LDK Solar Cash Crisis

We tried a play on LDK Solar last month.  We tried to go long by selling puts at $7.  That would have been a good strategy for about a month as this was not a buy and hold stock.  The guys over at Greenstocks Central reported yesterday that the CEO is trying to come up with a new strategy for funding.

the CEO stated in an SEC filing, “If we do not successfully execute our liquidity plan, we face the risk of not being able to continue as a going concern.”

LDK Solar has dropped from over $9 to under $7 in the past two days.  This is a perfect example of why managing your sell stops is important.  Looking back at the chart some well placed trailing stops would have exited the position on Nov 24.  There was also a strong jump up on Dec 4 where setting a stop at $8.50 would have saved some profits.  The slow stochastic is showing an uptick in the %K line, but this may continue to sell down. 

RTK Good but Not Good Enough

Rentech, Inc (NYSE: RTK) announced revenue of $24.7 million compared to $74.6 million for the prior year.  This is a net income for the year of $3 million or $0.02/share.  Not too bad, but the street was not amused.  We entered a trade on this one at $1.54 at the end of November. Today we were stopped out at $1.59.

Rentech is a clean energy company that has been around for a very long time . They’re testing some interesting technology and seem to have a fairly repeatable process.  We’re still undecided about getting back in.  The debt-to-equity ratio is a little high but this still might be a good short term play with a tight sell stop.  There is support near 1.44 and 1.38 which might prove to be a good entry point in the future.  It’s also still above its 21 day SMA which is a good sign for now.


It isn't easy funding Green

Cleantech has been on a roll lately.  Venture capital in the sector is up 46% to $965 Million.  The US Department of Energy announced $3.4 Billion in grants for smart-grid programs.  There are also $2.4 Billion in grants for plug-in electric-vehicle battery manufacturing.  One would think that this is absolutely great for green.


A123 Systems and Detroit Edison managed to land $5 Million for battery research.  There was quite a jump up in price from $14.97 all the way to $17.49 at its highest.


The Cleantech revolution has left some out in the cold.  Evergreen Solar recently got beat down prior to earnings and is going to shut down their manufacturing facilities in Massachusetts.  Guess where the new jobs will be located?  China.  Nevermind the fact that they received $58 million from the state taxpayers, and a portion of that was funded by the bail out–I mean Economic Stimulus Plan.

Green has a different ROI than IT.  Some are predicting 15-18 years to get a return, while IT is geared to provide a return in 5-7 years.  What we are seeing is a trend to invest in IT driven green initiatives such as the smart grid or to get into other green investments later in the life of the company.   Solar manufacturing is suffering right now because of an over supply with low demand.  If you’re starting a green energy company the safest place to find funding will be in software that contributes to the green economy.

LDK Solar Up and Away

LDK Solar had a nice bump up 20% today.  They have plans to sell a 15% ownership stake in its 15,000 metric ton (MT) annualized capacity polysilicon plant in Xinyu City.  China. Jiangxi International Trust and Investment Co., Ltd. has agreed to purchase this interest for approximately RMB1.5 billion (equivalent to approximately US$219 million).  The cash infusion was one factor that seemed to help their stock price for the day.  There were several entry opportunities for a day trade as this only kept going up today.  Instead of buying LONG I decided to sell several $7 PUT options hoping to enter on the lunch time pull back, but LDK kept going up.  Options expire in 2 days so this play wasn’t the best, but there’s no downside in it which is what we’re looking for.

LDK Solar 2009-11-18