Official Google Blog: Not merely tilting at windmills — investing in them too

Official Google Blog: Not merely tilting at windmills — investing in them too

LDK is back

Writing again after a long time. In the meantime a lot has happened with a lot of solar stocks up at very high levels . LDK which I spoke about as a stock to buy has got to $75 levels today after languishing as low as $27 on rumor mongering by the WSJ and the other analysts who like Goldman Sachs had downgraded LDK on a fundamental view 2 years out lol. Well most of the stocks have run up to high levels .

My strategy now would be

a) buy up suntech (STP) and Trina Solar(TSL) as they look like the only great stocks to buy right now compared to other whose valuations have run up too high

b) Sell stocks like YGE and SOLF whose valuations don't justify the fundamentals.

CSUN falls after reporting Q3 loss,LDK remains flat

As I mentioned in my previous post, CSUN is a preteneder in the solar space . In my last post i had written how speculators were running up the stock , yesterday it posted yet another loss inspite of great conditions in the solar industry driven by the strong Spainish demand.The stock is now trading at $7 levels from $13 levels a month ago. Canadian Solar (CSIQ) is another stock which has run up on a couple of deals to as high as $18 . I think when I am writing again in a month this will go down as well as this is another company without any differentiation and when the industry goes into oversupply it will go belly up .
LDK is now at $35 levels after having gone down to $29 . The inventory issue has been like a cloud over the stock and till the indpnt audit is over I expect it to languish at these levels , but I would give it a high probability that it will come through with much higher prices in 2-3 months once the issue is sorted out. The industry is sufferign from a bottleneck of wafer cutting equipment and LDK with its earlier orders will gain as wafers become the next bottleneck after polysilicon

China Sunernergy shoots up, more spice to the LDK story

China Sunergy shares went up to $13.78 (up nearly 35% in 2 days) on news that it had secured a 106 ton poly equivalent to 13 MW in cells from a Chinese poly produce for the upcoming year. Again the share price jump seems unwarranted . CSUN is one of the weakest solar companies in my view. It is a pure player cell manufacturer without any of the advantages of vertical integration like Trina or Yingli and none of the technlogical / manufacturing competencies like Suntech or JA Solar. It fell drastically this year to $6 levels after reporting disappointed Q207 results. I think this will be one of the first companies to go belly up once the solar industry goes into a period of oversupply. Though Company will generate strong sales this year $240mm and even in the next , it will hardly earn any profits given its lack of any competetive advantage and high cost of raw materials .Would be good to exit the company at these levels .
LDK story gets spicier by the day with a class action lawsuit being filed and another cell contract deal being signed . Critical thing for the company is to be able to deliver on its contract and execute on its expansion. The inventory issue is too much over hyped and will continue like a dark cloud over the stock price till the dust clears and the independent audit comes through

LDK bounces back , Hoku up as well

As I commented yesterday , it was a typical market overreaction that took down LDK down 20% on the inventory issue.The decline was far in excess of what could have been the business downside ( even if the inventory was over reported) . The LDK management also did its bit to shore up the stock by preannouncing Q3 revenue guidance 25% above its previous guidance given earlier. The stock is back up 20% in early market trading and looks a decent buy at these levels given their strong performance till date and growth plans. Will be interesting to watch how the inventory issue pans out in the coming days. Other Chinese stocks were also up in sympathy like yesterday
Hoku today gave out a contract to build TCS ( tri chloro silicane) to an engineering company . Note that TCS is a critical raw material for the production of Polysilicon . As has been the case with Hoku prices go sharply by 10-20% on any fresh news of construction . The company which has no revenue or earnings to speak of plans to build a 2.5k ton poly plant by 2008 end and has already signed numerous contract with downstream players like Sanyo on supplying this material. With poly expected to go into potential oversupply by 2009-10 it remains to be seen how this company will fare in the future as it has put all its eggs in the poly basket. With much bigger players in the poly area and downstream players also moving into poly production , this company without any track record whatsoever in the chemicals / poly field
I would never buy into this one.

LDK takes another hit

Most Chinese solar stocks took a big hit in early market opening driven by fears over Chinese companies accounting . LDK fell nearly 20% on Thursday after a financial controller left alleging irregularities on inventory accounting of polysilicon ( which is the critical raw material in making c-Si based photovoltaic) cells.After a relatively quiet Friday , LDK is down again after a report came on Barron's that the yields at LDK were low and they were not writing down the value of low quality polysilicon which could not be used .

Well my take on all of this is that the news has been overblown as usual by Mr. Market. $2bb in market cap has been lost due to a $50mm in inventory issue (which still needs to be verified) . Rather than the correction being only due to the news , I think this has been used by investors to book profits after the stock appreciated to $75 in the previous month up nearly 170% from its IPO prices at $27.

LDK's valuation is hardly dependent on its current year's earning rather its dependent on its plans to double solar wafering capacity each year and move upstream into poly manufacturing by building a really large poly plant which will catapult into the league of top 6 poly makers in the build.After the recent correction stock has started looking attractive at current levels once again, would look to buy after it goes down further at $35.