It’s been an interesting year…
Needless to say InterOil (IOC) has been the star performer. It is setting weekly new all-time highs, and no wonder. The news from the drill bit is exceeding all expectations, and we often remarked that we considered the PNG political situation as the main remaining risk. With the agreement with the government signed, that has now fallen away.
We see sustained, large scale institutional buying. The daily volume had doubled while the share price has quadrupled, so in $ terms, volume really has increased massively. And these institutions are buying for the $150-$250 share price we see when more of the potential (stripping plant, resource upgrades, second rig, more covering, farm-out, selling stakes, offtake agreements, LNG partner, etc.) is realized. Much (if not all) of this is now a matter of when, no longer of ‘if’.
Much less attention has been given to another company we followed closely in 2008, Trina Solar (TSL). We were pretty spot on with that one as well, as to our knowledge, it’s the only stock in the solar (polysilicon) sector that has recovered fully from the crash which raged especially hard in the solar sector.
One of the main reasons Trina did so much better than another investment idea we developed this year, LDK Solar (LDK) is that it didn’t go ahead on the idea of building its own polysilicon plant. LDK Solar did, and paid a heavy price for that decision. We knew all along that our investment idea would be a bit of a gamble (on a turn-around), the Jan20 2011 calls still have over a year to run, but we’re quite a bit less enthusiastic, to be honest. They recently had their major (German) customer scaling down considerably, although they were successful in selling a part of their polyplant.
We suggested one trade in eFuture (EFUT), which was very profitable in just a couple of weeks. Our profit taking suggestion at $10.40 seemed pretty spot on. The company has made some necessary accounting restatements (none all too material) but much more worrysome, their licence sales have gone into reverse gear. Like LDK, this might prove to be a pretty interesting turn-around play (they have actually presented such a plan). We’re watching this from the sidelines at the moment.
We had good solid wins (doubles at least) with Fuel Systems Solutions (FSYS) and China Green Agriculture (CGA). Both stocks offered compelling growth stories combined with cheap valuations, although the latter have been growing considerably less cheap with the enormous rallies in both shares. Both stocks have fallen off their recent highs, we still think they offer good (although no immediate) value at these points.
This is a scenario we’re also envisioning for Fuqi International (FUQI). Just like FSYS and CGA, it has a compelling growth story that at this point really isn’t reflected in the valuation metrics. We strongly believe the market is wrong about this company, although from a technical point of view, the shares are not out of the woods just yet. There might also be some headwind from the overall China securities markets. If you’d followed our advice earlier in the year, you would have made a quick double (in a matter of weeks), although our profit taking advice at $10.40 seems pretty ridiculous with hindsight..
Finally, there is Manas Petroleum (MNAP). It’s still more than doubled from where we adviced to buy, and we also suggested at least one profitable trade in these shares. However, we have to say we were not impressed by their Albanian deal. It might all work out very nicely, but this, as always, ultimately depends on the drill-bit. We have no foresight about that, so this stock is like a rather pure gamble. Contrary to many similar stocks, this one does have the advantage of spreading it’s properties into five countries though.
We wish you a profitable 2010 and thank you for your interest in shareholdersunite.com