Started buying solars today:
with TAN @ $5.30, I bought, each purchase 2% of portfolio:
FSLR @ $100 (PE = 11 = 100/9.25, using latest guidance for 2011 GAAP EPS)
TSL @ $14 (valuation of all chinese solars much lower than FSLR's)
YGE @ $5.30
JKS @ $16
the plan:
if TAN hits $4.8, 4.3, 3.8, equal-$ buys of:
FSLR @ $90, 80, 70
TSL @ 12, 10, 8
YGE @ 4.6, 3.9, 3.2
JKS @ 13, 10, 7
Still holding my SPWRA short; it's nicely profitable; will cover at $15, re-short on any strength. Currently, my portfolio is 90% cash, so I have the opportunity to buy, and keep buying.
The plan is tentative; buy prices are approximate. It is not a prediction prices get that low; it's a plan for what I'll do, if it happens. I will adjust my buy-prices, to keep about the same $ in each of the 4 stocks.
The stock market is overwhelmed by fear today. The solar industry is the most out-of-favor industry, with the possible exception of big banks. So I'm guessing it's a good time to start buying.
JKS is the strongest stock of the group, at double its 2010 low (but the weakest today, down 17%). FSLR and TSL have just taken out their 2010 lows. YGE (the weakest stock) is far below its 2010 low; a few more days of fear and volatility, and YGE could reach its 2008-9 low of $2.5.
The bear case: overcapacity continues through 2012, and panel prices sink so low nobody can make a profit. Macro risks cause a double-dip global recession in 2012. Therefore, once I've bought 2 increments, I will be willing to sell rallies, when I can get out at least even. There is also a chance (the bull case) we see a big increase in demand, due to price elasticity, and Tier 1 fundamentals bottom in 3Q11; therefore, I will always keep at least one of my buys of each of the 4 stocks.
I believe stock prices are Rational, but only in the long-term (5 years or more). On any time-scale less than that, prices are irrational; rallies and dips always overshoot. I thought solars were decent values for a LT hold, when TAN hit $8; I'm happy to begin buying at much lower prices, and I'll be steadily happier, to buy at even lower prices. The lower stock prices go, the safer it is to buy and hold them; this always feels wrong, because our fight-or-flight instinct always fools us, but it is always the truth. |
