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Update TSL, EFUT

May 28th, 2008 · No Comments

What we feared seems to be happening at the moment. There is an ongoing sell-off in the solar sector which, from a fundamental point, doesn’t make sense. Quite the contrary, as results in the sector have been good to stellar. Get used to it. 

It’s a relatively new sector, it’s importance as alternative energy plays on the market is two years old at most, and this is what happens from time to time. There is not a good deal of logic to it. It goes through quite exaggerated cycles of hype and fear.

We have just been through a pretty good rebound, and any excuse will serve to book profits. It’s particularly hard on our favourite solar play, Trina Solar (TSL).

This is the second time it seems to be caught in a sectoral sell-off, and just like the first time, it is even more unwarranted for Trina compared to most (if not all) of it’s peers.

Trina is still miles away from it’s all-time high ($73) reached a year ago, although it’s now almost three times as large and profitable. It’s cheap from a fundamental point of view.

Two things triggered the solar sell-off of the last days, profit taking and a retreat in oil prices. Mind you, those oil prices are still very high, but this is how it is.

Having said this, we do want you to notice that Trina hasn’t fallen through critical support levels yet, although it’s hobbling just above it’s 200 day moving average, as we showed yesterday in a chart. We keep a close eye.

The brave could even pick up a few, but there is no guarantee that this support will hold. We don’t think the sell-off will be anywhere as severe as it was in the first six weeks of the year though, and earnings must be out pretty soon (a date has still not been set, but it should be early June).

On a happier note, our Chinese supply chain software maker eFuture (EFUT) is still marching on. Where Trina seems to suffer from manic depression, this one is as steady as a rock. But we think a big move up is in the works.

EFUT has gained another big customer today, a big distribution center that handles many multinationals. Sooner or later, all these good developments are going to be reflected in the stock price. This think will probably make a big move when you least expect it. You just got to be in it and be patient.

Tags: EFUT · Solar sector · TSL