Canadian Solar (CSIQ)
From Cabot Wealth Advisory 1/16/14 Sign up for Cabot Wealth Advisory—it's free!
I’m writing about today is Canadian Solar (CSIQ). The solar sector as a whole is hit-or-miss (about half the stocks look good, half don’t), but CSIQ is one that’s acting very well, and part of it has to do with a unique business plan. Here’s what I wrote about it in Cabot Top Ten Trader two weeks ago:
“Like all solar stocks, Ontario-based Canadian Solar, one of the largest solar power companies in the world, has been through some huge ups and downs in recent years. But the company, founded in 2001, had a monster year in 2013, partly in concert with the global recovery in solar and partly due to some big deals that are unique to Canadian Solar. The company specializes in building big power facilities that are sold to companies that will tie them into the local power grid. The most recent sale was a $57.4 million deal, announced on January 2, to sell the Mississippi Mills plant to TransCanada. Mississippi Mills is a 10 megawatt facility, and is the fourth of nine such facilities that will be sold to the same client. Just today, it was announced that the company’s 30 megawatt solar project in Xinjiang (Western China) had been completed and connected to the power grid. Successful construction and installation news is fairly routine for Canadian Solar and investors like the company for its vertical integration (everything from silicon ingots, cells and modules to giant power plants) and its global reach. Germany is still the company’s largest source of business, with the U.S., Japan, China, Canada and Spain filling out the list. The company’s 54 cents in earnings in Q3 came after eight quarters of losses, and investors are betting that the company has turned the corner to consistent profits (estimates are north of $2 per share in 2014) in a supportive environment for solar power.”
Since that time, the firm announced the completion and grid connection of another 10-megawatt solar project in eastern China, which was constructed in just three months. Touting the results, management said "This project is another good demonstration of Canadian Solar's success in the development and construction of utility-scale solar power plants on a global basis as well our growing momentum in China, a rapidly growing emerging market that is poised to become the world's largest solar market in the years ahead."
It also inked a deal with supply north of 84,000 solar modules to National Renewable Energy Corporation for four utility scale solar projects totaling 25.3 megawatts in North Carolina.
As for the stock, let me be clear: It’s already had a huge, huge run. It was the biggest winner of 2013! So by no means am I saying the stock is early on in its advance.
However, shares did tighten up beautifully from mid-November through year-end, and then exploded higher on the first day of 2014. It ripped ahead from 30 to 40 in just four days (!), pulled back calmly and, this week is powering ahead again. t’s very volatile, but the powerful momentum, big earnings estimates and terrific price-volume action has me intrigued.
I actually missed CSIQ in Top Ten Trader when we wrote it up, looking for a dip that didn’t come. However, given its action since then, I think you could buy a small position (maybe half what you’d normally buy, dollar-wise) in the upper 30s, with a loose stop near 32. Then, if (and only if) CSIQ advances, you could consider adding a few more shares. I wouldn’t be looking to push the envelope too much, but if things go well, there’s big potential here.
|Canadian Solar (CSIQ)
No. 199 Lushan Road
Suzhou New District
Index Membership: N/A
Industry: Semiconductor - Specialized
Full Time Employees: 7,020