vitamin_j

Chinese Solar Stocks Present Compelling Value

I'm not hugely against Eric's thesis - he may indeed turn out to be right.

However, one thing about his "undervalued" argument (and I think Jack Yetiv's as well) is the question of when exactly the market is supposed to correctly value TSL et al. Investors in this bear market tend to overvalue bad news (share dilution, cash flow concerns, growing pains, margin compression), while undervaluing good news (example: a nice bump, sure, on today's TSL announcement, but not the 15% - 20% spike from last year's solar boom).

So there's some risk that these companies might continue with booming earning announcements, solar fundamentals keep looking great, the story is there, but that investors (especially large institutions worried about risk, credit, leverage, etc.) might steer clear of growth stocks in a highly speculative industry in an emerging market (China) as a rule. That might keep these companies undervalued until the broader market gets its legs back, I believe.

That's not to say that the thesis is void - Trina could very well be that great company ignored by the market - just that it may be years not months for it to pay. And that gets into the territory where Jack Yetiv fears to tread (right, Jack?): past the one-year horizon where industry-wide changes in technology might really shake up the game. So, if you're confident that TSL will survive and thrive for years to come, now is probably a great time to get some discounted shares. I'm more skeptical about investing for months vs. years. That might just go sideways or down further.

Also, my more skeptical case could be mitigated some by better news on subsidies and new solar markets. I personally believe that "green recovery/stimulus" is in the air here in America, but won't begin to be seriously enacted by the US government until the middle of next year.

With a one-year-plus horizon, I am long Suntech (STP) and Akeena Solar (AKNS).

Chinese Solar Stocks Present Compelling Value

Dicki - I'll admit I could have clearer re Trina's silicon supply. I am not intimately familiar with the company - I neither love nor hate it. Trina's silicon problems are more in the short term, and I have heard elsewhere about the built-in price decline you mention for next year. So we're both right, but I could have been clearer.

My main point wasn't to bash Trina, but to call out what I felt was a fatuous comparison with MEMC in the article.

Chinese Solar Stocks Present Compelling Value

I have to agree with rana. He or she is spot on - what will make WFR's price soar (continued high silicon price/demand) will make TSL's price dip (concern about silicon supply is a major factor driving recent Trina price drop), and vice versa.

Plus, WFR isn't even a pure-play solar company. Much of their revenue comes from supplying other, more traditional semi-conductor needs.

Investors be warned; comparing these two companies as the author does is just wrong.