GDP)
And Word Cup in 2014 as well as Olympic Games in 2016
Brazil bond/stocks are favorite thing on both sides: for 2013 and long-term (3-5 years).

I will try to catch something interesting nominated in BRL (bonds, stocks, govies).
Key issue for me is to be concerned with Braz-taxes.

My special cheerless jokes:

***
A gorilla walks into a bar and says, "A scotch on the rocks, please." The gorilla hands the bartender a $10 bill.
The bartender thinks to himself, "This gorilla doesn't know the prices of drinks," and gives him 15 cents change.
The bartender says, "You know, we don't get too many gorillas in here."
The gorilla replies, "Well, at $9.85 a drink, I ain't coming back, either."

***
A guy walks into a bar, orders 12 shots and starts drinking them as fast as he can.
The bartender asks, "Dang, why are you drinking so fast?"
The guy says, "You would be drinking fast, too, if you had what I had."
The bartender asks, "What do you have?"
The guy says, "75 cents."

Disclosure: I am long [[INTC]], [[FSLR]], [[TSL]], [[UA]], [[GTAT]], [[WWW]].

Additional disclosure: I have RUB, BRL, AUD nominated bonds

Intel, as it said, is the king of microprocessors market, which in charge of 15% of the market share. But the Samsung not a single company was able to cross 5% market share. Intel's technology is superior!

General best thing about Intel is the ability of its team to preserve mighty corporate spirit and ability to conduct great management skills and thirst for innovations through chain of iconic CEOs and directors. Let's take for example David Perlmutter (executive VP) - he along holds part of Intel's patents, he is the creator i387 math coprocessor, and he had taken part in a various Intel's famous projects. So he is a very iconic person in IT-industry.

Walking down to the figures:

Intel makes enormous revenue - more than 53 billions, and neatly earns more than 11 billions a year, and 35-50% of NI goes into dividends. Assuming outstanding stocks decrease over years, due to regular repurchase operations, dividend yield now is about 4.25% and five year annual increase rate for dividend payments is 6.77%, that's why longer you stick with INTC the more you get every year.

Yes, I know about storm in hardware producers market. But isn't it the best time to start picking solid gears for long-term value portfolio? Intel is mammoth that could keep the crown over decades. Think of everlasting Coca Cola's, IBM's, WMT's or J&J's domination on US market and overseas during decades. Intel can stand current storm and boost profits in future.

R&D expenses are about 10 billions, as much as Kazakhstan spends on science (yes, I'm investor from Kazakhstan), and scarcely any company in industry spends more. Let's imagine how many breathtaking devices are still not invented or commercially used in our days, however we've seen a lot of them coming (in futuristic movies mainly). And pardon me if I'm wrong, I believe that partly science follows after inspiring ideas that come to us via fantastic books and movies. Scientist just embody what they saw there. 15 years ago as small smart and powerful devices as we have now, were just sci-fi.

And I bet Intel, that directs up to 15% of revenue (5 year average) on Capex, has something special for us in its' very best laboratories. And thanks to "Innovation spirit" and ability to pass splendor over the years Intel is not "One man's" company. Besides, 70% of employees are purchasers of Intel's stocks. So this team of believers and hard-workers could lead further.

Current Capex and A&D rates make me think that Intel's long-term asset base regenerates totally every 6 years.

I'm buying now 30-40% of proposal amount, because it relatively cheap at the moment, come what may. And I'm going to buy rest during times of worries. Then it should be locked in portfolio for 2-4 years.

If it going to make 4-5% dividend yield a year and 10-12% of price appreciation, annualized, than it's the deal.

That's it.

Thanks for reading.

Disclosure: I am long [[INTC]], [[NFLX]], [[TSL]], [[FSLR]].

Disclosure: I am long [[WWW]], [[NFLX]], [[TSL]], [[GTAT]], [[FSLR]].