Solar Portfolio Update and Market Update – 10-25-2013

Solar Portfolio Update and Market Update – 10-25-2013

Solar Portfolio’s Update

I initiated our second 2013 solar portfolio (2013 Solar Portfolio 2) at the market opening on 26 June, subsequent to the introduction of President Obama’s new energy policy, which I thought was a positive step, although, far from what I would consider a “appropriate step” for America’s energy future, given that we are still lagging the rest of the world in acknowledging that solar is here to stay and its worldwide implementation is accelerating with each passing month.

I selected the three most technically strong stocks (based upon my evaluation system) from our publicly traded stock list and initiated theoretical equal money positions ($10,000.00) in each security – Canadian Solar – CSIQ, Sunpower – SPWR and Sun Edison -SUNE.

On 5 July I added two addition stocks that had given subsequent technical buy signals – Jinko Solar (JKS) and Yingli (YGE).

Background on 2013 Solar Portfolio 1

We closed out our last position in our 2013 Solar Portfolio 1 on 16 April 2013 with a realized gain of 44.94% for the first 14 weeks of 2013.

Solar Portfolio (2) Current Status

CSIQ – Sold 75% of our position at various stops as indicated.

JKS –   Sold 25% of our position at indicated stop loss point.

SPWR – Sold 50% of our position at indicated stop loss point.

SUNE – Sold 100% of our position at various stops as indicated and took a small loss.

YGE – Sold 50% of position at $3.80 and 25% of the position at $7.00

Current Stop Loss Points

CSIQ – Sell 50% of remaining position @ $22.00 and remaining balance @ $16.50

JKS – Sell 50% of original position at $21.50 and remaining balance @ $19.50

SPWR – Sell 25% of original position at $32.00 and remaining 25% at $28.50

YGE – Sell balance of position @ $5.50

Current Performance 2013 Portfolio 2

Realized Profits + 22.76%

Unrealized Profits + 104.25% as of the close Friday 10-25-2013

Market Update

At the current time the general market still remains in a “higher” risk status, based upon my technical indicators. In addition, we have the periodic senseless chaos created by our “leaderless” Congress going back and forth about absolutely nothing of any real consequence.

The end of last week saw corrections in all of our portfolio companies, ALL of which were overbought on their 10 week distribution – so corrections were expected. We have to wait now to see how severe these corrections turn out to be.

Three of our holdings – CSIQ, JKS and SPWR held up well and maintained their technical strength. YGE was the weakest of the 4 positions and did suffer some technical deterioration.

All of this does NOT mean that the market is going to have a major correction, stock markets can and have stayed in similar high risk status for months and even longer. What is does mean is that caution is warranted because the overall technical market risk is higher and at the same time the recent Government closing has cast doubt all around making it much more difficult to get a clear picture.  As a result, I have set my stop loss points closer to protect the portfolio’s profits.

As the old wall street saying goes – “You never go broke taking a profit”.

Remember – you will never be able to catch the very bottom of a stock’s movement or the very top. When that happens it is plain and simple – luck. The key thing to always keep the number one rule of investing foremost in your mind:

Cut your losses short and let your profits run

We have been in a Bull Market since March 2009, close to 4 ½ years. The average Bull Market is 3.8 years – so this market is growing long in the tooth. But I have not seen any “serious” indications of the end of this market. But when the market is in a higher risk area – the changes can come quickly – so we have to adopt a defensive posture.

Especially then the stocks in our portfolio are very HIGH BETA stocks, our average is approximately 1.7 – which means that they, on average, are 1.7 times MORE volatile than the general market – good on the upside (now) and bad on the downside. On the other hand, the solar sector is among the strongest of all the market sectors, in fact, it is incredibly strong at this time.

There is no way to really predict the future – but solar is booming everywhere in the world, even in the U.S. – this year will be the first year ever that solar has put in more capacity than wind worldwide.  The general press in the U.S. has still not caught on to the current “solar boom” or is “scared” to write about it for fear of offending some financial backers etc.

I think this may be the first really visible evidence of a much more widespread transition to solar – which, in my opinion, is well over due if one considers all the facts and costs and not the silly gibberish from the anti-solar groups, the coal faction and all the other reality ignorers from the flat earth society.

Change is coming, like it or not! In my opinion, I think we are seeing the very beginning of the end of the age of fossil fuels!

Market Psychology

The HARDEST THING for investors to do is know when to sell. That is why you have to set specific, non-emotional prices to exit if things do not go right. You cannot allow your emotions to get involved and take over your thinking.

Remember: markets fool the majority of investors by “Climbing a Wall of Worry” which is exactly what it is doing now. If you listen regularly to the financial news media (not a good idea) you would hear that we are having a least a “crisis” a week and that any day now the world is going to end. But the market has kept climbing that wall of worry and going higher and higher.

On the flip side (when that comes) once losses start to occur and keep getting worse then  investors generally get on the “Slopes of Hope” and hope that their stock comes back – trust me, the “I hope my stock comes back” technique will NOT work, now or ever.

Trust in your system and follow it regardless of what you think “should happen”. Once you try to impose your will on your portfolio you will stop paying attention to what is most important – and what is most important to understand is:

“what is actually happening” NOT what you think should be happening.

If you looked at the portfolios of the most successful investors you would, in general, see the following pattern:

Approximately 80% of trades would be either small losses and/or small gains and approximately 20% would be very significant gains. This is exactly how we dramatically outperformed the markets in 2012, 2011 and 2010 with far lower market risk since we were out of the market for much of those years when the market environment was unfavorable.

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Solar Portfolio Track Record

2013 Solar Portfolio (1) + 44.94% (January thru April 16th)

2012: Solar Portfolio outperforms markets by 325%

Solar Portfolio   + 39.7%

Solar Industry Average   – 13.93%

Major Markets Average   + 12.19%

2011: Solar Portfolio outperforms markets by 1,416%

Solar Portfolio   + 17.56%

Solar Industry Average   – 70.3%

Major Markets Average   + 1.24%

 

2010: Solar Portfolio outperforms markets by 310%

 

Solar Portfolio   + 42.94%

Solar Industry Average   -14.2%

Major Markets Average   + 13.87%

This performance by simply following the #1 rule of investing:

Cut your losses short and let your profits run

We cut our losses when things did not work out and we let our profitable stocks run as far as we possible and minimized any further deterioration by setting reasonable stop loss points to protect our profits.

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Background Analysis Notes

Keep in mind that there are two basic types of equity (stock) analysis. Below are a brief description of each and its primary purpose:

Fundamental Analysis (“what to buy”) – this is the analysis of the fundamental financial condition of a company to identify which stocks you may want to buy when the timing is right. This form of analysis will give you NO indication of the best time to buy a stock or sell a stock.

Technical Analysis (“when to buy”) – this form of analysis will tell you “when” to buy a stock and when to sell the stock. It will do this by showing you (in chart format) the basic interaction of supply and demand and when the two change and shift which will indicate a time to buy or a time to sell.

Mr. Lynch has worked, for 36 years as a Wall Street security analyst, an independent security analyst and private investor in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this field. He was the contributing editor for 17 years to the Photovoltaic Insider Report, an early publication in PV that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. He is currently a private investor and has from time to time been a financial/technology consultant to a number of companies. He can be reached via e-mail at: [email protected]. Please visit his website for the promotion of solar energy – www.sunseries.net.