vitamin_j

Four Reasons to Expect a Solar Boom

Look, I own STP and think the company's real good. However, your assertion

"Companies like First Solar and Suntech Power are self-funded companies that have been making money all the time, and these two companies have sufficient funds to expand their businesses."

is not true. Suntech has been partially funding its Capex through debt issues, most recently this past March. First Solar does indeed fund its expansion entirely through free cash flow. This makes it almost singular among solars. Suntech is one of the best of the silicon-based companies, and unlike most goes in and out of positive free cash flow. Also unlike most other Chinese solars, it is sitting on quite a money pile at the moment, which should give investors greater confidence for near-term headwinds. However, to imply that it funds itself solely through retained earnings like First Solar is misleading.

Solar Cycles and Stocks: The Sun Also Rises

Good article about the market - enjoyed reading it. Also nice to know that someone out there doesn't see Akeena as doomed.

However, can we come to some kind of consensus about article names? Can we permanently ban all cheesy sun referencing titles for solar articles such as "The Sun Also Rises," "Here Comes the Sun," etc.? I think diversifying our metaphors will help the industry expand further into the mainstream.

Temporary Market Bottom? 3 Solar Stocks That Look Like Bargains

Fair enough, David. I don't know enough about LDK specifically to comment on that company in particular.

However, I would note that, when Trina canceled plans to build their own poly plant, investors and analysts applauded this move. If you believe as I do in the thesis that poly prices will be significantly declining due to major new suppliers coming online, why would owning your own poly plant and vertically integrating be such a good thing, as opposed to choosing among suppliers clamoring to give you the best price on a product? And if you do believe that poly will continue to fetch a good price, why not invest in MEMC or the Norwegian REC solar, which both use a more profitable FBR technology, as opposed to a new entrant like LDK (again, I know little of LDK, so it's an honest question)?

Finally, what is your outlook for poly price and what's the evidence for it, as this is a key question for all three companies for the next 1 - 3 years?

Disc: I am long Suntech and Akeena Solar.

Temporary Market Bottom? 3 Solar Stocks That Look Like Bargains

This article is very poor. First, it misinforms badly about Spanish subsidies. Spain may cut its subsidies significantly, true, but nowhere have I heard that it may eliminate them. Can you cite a source for this claim? Also, the consensus is that the solar industry dodged a bullet with the cuts that ended up being made in Germany - 8% in 2009 and 9% in 2011 vs. a proposed 30% cut in 2009 - it would have been nice to mention that actual information.

Then I think the author glosses over something significant in considering three Chinese companies but not talking about the dynamics of the Chinese equity market.

Finally, what is this "polysilicone"? Are these companies doing a side business in breast implants?

Which Solar Stocks Will Continue To Shine?

I think STP is currently a great company at a good but not great price. The others are OK companies at great prices. With a horizon of more than a year (outside Yetiv's range I think, to be fair to him), I'd rather own the great company. From this extended POV, I find it quizzical that Yetiv's playing a value game in a growth sector, putting it all on forward P/E as he does, and all for 3-4 month swing trades. Of course, it seems to work, so I can't begrudge him that. More good fortune to you, sir.

However, I would add to Yetiv's risks that, by following his method and ignoring industry forces and qualitative factors for a company, if unforeseen circumstances soured on your 3-4 month gain, you'll either have to unload at a loss or hold a second-tier solar through an industry shakeout that first tiers like Suntech are going to win.

Trina Solar: Best Value in the Solar Space

Hi Jack -

I'm enjoying your series of articles. Seems to be generating high quality discussion about solar, which is a compliment to your work.

I'd question your heavy reliance on PEG as the basis for picking a solar company to invest in. Don't qualitative factors such as size, technology, management, and prior execution enter into your analysis? Or, in your mind, do these factors matter only in how much they manifest themselves in the PEG, ie the proof is in the pudding and PEG is the pudding?

I can see PEG as a determinative factor for success if you believed the solar panel/component industry was purely a commodity business. There are arguments that that's exactly what it is, or what it will be in the near future. In that case, the company that can produce the interchangeable product, in this case the solar panel, with the most profit (and in a growth industry the most profit growth) wins flat out. Those arguments may be borne out.

However: Brand? Access to markets? Partnerships? Relationships? Guanxi? Diversity? Products? Record?

Do all these take a backseat to PEG?

You may poo-poo the factors I cite as too soft. I'd agree one has to look at the hard measures, the bottom line, etc. However, I'd be more comfortable hearing something like "this company has this great PEG, and here's why they're a great company that's going to continue to win in the solar industry (especially with trailing data limited)."

My point in slogan form: I'd rather by a great company at a good price than a good company at a great price.

This might depend on horizon - mine might be farther out. What's yours? Is the "value" you see in TSL a question of months? Years? A year? You seem to be limiting yourself to a year tops (2009 eps worthless except as speculation, you say) - right?