Alternative Energy Investor Discussions

[ckessel]

$13 by June is a 200% annualized return when the market averages less than 10%. This is exactly my point about buying short term options: "If I can get my stock to do 200% then my options will do just fine..."

I suppose it depends on your viewpoint. Annualized from where? If you'd bought JASO last mid-Nov, $13/share is pretty minor profits. If it's only reasonable to expect 10% from JASO in the next year from today's depressed value, that's a heck of a lot of nothing for anyone that bought within the last 4 months or so.

Presumably if we were all happy with 10%, we wouldn't be here in this forum looking at high growth, volatile solar stocks. We'd be in much safer holdings

 

[mershaw2001]

For all the people asking, today's solar tanked because of RENESOLAR (SOL). They were charged with dumping, and so aren't selling to the us anymore. Why Shares of ReneSola Ltd. Dropped Today - Fool.com

I think that the rest of the solar companies fell in sympathy.

The correct play right now is to buy shares, sell options against those shares. For instance, buy CSIQ and sell the 37's for 3-4 months out. IV is high, price of stock is low. Don't buy SOL, just buy the others (jaso, csiq, etc that fell in sympathy).

 

[dalalsid]

I'll channel sleepy here, which also mirrors my own solar philosophy: Buy and hold, and buy more on the dips.

Yeah I agree with that and I'm redirecting my Scottrade FRIP to JKS and JASO for the time being. I really like that program. I can just go in and select the stocks the dividend goes to and orders execute no fee next day. I sent scottrade a suggestion to provide limit orders on FRIPs and I got a personal response. If anyone else is interested, please email [email protected] with a suggestion for Limit order FRIPs.

 

[sleepyhead]

Just wanted to say that I really like JASO as a lont-term play. Minimum of 12 - 18 months, but most likely as a 5+ year play on the Chinese solar sector. JASO might not do well in the short run, because their aren't that many analysts following the stock and their is still a lot of FUD going on. The market is slowly turning on the stock, but I believe that it is still misunderstood; it may take a long time before the market figures it out. If you plan to invest in JASO, I recommend shares and a 2-year investment horizon, i.e. Buy and Hold!

The reason I like JASO is that it is trading to a discount to book value, and pretty substantially. This is unheard of in the solar sector; they have the best balance sheet. Now if we hit another recession soon, it will obviously cause a lot of pain to JASO holders, but I believe that a recession would benefit JASO tremendously in the long run. JASO would be the last company to go bankrupt and a recession would force all of the tier 2 and 3 manufacturers to close up shop, and will accelerate consolidation in the industry.

I am not saying that we will hit a recesson, but if we do then I believe that JASO offers the least downside risk at current prices. I like CSIQ and JKS a lot too, but they have further to fall. TSL is a good one, but I don't research them enough to be confident enough to put big money into them.

My other favorite pick is SPWR for very similar reasons to JASO. Both companies are focused on pushing the envelope in effeciency, and I believe that in the future efficiency will rule. The future of the solar market is in distributed generation, and the more efficient panel allows for more watts to be installed on constrained roof space. SPWR backed by Total would be the last solar company to go bankrupt.

I have been against FSLR for the longest time (and rightfully so, just look at returns) but if they can achieve their efficiency road map then I think that FSRL might become a very attractive investment in the next 3-5 years. I am not sure when to get in on this stock, but I will be looking at it in 2015 - 2016 on big pull backs.


I like SCTY a lot and I am sure that they will do well over the next 20 years. But SCTY has by far the furthest to fall if we hit a recession. It is a company that will suffer the most if we hit a big recession because financing will dry up and their operations could potentially come to a stand still. If you believe that the bull market will last another 2-3 years then by all means buy SCTY. But we are in our 6th year of the bull market and I am not sure how long it can last. My honest opinion is that the bull will last at least 12 - 18 more months and most likely 2-3 years. But I am not sure on that and wouldn't be surprised if a recession comes a lot sooner than expected, such as in 6-12 months. The US economic indicators are fantastic IMO, but I am worried about China and somewhat Europe. For this reason I do not invest in SCTY. I will wait patiently for the next recession and buy SCTY for $20 - $30. And if the recession does not come until 3 years from now, then I will buy SCTY at $60 3 years from now; so I don't see a reason to invest in the company right now as far as my investment risk profile is concerned. If the bull lasts another 3 years then SCTY will probably reach $200, which would make it a 3 bagger from here. But if the bull does last that long, I believe that JASO will be at least a 5-bagger. Therefore, I am not investing in SCTY because in my view it is not the best risk/reward solar stock out there at today's prices.

Good luck to all and let's hope this market turns around. The funk may last another few more weeks or maybe even a couple months, but the future solar looks extremely bright and I have no doubt in my mind that solar will be the long term winner in the energy industry.

 

[dalalsid]

@sleepy - do you think that a recession will change China's green energy deployment - Their target for 2014 is what - 16GW? Can the Chinese companies survive and prosper on China demand alone regardless of the rest of the market? I'm with you on JASO valuation and JASO is doing well with efficiency. I like Jinko because of their cost reduction. SPWR because of their vertical integration and 100% capacity usage and Total support.

 

[FluxCap]

Awesome "state of the solars" post, Sleepy. Thanks as always.

I'm definitely long solars over a true long horizon (5-10 years) but I actually am a bit worried about the fact that the Chinese solars could be vulnerable to further accounting and insider shenanigans, as they don't have the same penalties for misconduct and mismanagement that US companies /US regulatory environment do. As crony-filled as our regulatory system is in the US, my understanding is the Chinese system is potentially even more susceptible to influence and corruption and the whims of what amounts to a dictatorship/authoritarian government system. Any thoughts on this as a risk factor?

Assuming these companies are managed without criminal misconduct, then I too see them as massive money-makers in an economy facing dire (even catastrophic) consequences for continuing to burn fossil fuels.

 

[sleepyhead]

@sleepy - do you think that a recession will change China's green energy deployment - Their target for 2014 is what - 16GW? Can the Chinese companies survive and prosper on China demand alone regardless of the rest of the market? I'm with you on JASO valuation and JASO is doing well with efficiency. I like Jinko because of their cost reduction. SPWR because of their vertical integration and 100% capacity usage and Total support.

I really don't know, but China will not hit a recession for many years. Their growth is slowing down to 7.5%, so that is a long ways from a recession, and I think that it is their slowest growth in 20 years or so. But if China does suffer economically, I wouldn't be surprised to see them unleash some stimulus that would address clean energy as well. I think that China will do everything it can to promote clean energy, because they have to. The smog is out of control.

 

[FluxCap]

I really don't know, but China will not hit a recession for many years. Their growth is slowing down to 7.5%, so that is a long ways from a recession, and I think that it is their slowest growth in 20 years or so. But if China does suffer economically, I wouldn't be surprised to see them unleash some stimulus that would address clean energy as well. I think that China will do everything it can to promote clean energy, because they have to. The smog is out of control.

Agreed!

 

[sleepyhead]

Awesome "state of the solars" post, Sleepy. Thanks as always.

I'm definitely long solars over a true long horizon (5-10 years) but I actually am a bit worried about the fact that the Chinese solars could be vulnerable to further accounting and insider shenanigans, as they don't have the same penalties for misconduct and mismanagement that US companies /US regulatory environment do. As crony-filled as our regulatory system is in the US, my understanding is the Chinese system is potentially even more susceptible to influence and corruption and the whims of what amounts to a dictatorship/authoritarian government system. Any thoughts on this as a risk factor?

Assuming these companies are managed without criminal misconduct, then I too see them as massive money-makers in an economy facing dire (even catastrophic) consequences for continuing to burn fossil fuels.

There is always that risk of investing in Chinese companies, but I don't see any criminal misconduct or fraud happening in the solar industry. If their was fraud then these companies would have fudged their earnings over the past 2 and half years to show profits instead of huge losses.

In the end, if solar does take off then someone is going to have to make a profit. Nobody will be producing panels if it is a money losing venture. Profits will come eventually, and once they do the big companies will continue expanding and reach economies of scale to a point where new competition will have a hard time entering the business.

I think that the solar sector will continue consolidating for many years and we will see only a 1-2 dozen big companies in the arena.

 

[Bgarret]

I really don't know, but China will not hit a recession for many years. Their growth is slowing down to 7.5%, so that is a long ways from a recession, and I think that it is their slowest growth in 20 years or so. But if China does suffer economically, I wouldn't be surprised to see them unleash some stimulus that would address clean energy as well. I think that China will do everything it can to promote clean energy, because they have to. The smog is out of control.

I always find it interesting about "slowing" growth in China. If their economy was x GDP 8 years ago growing at 9%, it is now 2x GDP growing at 7.5%. Which would you rather have - 1.09x GDP or 2.075x GDP? Not to use math or anything that would confuse the average financial reporter.

 

[dalalsid]

I really don't know, but China will not hit a recession for many years. Their growth is slowing down to 7.5%, so that is a long ways from a recession, and I think that it is their slowest growth in 20 years or so. But if China does suffer economically, I wouldn't be surprised to see them unleash some stimulus that would address clean energy as well. I think that China will do everything it can to promote clean energy, because they have to. The smog is out of control.

This would mean that even if the US hit bad times, Chinese solars would be less affected as Chinese solar deployment is not expected to stop growing. US solar deployment this year = 4GW AFAIK. China expected to grow from 14GW in 2013 - 16GW in 2014. If they keep growing by 2GW, the solars wont even need the US market for growth.

 

[Mitthrawnuruodo]

Was this shared here already? - I feel that Mr. Gordon Johnson has sleepyhead on speed dial

Axiom Capitals Gordon Johnson Discusses Solar Stocks, U.S. Steel | Benzinga

 

[tslafan123]

The topic of what will happen to SCTY's financing if there is a recession came up here. So I though this snippet from the 10K document is relevant:

"We finance our operations, including the costs of acquisition and installation of solar energy systems, mainly through a variety offinancing fund arrangements that we have formed with fund investors, credit facilities from banks, preferred stock equity offerings and cash generated from our operations. As described below under—Financing Activities—Financing Fund Commitments, as of December 31, 2013 we had $544.3 million of available commitments from our fund investors, including a $344.0 million financing fund structured as a debt facility, that would be available through our asset monetization strategy.

While we have reported operating losses for the year ended December 31, 2013, we believe that our existing cash and cash equivalents, funds available under a secured credit facility and funds available in our existing financing funds that can be drawn down through our assets monetization strategy will be sufficient to meet our cash requirements for at least the next 12 months."

Another thing to note, Solar City is constantly expanding it's funding choices. The list includes:
- Incoming cash from lease payments
- Tax equity funds
- Syndicate loans (eg: the latest 250Mil financing facility)
- Asset backed securities (example)
- The upcoming crowdsourcing platform

It's worth noting, not all recessions are as bad as 2008/09 recession. Most recessions are moderate lasting about 2 to 3 quarters.

 

[sleepyhead]

This would mean that even if the US hit bad times, Chinese solars would be less affected as Chinese solar deployment is not expected to stop growing. US solar deployment this year = 4GW AFAIK. China expected to grow from 14GW in 2013 - 16GW in 2014. If they keep growing by 2GW, the solars wont even need the US market for growth.

Chinese solar companies do not need the US at all to grow, but the US needs Chinese solar companies to grow. The best case for everyone would be a negotiated solution similar to EU - China deal where you force China to sell at a minimum price. This would be in everyone's best interest except for the installers that rely on cheap panels, but if done right it would only raise the price of panels by 10% - 20%.

Make no mistake that if we do hit a recession then Chinese solar stocks will get sold off like everything else, and most likely they will get hammered pretty hard even if they don't slow down growth that much. In a global recession demand for solar will decrease and that will lead to lower ASP's, so it will affect the Chinese solar companies a lot, but they should come out very strong out of the recession.

- - - Updated - - -

Was this shared here already? - I feel that Mr. Gordon Johnson has sleepyhead on speed dial

Axiom Capitals Gordon Johnson Discusses Solar Stocks, U.S. Steel | Benzinga

Ironically, Gordon Johnson has the exact same thoughts on SCTY, FSRL, and JASO that I do. I agree with almost everything he said in that article.

But I don't agree on fracking and that solar is not the future, so don't worry guys the world is not going to explode yet.

I am starting to like this Gordon guy, even though he was plenty wrong on solar in the past.

 

[tslafan123]

futureproof made some amazing points about solarcity's vulnerability in a recession the scty thread. If you are interested in better understanding the risks in solarcity, you might want to check it out.

 

[sleepyhead]

And for those of you that are serious about risks associated with SCTY, trust me when I say that financing will be HUGE issue for SCTY in a recession, especially if it is severe. Their 100% annual growth rate will fall drastically, probably closer to 0%, and the stock will get hammered if such a scenario unfolds (same would happen to TSLA stock if their growth rate went to 0% due to recession).

Everybody talks about SCTY getting 1 million customers, but if you want to sign 1 million lease customers then you are talking about $10b - $20b in financing needed. That is not chump change, and I can imagine them having a hard time securing so much capital. I think that they are going to have to sell more systems or do pre-paid leases, because this lease model is just way too capital intensive.

 

[tslafan123]

I wonder how growth will stall to 0 if they have cash in hand for next 12 months of planned activities?!

The 10K document clearly spells it out. The growth will be as planned for 12 months with no issues.

Financing doesn't dry out overnight. They may end up paying a bit more for capital. That would be it.

- - - Updated - - -

What a classic Fear Uncertainity Doubt attack. Wow! Just wow!!

Fear: What if stock crashes 90%?
Uncertainity: How will they raise financing in recession? Will growth come to 0?
Doubt: Are they ethical? Will they continue to have customers if people discover their gimmicks?

This is just incredible to watch. If someone did the same with Tesla he would have been torn to bits and pieces on this forum. But the revered highness gets down on solar city, which most people here don't seem to fully understand/follow closely. Its just fascinating to see these attempts of trying to turn people into sheeple.

I can't stop but think, what's the motive here.

 

[AlMc]

MODS: Clean up in aisle #3. Thanks.

 

[InTheShadows]

I wonder how growth will stall to 0 if they have cash in hand for next 12 months of planned activities?!

The 10K document clearly spells it out. The growth will be as planned for 12 months with no issues.

Financing doesn't dry out overnight. They may end up paying a bit more for capital. That would be it.

- - - Updated - - -

What a classic Fear Uncertainity Doubt attack. Wow! Just wow!!

Fear: What if stock crashes 90%?
Uncertainity: How will they raise financing in recession? Will growth come to 0?
Doubt: Are they ethical? Will they continue to have customers if people discover their gimmicks?

This is just incredible to watch. If someone did the same with Tesla he would have been torn to bits and pieces on this forum. But the revered highness gets down on solar city, which most people here don't seem to fully understand/follow closely. Its just fascinating to see these attempts of trying to turn people into sheeple.

I can't stop but think, what's the motive here.

Solar city is a utility company. They are a clean distributed utility company. There is nothing about their business model that sets people free from the utility, empowering them to make their own energy.

Anyone that has the sense to run the numbers can see that they can get a way better deal buying their own system. Leasing is not owning. Leasing is allowing another utility to borrow space on your roof to take all the clean energy credits and tax incentives. And their systems are overpriced at that.

 

[tslafan123]

Solar city is a utility company. They are a clean distributed utility company. There is nothing about their business model that sets people free from the utility, empowering them to make their own energy.

Anyone that has the sense to run the numbers can see that they can get a way better deal buying their own system. Leasing is not owning. Leasing is allowing another utility to borrow space on your roof to take all the clean energy credits and tax incentives. And their systems are overpriced at that.

I understand you have an installation business. I have deep respect for what you are doing for the consumer, the society and the overall humanity. Having said that, people may not care as such about freedom from utility so to speak. Most people have no intention of owning or maintaining or dealing with a system. They just want to pay a lower bill for the electrons and have the satisfaction of being part of the clean energy revolution. Ultimately it's up to consumers to chose what they want and who they like. Clearly there is a tremendous trend in favor of SolarCity and it's business model.

Here is a recent article from Mar 26 on the subject:

Until recently, most homeowners who have been interested in solar energy have only been able to purchase the panels outright, often for a total cost of about $10,000 and a break even point of about six to nine years. That's attractive to a set of buyers but may not work for many. Now, companies such as SolarCity Corp. (Nasdaq: SCTY) are interested in broadening the market by offering long-term leases and maintenance for panels.

The end result could cut the total cost for the panel and make the breakeven point more attractive to many homeowners.

Already, some homebuilders are interested in the prospect of leasing panels. Austin-based PSW Real Estate, whose energy-efficient homes all include solar panels, estimated that the leasing option, specifically having someone else maintain the panel, could remove some of the complexity for homeowners and help lower the cost of solar.

"It takes a lot of the fear away, when owners think 'What would it take to maintain this, or who would even fix this?'" said Anthony Siela, a managing member at PSW. "Those are the questions you ask when you're bolting a huge piece of equipment to your roof."