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  • SolarCity, SunEdison And The Retained Value Game [View article]
    I just thought I'd link to "Price of petroleum" on Wikipedia. There's a chart there which shows the oil price since 1861, both nominal and adjusted for inflation. You could say the real price went down from 1864 to 1971, and then up, but there's enough fluctuations on top of that to give a different interpretation. Anyone in 1970 who thought they could extrapolate a trend into the future would have been very wrong. The inflation-adjusted price is about back up to where it was in 1864. I can't say how accurate the chart is, and price indexes probably aren't all that reliable over such a long period.
    Apr 20 11:25 PM | Likes Like |Link to Comment
  • SolarCity Retained Value - A Word To The Investors [View article]
    Complicated financial structures generally carry risk, but when project based loans are non-recourse, there's less risk, although a default would affect the ability to raise finance. Bankruptcy-remote entities can also reduce risk while increasing complexity, but I don't know if that will apply to SUNE. There's a risk that complexity which starts out with good ideas could have bad complexity heaped on top, IMO.
    Apr 20 11:03 PM | Likes Like |Link to Comment
  • SolarCity Retained Value - A Word To The Investors [View article]
    Amy S. mentioned "investigation for accounting errors". One way to check the risk of a company's accounts having to be restated is to use the online M-Score calculator on Unfortunately, it doesn't work for SCTY, as it gives a history of continuous zeros.

    I put SUNE into the calculator. This is the link, but you have to close sign-up windows, and when you get an error, you click on "Beneish M-Score" in the alphabetical list on the left.

    SUNE's M-Score has recently increased to -1.10, which is fairly risky. It's above the commonly used threshold of -2.22, and well above -1.78 which is supposed to mean a 1 in 20 chance of earnings manipulation (and being required by auditors or the SEC to restate the accounts). According to a chart on the page, SUNE have had higher scores previously, and so far as I know they did not have to restate their accounts. (The '1 in 20 chance' is my own interpretation, working back from misclassification costs, and I can't promise it's right.)

    Gurufocus now give a helpful breakdown of the components of the M-Score. The main causes seem to be:

    1) A doubling of the days sales outstanding, with Accounts receivable up a lot while revenue fell. The theory is that this can be the result of inflating revenue, although it's something companies can usually hide by selling receivables.

    2) When it gives a GMI of about 1.8, it means the gross margin fell by the ratio 1.8 : 1, which is about 45%. The theory is that the fall could indicate poor prospects and pressure to manipulate.

    3) When it gives a SGAI of nearly 1.5, it means that SGA costs as a proportion of revenue have gone up by 50%. That's supposed to show that efforts to increase sales have not been effective.

    My opinion is that points 2) and 3) can be adequately explained by the decision to retain solar projects, and assuming they could have sold the projects at a reasonable price, the M-Score would have been a lot lower (which is better) if they hadn't retained solar projects. Unfortunately I don't have time for a proper investigation.

    I'm keeping my SUNE shareholding, which I already regard as speculative.

    I hope that wasn't too off topic.
    Apr 18 10:39 AM | Likes Like |Link to Comment
  • The Female Health Company: Fundamentals & Commitment [View article]
    I got an email reply from Michele Greco, Female Health’s CFO. I've cut the address short but there's nothing cut out the middle. I ought to have posted it here sooner. I sent it to Joseph P. Porter as promised, as soon as I saw it, but he seemed to have forgotten about it or lost interest. It took a while to get the email, but I'm not complaining, and I'm grateful to Michele Greco for taking the time.

    "Mar 19 (2 days ago)

    to me

    We do not anticipate any further reduction in the valuation allowance, therefore there will not be any more tax benefit as a result of the reduction.

    Utilizing the NOL will have a favorable impact on our cash flow.

    Hope this answers your question.


    Michele Greco

    Vice President and C.F.O.

    The Female Health Company

    515 North State Street, Suite 2225"

    The sentence “Utilizing the NOL will have a favorable impact on our cash flow.” suggests that Net income will not benefit from utilizing NOLs.
    Apr 16 10:48 AM | Likes Like |Link to Comment
  • The Female Health Company: Fundamentals & Commitment [View article]
    1) Positives:
    • Big upside from well funded programs, but it's hard to nail it down, even though I collected and processed some info.
    • Big upside if female condoms take a significant market share from male condoms.
    • The rising deferred tax assets imply management optimism about growth (even though they've been conservatively estimated).

    2) Short term risks:
    • If income before tax doesn't shoot up, Net income will drop, and I don't know if that's factored into the share price.
    • The dividend cover isn't high for a company with lumpy orders and cash collection. There's probably millions more cash than total liabilities plus any likely contingencies, but it isn't much more than a year's dividend.

    3) Long term risk:
    • The single product, emerging competition, doubt about which female condom is most preferred, and some evidence that women don't all prefer the same female condom. The competition isn't very advanced but IMO women want a choice and some day they'll get it.
    • There may be a risk of the aid work becoming too dangerous, unless anyone knows better.

    For more info about some of those points, find:
    "the benefit from two programs"
    "The global male condom market (public and private sector) is estimated to be $3 billion annually."
    "Cash net of Total liabilities and Total Contractual Obligations = $3,007,757"
    "Female Health’s dividend cover and covenant restrictions"
    "I hope the programs aren’t hit by violence, but"
    and this again: "Some information about the female condoms women prefer"

    I think the risk/reward is good for speculation, of the "maybe long term, but watch" kind, and I wouldn't expect anyone to bet the ranch on FHCO or rely on the divi for their income. But, I'm more confident about research and bits of analysis than I am about summaries and decisions.

    I hope that helps, and isn't too long. Thanks for looking at the piece, even if you don't have a spare week to read it in.
    Apr 16 10:24 AM | Likes Like |Link to Comment
  • The Female Health Company: Fundamentals & Commitment [View article]
    I've published a long blog-piece called "The M-Score and The Female Health Company". It's mostly about the Beneish M-Score. (on

    Investors in Female Health might like to find the section headed "Some information about the female condoms women prefer", if they aren't aware of two studies made in South Africa, although the information is fairly limited.
    Apr 15 06:17 PM | Likes Like |Link to Comment
  • SolarCity, SunEdison And The Retained Value Game [View article]
    The author gave this link above: "Solar’s Dramatic Price Plunge Could Trigger Energy Price Deflation" by Giles Parkinson, April 14, 2014 (

    I'm usually wary of extrapolating trends, but I wouldn't like to bet against falling solar energy prices. The author of 'Dramatic Price Plunge' believes the big oil and gas producers will anticipate the effect of cheaper solar. There's less incentive to conduct exploration. While there might be less incentive for expensive development, there's also less incentive to keep reserves that are depreciating. It isn't all one-way, and they won't be too worried over falling energy prices in Eastern Europe right now.

    Solar power could possibly transform the economics of deserts. Googling "condensing water in the desert" gets plenty of hits, including
    "Device that harvests water from thin air wins the James Dyson Award" By Bridget Borgobello, November 11, 2011 (

    I've left out the implications, the ifs and buts and complications like social, environmental and political in case I end up writing an essay.

    I've gone off-topic, but there's more to think about than the value of retained solar projects.
    Apr 15 10:27 AM | Likes Like |Link to Comment
  • SolarCity, SunEdison And The Retained Value Game [View article]
    I'm happy with that. "may be overstating retained value" I agree with. It's not enough to make me sell my SUNE shares, which I regard as a speculative investment anyway, since the company doesn't exactly have a strong record of free cash flow. If anyone has a more negative opinion, I'm always prepared to read the case against.
    Apr 15 09:06 AM | Likes Like |Link to Comment
  • ASML And Smaller Computer Chips: Will Moore's Law Break? [View article]
    I'd say alternative technologies need to be develped, rather than invented, if EUV doesn't work out. This looks like a good round up of various methods:

    "Waiting For Next-Generation Lithography" by Mark LaPedus, January 23rd, 2014 (

    I wouldn't know if it has errors or omissions, but it's informative and easy to follow.
    Apr 13 10:39 PM | Likes Like |Link to Comment
  • SolarCity, SunEdison And The Retained Value Game [View article]
    Is anyone arguing that retained solar projects will always be uneconomic, no matter how cheap solar modules become?
    Apr 13 10:07 PM | Likes Like |Link to Comment
  • SolarCity, SunEdison And The Retained Value Game [View article]
    Much of SunEdison's debt is non-recourse. If a solar project financed by non-recourse debt fails, the company have the option to default and let the lenders take possession of the project, and the lenders have no further claim on the company. Defaults would harm the company's reputation, but the important point about non-recourse debt is that lenders regard the projects as safe enough for that kind of financing. SunEdison are keen to use "other people's money" and non-recourse debt is only one option, but it's enough to establish that lenders with plenty of cash at stake are confident about the projects financed that way.

    On the other hand, there's "SunEdison cancels plan to set up solar plant in India" where the cancellation was due to insufficient local capacity for making solar cells. Also, the price of panels had gone up. They seem like more important factors for a new project than for maintenance, but there's some chance of local shortages and high prices affecting repairs. The risk is increased by the typical two-decade project lifetime. I don't know how the risk is compatible with previous use of non-recourse debt. I expect that some projects and some countries are riskier than others, and that could be the explanation.

    One problem with retaining projects is that from the point of view of a shareholder, the value lacks the objectivity of a sale. SunEdison seem to offer good risk/reward, but they don't have a good history of free cash flow so I regard the company as speculative.

    I don't follow SunEdison as closely as I used to, and I'm willing to change my opinion if I think there's a good reason to.

    With apologies to anyone who read my description of non-recourse debt every time I felt it was needed.
    Apr 11 11:56 PM | 1 Like Like |Link to Comment
  • As The Market Shifts Away From High PE To Low PE Stocks, Qualcomm Is Breaking Out To New Highs [View article]
    I like the company profile at the start. I've owned Qualcomm shares for over a year and I still need reminding what QCT, QTL, QWI and QSI mean.
    Apr 4 05:24 AM | Likes Like |Link to Comment
  • Why Nvidia's Partnership With VMware Is A Big Deal [View article]
    I get it now. Nvidia will sell more GRID cards to enterprises and service providers. The way Forbes explain it on needs less prior knowledge.
    The title "Nvidia And VMWare: The Biggest Cloud Announcement This Week You May Not Have Heard About" confirms that the news might not be fully appreciated.
    Apr 4 01:36 AM | Likes Like |Link to Comment
  • Why Nvidia's Partnership With VMware Is A Big Deal [View article]
    I don't know much about this, but I'm thinking if it means a lot more graphics gets done in software, it still has to execute on hardware. Is it going to make much difference to chip-makers?
    Apr 3 10:59 PM | Likes Like |Link to Comment
  • IPG Photonics Continuing To Expand Its Fiber Laser Opportunity [View article]
    About margins, I see a difference between margin erosion as competitors catch up regarding efficiency, and margin drift right now.

    I don't think it's inevitable that margins will drop very far, as some industries have high margins for a long time, like medical diagnostic equipment. They have high development costs, but I don't think they all have low return on investment.

    Because IPG are vertically integrated, spend a lot of time testing, and have short lead times for customers, preparation for expansion involves some expense. Building up inventory ahead of expected demand also hits Cash from operations more than Net income, and investors are wary of the gap. I hope the expected demand materializes, but there is some risk over Russia, as mentioned in the article.
    Mar 26 08:14 PM | Likes Like |Link to Comment