Saturday, January 5, 2008

Posted in response...

This was posted in response to this article.

This is actually the second of my responses. In the first (not posted) I tried to detail the long term factors that made the author's short-term thinking invalid. Then I got to think about it, my long term arguments are meaningless to him, he's looking short-term, and wants to short (or wants others to short). It pissed me off that he left LDK off of his data sheet, and so wrote up a second, less elegant, but more to the point, response. I nearly didn't even post this one. I thought, "this guy's article is a damned short trap." He's not telling anyone to short LDK or any other company, but he's putting LDK in a prominent position as a big loser in '08, but he's not giving the reader the information to make an informed decision. Fuck it, I posted.

I started writing a lengthy rebuttal on this article. In trying to work it out, I failed. Why? Because you are “not even going to talk about 2010.” You are purely thinking short term here, because by ‘09 the polysilicon famine will be on its way out, prices will come down dramatically, and demand will explode (it’s already exploding at today’s prices).

Well, it’s your money, but I suggest that you are a fool if you short a solar stock in today’s climate, especially based on short term thinking. You might win some, but it won’t take too many big movements up in order to put you out of business. More and more people and institutions are looking at Solar long-term every day, and the money is following in, not for today, but for the long term.

As to your specific picks, though you state your belief that ASPs will drop faster than poly prices, you go on to place LDK and WFR at the head of your list of companies that will be primarily affected by the shortage of polysilicon. This does not follow. In the case of WFR, they are currently a leader in its manufacture, and in the case of LDK, they are on a path towards a future leadership role in Solar Poly Production.

In my search for future industry leaders, LDK Solar is my most confident pick (particularly at today’s prices).

Do you really want to short a company that is positioned to control a significant part of the market in the manufacture of polysilicon that you admit is the key ingredient of the Chinese Solar industry?

Do you think it wise to short a company working with top names like Flour, Sunways, and GT Solar in the development of Billion Dollar polysilicon facility which is ultimately due to produce 17000 Tons of Poly per year?

Is it wise to short a company that went from 2-6000 employees in two years, led by an entrepeneur who has already built up a company from scratch and which now employs 12000 people?

Is it wise to short a company that’s been driven well below its fundamental value by an allegation, for which the company has since been cleared?

Well, go ahead. Like I said, it’s your money.

BTW, I noted that on your datasheet, you listed nothing for LDK. I’d be curious about the ommission, but I guess I’m not suprised.

The estimated Wafer numbers for LDK for 2008 are 510 MW to 530 MW, and 1,050 MW to 1,150 MW in 2009 with gross margin in 2009 being 42% to 50%. Polysilicon production capacity for 2009 is slated to be 5,000 metric tons to 7,000 metric tons. These numbers are from LDK.

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