Thursday, March 5, 2009

Robert Hsu and STP

If we gain 50% from now we will be down 25%.

It sound incredible, doesn' t it? This is the current situation Mr. Hsu's readers are in just now with STP.


They bought STP at $12. STP is now under $6. Mr. Hsu hopes it goes to $9 (gaining 50%) so to sell and take a 25% loss.


The story is worth to be told.

All began on Jaunary 7th 2009 with the following message:

New Buy: Suntech Power Holdings
Our new recommendation this week, Suntech Power Holdings (NYSE:
STP) may be a familiar name to those of you who also subscribe to our sister publication China Strategy. Back in 2006, I recommended Suntech, and we ended up selling the stock at $40 for nice 18% gain. Since then, the Suntech shares have plunged nearly 70%, and are now trading around $13. And these bargain levels are offering us a great price to purchase the stock.
Founded in 2001, Suntech is a [...].
Strong Financials
Over the past few years, Suntech's business has been driven by healthy demand for its solar products, which has resulted in strong top-line growth. Net revenues increased from $226 million in 2005 to $1.35 billion in 2007, representing a compound annual growth rate of 144%. Its net income increased from $30.6 million in 2005 to $171.3 million in 2007, representing an annual growth rate of 137%.
[...]
In the current economic and financial environment, Suntech's shares have been fairly volatile. After reaching a record high of $90 on January 3, 2008, the stock has tanked nearly 90%. Shares are now trading at 10 times this year's earnings, which is very cheap for a solar company. So I expect the stock to really take off from here. And I want you to buy STP under $13. I'm targeting $20 in the next four to six months, which would give us a nice short-term gain of about 50%.

January 14th

Suntech Power Holdings (NYSE: STP) said that it will license Open Energy's building integrated solar roof membrane product. STP will oversee the worldwide manufacture, distribution, sales and marketing of Open Energy's solar membrane product.
In addition, STP said that it is no longer implementing a plan to expand its capacity by 40% this year because of weak capacity. The stock is down a bit with the rest of the market sell-off, but with a green energy movement in force, I expect STP to rally strongly this year. Continue to buy STP under $13.

January 21st

Suntech Power Holdings (NYSE: STP) will supply solar panels to power Masdar City, the world's first carbon neutral city being built in Abu Dhabi, United Arab Emirates. The panels will form part of the largest solar plant in the Middle East. The panels will generate over 17 million kilowatt-hours per year and reduce carbon emissions by over 15,000 metric tons annually. This is a healthy expansion for the company into the Middle East. Continue to buy STP under $13.

January 28th

Suntech Power Holdings (NYSE: STP) announced that it will supply up to 5 megawatts of photovoltaic solar panels to be installed throughout the Mid-Atlantic U.S. This is part of the company's efforts to power cleaner energy solutions in the U.S.
In other news, STP raised its revenue guidance for the fourth quarter. The company expects total quarterly net revenue of $405 million to $420 million, above the previous guidance of $345 million to $360 million. And full-year 2008 total net revenue is expected to range from $1.91 billion to $1.93 billion. The company said that it will also cut 800 workers, which is about 8% of its workforce. I am not concerned about this layoff because the company is still hiring new workers. Cutting inefficient workers on an annual basis is an ongoing policy for the company, which is not a bad strategy. That is why I believe that STP will be one of the winners in the increasingly competitive solar cell industry. Continue to buy STP under $13.

February 4th

Suntech Power Holdings (NYSE: STP) shares have been following the decline of oil prices in recent weeks. I think as oil stabilizes at $40, the stock will move higher towards the low teens again. Buy STP under $13.

February 11th

Suntech Power Holdings (NYSE: STP) has been granted preliminary injunctions in Germany to prohibit a Hong Kong-based company from infringing on its brand and trademark. As new stimulus packages around the world include green energy initiatives, Suntech stands to benefit from the move towards solar energy. Continue to buy STP under $13.

February 18th

Suntech Power Holdings (NYSE: STP) announced its fourth-quarter earnings this week. STP lost $65.9 million, or 42 cents per share, during the quarter, which is up from $50.6 million, or 29 cents per share, a year earlier. In addition, revenue increased 4.2% to $414.4 million.
For all of 2008, STP's income fell to $111 million, which is down from $171.3 million in 2007. And revenue for the year increased 43% to $1.92 billion.
Looking ahead, STP expects first-quarter revenue to come in between $340 million and $380 million. And it looks for its capital budget to be about $100 million for 2009. I think these results reflect the current competitive state and a potential bottoming in the solar industry. In this environment, smaller inefficient competitors will likely be put out of business while STP gains market share. I still look for shares to turn around in the coming months. Buy STP under $13.

February 25th (down 42% Mr. Hsu is waking up)

Suntech Power Holdings (NYSE: STP) announced its fourth-quarter results last week. The company lost $65.9 million or 42 cents per share in the quarter, compared with a $50.6 million, or 29 cents per share last year. However, STP's revenue rose 4% to $414.4 million.
Looking forward, Suntech Power said it expected production to rise 60% this year to at least 800 megawatts, despite a slowdown in bank lending to the sector. The company has already signed over 600 megawatts of contracts with its European customers, and it plans to set up an agent network of 100 stores this year to sell household solar-powered devices to the Japan market, which should total 400 to 500 megawatts.
In addition, STP aims to triple its sales in the United States to 120 megawatts in 2009. And this is likely to happen, as the U.S. is expected to see total demand of between 400 to 700 megawatts this year, thanks to the stimulus plan.
Following the earnings announcement last week, the stock sold off 26% before gaining back some ground yesterday. The market action in STP is not positive. We bought STP -- one of the largest and most efficient solar cell companies in the world -- as a play on the Obama administration's verbal commitment towards solar energy. But like many other ideas announced by the administration, there is far more talk than substance.
Therefore, I do not want you to buy STP anymore. I think STP may bounce with other stocks in the coming weeks, which will give us a better exit price. For now, don't buy anymore STP and wait for a bounce above $9 to exit our trade. Hold STP.

March 4th

Hold STP. Sell above $9

That is: sell if it gains 50% and take your 25% loss (in the best case...)

2 comments:

Anonymous said...

Louis N. at least specifies stops in his Quantum Growth service. Robt Hsu should encourage the use of stops for Asia Pacific Edge which is actually described as more of a trading (vs. investing) service. For that matter, he should for China Strategy too. Makes you wonder if he uses stops in his own investing. With these pro guys, any loss over 15% is inexcusable, IMO.

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