One Stock Shorts are Beginning to Fear
Edgar is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wise investors know exactly when to turn bearish, right around the time when everyone else is overwhelmingly bullish. Per John Templeton, bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
As the S&P500 fired off after Mr. Obama's speech, I began focusing on a one particular stock that fund managers are accumulating and keeping shorts at bay. Paying attention to stocks that are reaching their 52-week lows/highs or having wide fluctuations in their short ratios could be a leading indicator as to whether a stock is near its turning point. This is a great combination for speculators who would like to profit a few percentage points in a short period of time.
One stock that continues to deliver and stands out from the crowd is First Solar (NASDAQ: FSLR) which skyrocketed 60% in the last month after reaching its 52 week low of $11.43. Of course it is imperative to mention that the stock plummeted nearly 77% in the last year from its high of $103. While the option activity has been nearly 50% higher on the call side than the put side, bears still love the stock due to its sudden sell-offs that reward handsomely in a very short period of time. This interest was also evident in the recent short increase of 8.83% from 29.27 million to 31.86 million from its previous month. These short ratio increases tend to result in severe short squeezes with fears that a stock could spike unexpectedly with above average volume. While this creates a short trader playing field, long term investors should also be focused on the stock, especially with possibility of democrat's victory in the elections.
It seems that many are still skeptical of solar energy being a growth driver in the alternative energy space due to lack of European subsidies and competitive pricing power from Chinese names such as Yingli Green Energy (NYSE: YGE), JinkoSolar Holding (NYSE: JKS), and LDK Solar (NYSE: LDK). However, as these micro names are struggling with heavy debt loads, declining PPS and no pricing power, while being on the verge of acquisition or extinction, we will see the last man standing shine once again after all the smoke clears.
|Company Name||3 Mo. PPS Change||
Past 5 Yr. EPS Growth
|M.R.Q Short Term Debt (in mill.)||M.R.Q. Net Income (in mill.)|
|First Solar (FSLR)||+59.19%||35.94%||$962.26||$110.98|
|Yingli Green Energy (YGE)||-36.02%||24.88%||$2,207.85||($572.98)|
|JinkoSolar Holding (JKS)||-21.72%||0%||$817.30||($310.49)|
|LDK Solar (LDK)||-29.28%||-2.01%||$2,130.27||($185.17)|
The chart above shows a clear distinction of First Solar being the leader in the alternative energy space, as the others are struggling to meet their debt obligations amid minimal earnings growth.
In my prior article, "The Right Turnaround Stocks For Your Million Dollar Portfolio", I had a much lower fair valuation of $16 per share when the news regarding First Solar planning to aggressively build solar farms in India and sell power directly to businesses was non-existent. Currently I assess $21-$23 being a fair valuation range for First Solar until the Aqua Caliente project is completed and begins to generate revenue. As crude prices soar and financial crisis eases, it is my opinion that solar stocks will see more interest from the public as well as the European government subsidies once again.
edgarambart30 has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend First Solar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.