Monday, April 6, 2009

Robert Hsu and STP

Post Updated on March 27th 2009
Second Update on April 6th 2009

Another 41% loss for Mr. Robert Hsu and his $3.000/year paying subscribers.

The facts:

January 7th 2009

Green Investing in the New Year
Over the past decade, the solar power market has grown significantly, making it one of the fastest growing renewable energy sources today. In fact, according to an independent solar energy research firm, the global solar power market -- as measured by annual solar system installed capacities -- grew at a compound annual growth rate of 42% from 427 megawatts in 2002 to 1,744 megawatts in 2006.
And in California, applications for state rebates to install solar panels hit their highest level ever in December. A record 133 megawatts of solar photovoltaics were installed in California in 2008, even as the state's economy stumbled. By 2018, 3,000 megawatts of solar panels could be installed in the state, which will provide enough power to displace five good-sized power plants.
What's interesting is that despite the deep recession in the U.S., our country's demand for solar power has been surprisingly strong. And it will likely grow stronger under the country's new administration. President-elect Barack Obama has pledged to promote industries that are environmentally friendly, as well as invest federal money in creating green technology. In addition, conservation and renewables will receive another push in the form of public works projects that are built into Obama's stimulus package.
Overall, Obaman's plans will likely dominate the direction of the green movement, and will benefit public green companies. With this in mind, I'm recommending a Chinese solar company that has significant business in the U.S. -- particularly in California -- that will be one of the main beneficiaries of Obama's green plans and the growing demand for solar power.

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 worldwide leader in the design and manufacture of innovative solar energy solutions. The company designs, develops, manufactures and markets a variety of photovoltaic cells and modules. And its products are used to provide reliable and environmentally friendly electric power for residential, commercial, industrial and public utility applications in various markets worldwide.
One of the reasons that Suntech has been so successful over the years is that the company's China-based design, development and manufacturing facilities provide it with several competitive advantages. This includes: access to low-cost technical expertise, skilled labor and facilities. And its Research & Development team in Wuxi, China, continues to pioneer technology advances in solar power generation products.
To expand its reach even farther around the globe, Suntech is expanding its capacity by building more factories and installing cost effective equipment to make solar energy a practical solution for more customers. Currently, the company sells its products in various key solar energy markets worldwide, including Germany, Spain, Italy, the United States, China, Japan and South Korea.
In addition to its expansion projects, Suntech will also benefit from industry consolidation, as it is the long-term leader in the solar industry. Its exceptional project history, dedication to innovation and focus on producing premium quality solar products set Suntech's products and brands apart from the rest of the competition. Moreover, its localized customer service, broad product range and manufacturing scale provide a stable base to serve its customers' long-term needs.

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%.
And in the third quarter of 2008, total revenues grew 54% year-over-year to $594 million, while net income rose 5% to $55.9 million or 33 cents per share. Gross margin -- one of my favorite indicators of a company's operating performance -- increased to 21.6% during the third quarter of 2008 from 20.7% for the third quarter 2007.
In addition to posting positive results during the third quarter of 2008, Suntech has a strong balance sheet with more than $600 million in cash as of September 30. The company also had approximately $1.7 billion of approved credit lines to be used for fixed asset purchases. So the company has sufficient capital to cover its expenditures at least until the end of 2009.
Looking ahead, Suntech expects to post full-year 2008 revenue of $1.85 billion to $1.87 billion, and its full-year photovoltaic product shipment to approximately 490 megawatts. The company also remains on target to reach 1 gigawatt of installed photovoltaic cell production capacity by year-end 2008. Suntech anticipates full-year 2009 shipments of more than 800 megawatts.
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%.

Buy price was $12.00

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 (alredy trading below $9)

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 (trading at around $7)

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 (trading below $6)

Hold. Sell above $9

March 11th

Suntech Power Holdings (NYSE: STP) has been the victim of some rumors as of late. There has been speculation that the company would be acquired, but I believe these rumors were groundless. Suntech is still very competitive, and there isn't any chance that the company will file for bankruptcy or sell out. And as China's fragmented solar panel sector heads for consolidation, Suntech will emerge as the biggest winner. Continue to hold STP.

March 18th

In addition to selling MT, I recommend selling Suntech Power Holdings (NYSE: STP). Earlier this year, I recommended STP as a way to profit from President Barack Obama's pledge to promote industries that are environmentally friendly, as well as invest federal money in creating green technology. The company has many competitive advantages, and I thought that it would benefit well from the global increase in solar power.
When the environmental spending fell short of expectations, Suntech shares sold off sharply. Even with the sharp bounce in the past week, the stock is only trading around $7. Given the dismal fundamentals in solar industry right now, it will be at least a year before the industry turns around. Sell STP.


Update March 27th 2009

Just one week after Mr. Hsu told his subscribers to Sell STP, the stock jumped 44% in one day. That is +60% since March 18th (the Sell date).

It should be clear now that Robert Hsu's advice is extremely useful for investors: if you do exactly the opposite of what he says.

For Mr. Hsu we have a loss of 41% and a missed profit of 60%.

Update April 6th 2009

STP closed at 14$ last Friday. That makes a 100% missed profit for Robert Hsu.


Anonymous said...

We're also told to hold off buying YGE (which also jumped about 40+% a few days ago) until the price drops back to $5. We may wait quite a while for this as the stock has started climbing again.

davidam said...

I find his " America is finished", "Obama has failed" etc etc, advertising messages to be very offensive. I wonder if his real motive is less about making money and more about supporting an agenda.

Anonymous said...

I don't know much about Mr. Hsu but he is right about obama.
He has failed and if he stays in that office for eight years, America may be finished.

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