Alternative Energy Investor Discussions

[ckessel]

SPWR apparently issued soft guidance for 2015 and tanked.

I believed in solar. Still believe I guess, but it's been a pretty crappy investment over the last year. Straight NASDAQ index would have crushed nearly every solar (csiq, spwr, scty, etc). I bought $25 SPWR J15 LEAPS just over a year ago when SPWR was about $33, paying just a $2 premium. I thought that was a pretty conservative buy since I had 14 months, but right now I'm looking at a gigantic loss and with SPWR guiding for a light 2015 I'm not sure there's much reason to think it'll recover before J15.

 

[uselesslogin]

SPWR apparently issued soft guidance for 2015 and tanked.

I believed in solar. Still believe I guess, but it's been a pretty crappy investment over the last year. Straight NASDAQ index would have crushed nearly every solar (csiq, spwr, scty, etc). I bought $25 SPWR J15 LEAPS just over a year ago when SPWR was about $33, paying just a $2 premium. I thought that was a pretty conservative buy since I had 14 months, but right now I'm looking at a gigantic loss and with SPWR guiding for a light 2015 I'm not sure there's much reason to think it'll recover before J15.

I had my crisis of confidence and after the sting of GTAT and now sold out of solar. I hope this means it is the bottom for everyone else. I never got around to researching or learning much about the solar companies. It just doesn't interest me. In the meantime there is a ton of competition in solar which means in most cases that erodes the earnings across the entire sector. Now, that isn't to say that solar stocks aren't priced ridiculously irrationally low but since I don't really know the ins and outs I can't hold on with as much confidence as I hold on to TSLA. I have lost a good percentage of the money I made on TSLA but am still ahead of the game.

 

[Convert2013]

I've been in and out of KNDI with very small positions a few times over the past year in a trading account of mine. I haven't been impressed with the company during that time. The company doesn't meet my criteria for a major long-term holding since I'm not convinced in the management's ability to execute and I found it difficult to gauge how compelling their cars are.

Their product is certainly no Tesla, but once the Chinese government begins to build EV charging infrastructure in large numbers, the lower to mid-end pure EV market will pickup (it already has significant over last year), out of which they should capture a decent market share (~25%). Their leader Hu has political ties with the PRC and its a different world out there. Execution I agree is not as good, but the Chinese government can force things to happen due to their pollution crisis. They have already limited sales of gas powered cars in big cities. It looks like next year they should be able generate about $1 billion in revenues +/- with their sales for car share, expected direct sales to consumers, and international sales. I am planning to hold for 2 + years, but doing weekly DD.

 

[Johan]

JASO still make one of the very best panels on the market, with regards to conversion percentage and warranties. I still believe them to be seriously undervalued with regard to future potential. As a long term play I'm not worried. JASO has their Q3 earnings next week Nov 18th. Today might be a good day to buy, but I've learned to stay away from the options in these solars, even the LEAPS. They are too easily manipulated due to low volume, the bid/ask spread can be ridiculous and even a 2017 LEAP may be to near in to the future for them to take off for real. I only hold stock and look at days like to today like a buying oportunity.

The price of oil at a historic low doesn't help much either, but we should all know that the current oil price is a temporary situation and does not reflect the real market economy of oil.

 

[Perfectlogic]

Here Comes the Sun: Americas Solar Boom, in Charts | Mother Jones

At first glance the solar industry seems like a great investment, and I was very close to pulling the trigger on some stocks myself a while back. But then I realized that the industry's greatest strength, the incredibly fast falling prices (increasing its competitiveness in the energy sector), might also be its greatest weakness as an investment. Even though the amount of solar panels in KW output has been increasing at a fast rate for years it doesn't translate well into earnings growth for the companies as the price reduction negates a large part of the increase in sales. Another thing is the immense competition in the space, margins are paperthin and companies loaded with debt, cant see how the industry can break out of this commoditized state.

Just a counter to the otherwise pretty bullish thread, the solars have been beaten up pretty badly lately, it might have created an opportunity I don't know, but the play isn't as great as it seems at first glance.

Edit: I think Tesla is in a better position to capitalize on the upcoming solar boom with it's batteries than the solar industry.

 

[ggies07]

Which is odd because the most money I've made from solar is the company that gets ragged on the most: Solar City

 

[blakegallagher]

Here Comes the Sun: Americas Solar Boom, in Charts | Mother Jones

At first glance the solar industry seems like a great investment, and I was very close to pulling the trigger on some stocks myself a while back. But then I realized that the industry's greatest strength, the incredibly fast falling prices (increasing its competitiveness in the energy sector), might also be its greatest weakness as an investment. Even though the amount of solar panels in KW output has been increasing at a fast rate for years it doesn't translate well into earnings growth for the companies as the price reduction negates a large part of the increase in sales. Another thing is the immense competition in the space, margins are paperthin and companies loaded with debt, cant see how the industry can break out of this commoditized state.

Just a counter to the otherwise pretty bullish thread, the solars have been beaten up pretty badly lately, it might have created an opportunity I don't know, but the play isn't as great as it seems at first glance.

Edit: I think Tesla is in a better position to capitalize on the upcoming solar boom with it's batteries than the solar industry.

One more strength of Solarcity . The genius of Solar City is the simplicity they have to scale up. They double their residential installations every year and will install .5 gig this year, 1 gig next year, 2 gigs after that,etc,etc

When I listen to the other companies earnings calls I get an appreciation for how hard it is to locate and execute on major projects all over the world.

Edit: It is also worth noting that Elon and Lyndon think there will be a panel shortage in the next few years and that will bode well for all the panel manufactures bottom line.

 

[uselesslogin]

Thought about it some more. I ended up buying back in but now I am 100% stock and spread across more companies. I won't earn as much money on the upside but I've been getting far to greedy lately and paying the price.

 

[ckessel]

Thought about it some more. I ended up buying back in but now I am 100% stock and spread across more companies.

The bit about "spread it across more companies" got me curious, so I put in a bunch of solars into Google's finance chart: SCTY, CSIQ, SPWR, JASO, TSL and compared them against straight NASDAQ going back 1, 2, 3, 4, and 5 years (roughly, the granularity on the scroll bar isn't precise). I didn't cherry pick anything intentionally; I just entered ones that I remembered we talk about here.
(NOTE: JASO had a 1:5 reverse split in late 2012, I'm not sure how the Google finance graph handles that)

1 year: NASDAQ beats them all handily.
2 years: 2013 is a great year for solars. CSIQ crushes everything. SPWR and SCTY do really well. Most solars are winners over NASDAQ.
3 years: SCTY, SPWR, and CSIQ are still the big winners due to the great 2013 year. NASDAQ beats everything else. JASO is down 12% over this 3 years span. The only solar I picked that's negative (does the 1:5 reverse work into that?).
4 years: SCTY is the again the big winner. SPWR and CSIQ beat the NASDAQ slightly. The other solars (TSL, SOL, JASO) are hugely negative.
5 years: NASDAQ crushes everything except SCTY. SPWR and CSIQ are positive (thanks to 2013), but underperform NASDAQ. TSL, SOL, and JASO are again hugely negative.

2013 was a huge growth year for solar stocks and if you managed to time that, you're rich. For a buy and hold, on a 5 year scale, almost every solar is worse than a NASDAQ index. And if SCTY wasn't in your portfolio when it went public, your solar portfolio doesn't look good.

Is there good reason to believe the next 5 years will be different than the previous 5 years? I really don't know. I missed the huge 2013 run up. Is there going to be another such run? Is it going to be big enough to outpace NASDAQ?

Mostly musing...as I watch my various solars and wonder if it's misguided to think 5 years from now I'll outperform the NASDAQ.

 

[uselesslogin]

The problem with five year windows is they can be very different depending on which one you pick. If you choose March 2009-March 2014 you will probably see solar absolutely destroying the NASDAQ. That being said the variability in this case shows high volatility which can be difficult to time and may lead to under-performance more often than over-performance.

For the next five years the theory is that we are hitting a tipping point and demand is going to be so high that margins will be high despite the industry being somewhat of a commodity. This is further reinforced by the currently low PE ratios. In theory part of the low price right now is the idea that the higher margins are only temporary and will disappear in a year or two especially with all the competition. However, one thing that gets me to stay solar is that the recent drop seems to be correlated with the drop in the oil price which makes absolutely no sense. Oil could be $30/barrel and it won't affect the solar industry. At this point though I don't hold any more than I did before so it has become a fairly small part of my portfolio thanks to all the losses.

If solars can establish a track record of decent margins and earnings the return should be quite good. But I can't say with any certainty that they will even though I think they will.

 

[ckessel]

The problem with five year windows is they can be very different depending on which one you pick. If you choose March 2009-March 2014 you will probably see solar absolutely destroying the NASDAQ.

I just tried that. NASDAQ killed them all. Extend it to mid-2013 and SCTY and CSIQ beat the NASDAQ because that's when solars went bonkers in 2013.

Take a 5 year span and scroll it around. There's very few points where solar beats NASDAQ aside from SCTY being a notable exception and CSIQ/SPWR holding their own (but often not drastically different than NASDAQ).

If solars can establish a track record of decent margins and earnings the return should be quite good. But I can't say with any certainty that they will even though I think they will.

Yea, that's my thinking too, but running those graphs makes me wonder if, as an industry, it really going to do better than the NASDAQ. Certain vendors, certainly. But which ones? Which ones will go bankrupt?

Say, 2 years ago, you put a bunch of money into TSLA, Fisker, Coda and whoever else in the EV market (granted, it's not public stock in some cases, so it's a difficult comparison). How many of those were complete losses? If you averaged total losses with something like Fisker against TSLA, how much would you beat the NASDAQ?

Just thinking out loud here, not advocating any particular investment.

 

[sleepyhead]

Good to hear from you Sleepy. I would buy some of your points, if it weren't for the following:

1. They hedged $15.4 million of their $20.9 million currency loss this quarter - they were pretty proud of it and it does show a little additional maturity of their management and Forex understanding.

2. They addressed the drop in GM in Q4 with tariff effect (1-2%), potential Forex (1%) and slightly lower mix of project revenue (4 Canadian projects vs. 5).

3. If you take the midpoint of their guidance (which is conservative) at $950 Million and 18% margins and $80 million of expenses/interest/Forex you get $1.52 in earnings - exactly in line with consensus analyst estimates for Q4. What's more, add $1.52 to the other 3 quarters and you get $4.25 + in earnings for the year, well over analyst estimates of $3.54 and leaving CSIQ with a current P/E of 6.7.

As for other thoughts - they didn't move a project from Q4 to Q3 - it was the opposite. They moved Ray Light out of Q3 and are now not specifying when they will realize revenue from this project and they substituted William Rutley's sale to TransCanada, which had been on their books since 2012. The tactic they used for Q4 2014 and Q1 of 2015 was to give themselves more flexibility with project recognition. They had scheduled 7 Canadian projects to be realized in Q4 in their investor presentation in August, but in their earnings release they bumped Gold Light to Q1 of 2015 and left Liskeard 1 and Ray Light as unspecified for expected COD/Recognition. I think they did this so they could move revenue from 2014 - 2015 if they wanted and smooth out their earnings. Just as Q4 is usually good, Q1 is usually wretched.

There may be a "real" explanation for what happened yesterday, but we haven't heard it yet. Most stocks leap if they beat by pennies and raise overall yearly guidance - CSIQ beat by 50% and $.69, raised their yearly guidance, showed restraint and conservatism, greater management effectiveness, good visibility for future earnings, paid down millions in debt, opened new markets, were upbeat about not only their record earnings and revenue, but the prospects going forward.....and got their asses handed to them.

In this, Sleepy was right about maybe the most important point - short-term options in Solar are asking to have someone else play with your money whenever they want, regardless of results.

1. You are correct that they hedged $15m of the $20m loss and the net loss was only $5. For some reason they wrote "net foreign exchange loss" was $20m, but that number did not include the "hedging" offset; for that reason I missed the actual forex impact, which is only $5m or so loss. I take back what I said about them being "incompetent" in FX hedging; they used to be, but it looks like they solved that issue. They hedged 75% of their exposure which is perfect from an accounting standpoint. You never want to hedge 100%, since you run the risk of overhedging if your projections turn out to be incorrect.

2. I am sure there is a good reason for drop in GM, but the market doesn't care. Most players do not listen to conference calls or even read the press releases, they only read the headlines. It isn't fair, but that is how the market works in the short run. This is also how buying opportunities are created.

JKS had 27% GM one quarter, then it fell to low 20's and the stock is getting punished. JKS still has some of the highest GM's in the business, but all the market sees is declining GM.

3. I agree with you here again, but the market doesn't care. They saw $1.76 in Q3, but "only" $1.52 in Q4; sell, sell, sell.

This is exactly what happened to JASO in Q4 last year. They crushed the estimates and delivered guidance that was weaker than Q4, but stronger than Q1 projections. The stock was up as much as 20% pre-market and then up 14% in actual trading that morning. Then it started declining and ended that day down 5%. Exactly the same treatment was given to CSIQ for those exact same reasons.

Overall, I agree with all of your assessments and think that CSIQ is still a good investment. I am just trying to find reasons why the market treated the stock the way it did. I think another reason is that they guided significantly lower ASP's. I know that there is a very good explanation for this as well (less US sales that have high ASP's due to tariffs), but the market doesn't care short term.

I think that the reason for the sell-off is a combination of:

1. Weaker sales and EPS guidance for Q4 vs. Q3
2. Weaker GM guidance
3. Weaker ASP guidance
4. Crashing oil prices, but more importantly cheaper natural gas prices

I am going to add some CSIQ on Monday, since I don't have a lot of it and I just paid $30 last week. I am happy to buy at $26 here.

 

[sleepyhead]

So sleepy & bgarret - JKS is my largest solar investment and doing miserably. What is better now, more JKS under 22 or CSIQ at 27? Sunpower is also around 27 right now. Jaso is under 8. Basically all my solars are a bloodbath.

Edit:
Bah - order to buy csiq at 27 executed and still dropping

All solars kind of trade together and it really didn't matter which one you bought in 2014. There was some differentiation in stock movement in 2013, but 2014 is painting all solars with a similar brush, give or take.

I never liked JKS, because they are a "cost" leader and that is not a differentiator that I like investing in. They did well in 2013, because they were able to cut costs faster than others, but now others are catching up and the cost gap is closing.

They had a great idea of keeping their high IRR, high FIT Chinese solar projects on their books, but they sold of 45% equity portion to a private equity firm for $225-$250m in cash; I also believe that the PE firm gets same 45% equity in future projects too (but not sure on this one). This was a huge bummer for long term shareholders, but they needed to raise capital since their BS was very weak.

I think that there is also some kind of lawsuit by shareholders against them for dumping toxic waste into rivers. I invest in solar companies because they are "clean". I couldn't care less about "green" companies that pollute other parts of the planet.

I like solar companies that differentiate themselves in this commodity-like sector:

SPWR - Highest efficiency, highest quality solar systems. Just bought a microinverter company to integrate them into their solar panels, so that they produce AC power on your roof and no reason to install big inverter on side of house. Should cut soft costs and make the system more efficient. I like that they can create a yieldco structure and get more benefit than any other company can from a yieldco, because their systems will create significantly more energy over the life of the system due to lower degradation, better performance, and better longevity. I have a SunPower system on my roof and it generates 20%-30% more energy than the NREL calculator says that it should; that is a big deal.

JASO - focus on higher quality cells and modules than Chinese peers. They need to move faster into downstream though. They missed the boat on power plants, so hopefully they can move faster into DG and learn from their mistakes. They are best positioned with their higher efficiency panels, and higher percentage of mono panels. TSL is very similar to JASO in this regard. I like JASO a little more, because their management doesn't stretch the truth like TSL does and is more conservative.

CSIQ - Made a big push into high FIT solar projects. This should allow the stronger to get stronger as they start raking in the cash from these project sales. This will allow them to reinvest that cash (that peers do not have). CSIQ has opportunity to become a huge player in the future if they play their cards right.

SCTY - I like SCTY as a company and they have ability to become a big company and one of the best solar companies in the world. I just don't like the stock and business model. I think that there are many risks to their business model, especially if we hit a hard recession when financing dries up. They are constantly diluting shareholders and their share count seems to double every 2-3 years. The stock has a high valuation and that limits potential upside. I still think that it can be a home run, but I don't like risk/reward ratio. I will be looking to add SCTY during next recession when the stock tanks; and it will tank, just like all other solar stocks and possibly a little more than others.

I think that the best time to get into SCTY is right before their battery business starts taking off, which should be around 2016-2018 time frame. I am expecting a recession to start in 2016-2017, so getting in SCTY in 2018 is what I plan on doing once it hits rock bottom. It is a great company and was a great stock investment last year. It will probably go up, but I think that upside is limited and you will quickly lose that gain once the market tops out in a couple of years. At $50 it is a pretty good value, but make sure to cash out before the market top happens. Then get back in at the bottom if you can time the market this way. I will just wait till that bottom happens...

There are other opportunities in solar as well, and I will be exploring those derivative plays in the future. There are a bunch of ways to make money in the solar revolution that is to come over the next couple of decades. We just have to find them before the market does.

 

[mershaw2001]

what just happened to spwr??????

Huge spike, may have just been the result of a buffett-is-buying-rumor.

 

[uselesslogin]

Liz Claman on Twitter:

I think she thought Warren had invested in SPWR last year when it actuall was that one of Berkshire's utilites bought a SPWR project in 2013.

 

[mershaw2001]

it looks like someone bought 10,000 option contracts out of the money just after that was announced. I must admit to being quite satisfied if that was an algorithm that mined twitter and just got screwed.

 

[sleepyhead]

JA Solar Announces Third Quarter 2014 Results - MarketWatch

JASO with some pretty good results this morning, up 8% pre market.

Board authorized to buy back up to $90m in shares in the open market. They must know that the stock is undervalued. $90m will get them over 25% of outstanding shares at current market price...

- - - Updated - - -

SunEdison and TerraForm Power Sign Definitive Agreement To Acquire First Wind For $2.4 Billion

SunEdison and TerraForm Power Sign Definitive Agreement To Acquire First Wind For $2.4 Billion - MarketWatch

Very interesting acquisition. Looks like SUNE is going all-in on renewables.

 

[ckessel]

It'd be great to see JASO react to the ER. The stock seems like it usually just blithely ignores ER and meanders on some path no one can see

 

[Johan]

Finally some good news for JASO. I have been buying LEAPS in JASO in the last month and just yesterday got me some Jan17s. Good stuff.

 

[ckessel]

Finally some good news for JASO. I have been buying LEAPS in JASO in the last month and just yesterday got me some Jan17s. Good stuff.

I'm skeptical today's movement has anything to do with JASO's ER. TSL is up by the same percentage this morning as JASO and TSL's ER isn't until next week.

Don't get me wrong, I'm happy to see JASO (and solar in general) move up, but it doesn't look like it's related to more than the market in general.