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Solar Energy Fund As one of the fastest growing sectors in the
last 5 years, Solar Energy continues to shine with the Chinese market
leading. Renewable energy resources gained traction in both China and US as a
way to cut the energy dependence on foreign sources. Although the financial
crisis of 2008 and the European Crisis of 2011 threatens to put a dent in the
financing structures necessary to implement Solar Energy projects, the
installed capacity is continuing to grow at an astonishing rate. Many Solar Wafer and Panel makers have taken
huge hits up to 80% to their stock prices in the last three years due to two
reasons. The over investment in the manufacturing capacity before However, many of these subsidies and financing
incentives should come back as the economies recover and financing becomes
abundant again, as renewable energy presents the only solution to complying
with the Kyoto Protocol, and the similar measures in US to limit carbon
emissions. Many of the solar manufacturers share prices trade at extremely
cheap valuations of 2X - 3,5X EBITDA. Thus, Solar Energy investments are expected
to give investors a very high return as they return to their normal
valuations of 6X - 8X EBITDA and as growth and profitability rises as the
oversupply of wafers get depleted and new projects are approved. Due to the
high-beta nature of many of the Solar Energy firms, the Solar Energy Fund
will be a very actively managed fund. The aim is to exploit the long-term
uptrend in the sector while avoiding the harsh price corrections these
high-beta stocks can be faced with due to external factors. The fund will
also try to take profits when there are extreme upswings in the price not
supported by fundamentals and try to reinitiate positions at more favorable
levels. |
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Since Inception Relative Performance
Graph vs DJIA and 7 -10 Year Bond Index Latest Trades
Comments June 17th’
12 14:52 Not only have I turned this Fund
largely unprofitable but it also seems that if I had waited a little while
longer I would have recovered most of my losses. It seems I have closed out
my positions right when the stocks were normalizing. This has been really
unfortunate for this Fund, but I still have confidence in this sector. In my
opinion, many of these stocks are very undervalued When these stocks start
their medium-term rally the gains will be so great that, this Fund will not
only recover its losses but it will also become one of the best performing
Funds. Because of the volatility in the sector though, it just is very hard
having leveraged long positions without being exposed to margin calls.
Therefore, I should probably wait for some sort of a capitulation before I
put on any further trades. June 4th’
12 10:46 Unfortunately I have turned my best
performing Fund into one of the bottom ones with my latest solar trades. I
just wasn’t able to anticipate the developments that have happened in May
2012. Also the market weakness did not help either. I started getting margin
calls and I decided to close down the positions altogether before they make
so much damage that even future option trades won’t recover. The Fund is down
about 61% and it will remain passive for a while until I can find some very
solid option trades to make-up the losses. Another option would be to
initiate medium-term long positions in the solar stocks if they really get
crushed and hence they would be about to capitulate. In both cases, I will
wait until I can be very confident in a possible trade before I put it,
because the Fund can’t handle any more downside. May 4th’
12 15:43 FSLR and LDK are close to my buy
targets. The developments in Europe are cause for concern but even in a weak
market, I will probably start to accumulate long positions in FSLR if it gets
to $15 and in LDK if it gets to $2,65. I might do it
with a hedge in short positions in SPWR or CSIQ. Mar 14th’ 12
13:15 I had remained passive on this Fund
after the spectacular trades I have made. However, I decided to initiate some
large long term Treasury positions in the Fund to take advantage of elevated
yields. When the yields come down with a market correction these should
appreciate quite well. Feb 14th’
12 15:57 I have closed out my position in
TSL at another 15% profit. I have also closed out my short position in SPWR.
I did not get out of those positions not because there isn’t more downside to
those stocks, but because the sector has just gone crazy lately and I
wouldn’t want to lose all my gains to a 30% up day. Plus the Fund is up an
amazing 32% so I will probably sit on the sidelines until a real good
opportunity emerges. My next trade will probably be towards an up move, when
I catch these solar stocks back down another 30% from their current levels. Feb 13th’
12 9:52 Trina Solar has jumped another 14%
at the open but has turned back down sharply and I was able to short it when
it was up 9%. It will probably just crash back to at least $9 since it was
unable to make a new high. And if it turns back up my profits from the
previous trade should cushion the losses before I close my position. Feb 10th’
12 15:48 There have been some real erratic
movements in the solar stocks in the last 2 days and the Fund has done a
great trade to take advantage of that. Trina Solar was up %15 in two hours
when I decided to short it. It actually continued to move higher to almost up
30% but came down towards the end of the session to put me at a slight
profit. Then it went down another 8% the next session that made up about the
same amount in two days. I will close out the position since it might jump
back up another 10% at the next session’s open. Jan 23rd’ 12
15:13 Ironically, my hedge position in
SPWR is working much better after I have closed my other positions. SPWR is
down almost 8% taking the Fund up almost 20%. I am contemplating when to
close out the short position in SPWR as I wouldn’t want to lose the profits
to a surprise up 30% day that have happened recently. I will probably
evaluate the technicals to make my decision. Jan 19th' 12
10:44 Seems like there's some profit taking is approaching in
the Solar sector, as well as the market in general. I closed out the long
positions in FSLR and LDK. Jan 13th' 12
15:11 Seems I won't have a chance to close out the options
positions on TSL before market close. Since Europe was closed shortly after
S&P downgrade news the markets have not responded fully, or at least I
hope. I will take the chance to keep those options for a while as I don't
presume the EUR.USD market can just pass over the news. Jan 13th' 12
11:04 I just closed the stock position on TSL as it gave
signals of turning down from its recent jump. I still have the uncovered
short position in 9 calls, that I will try to close
before market close. Until that it is a very risk position to carry but the
France's downgrade will probably overwhelm the markets and the EUR will go
down sharply even more. TSL seems to move very closely with the EUR so I
should have a shot at closing those options positions at favorable levels. If
I can close the options position at roughly $0.15, the profit on the TSL
trade will go from 19.2% to 26,6%. Jan 11th' 12
15:02 Also I would like to comment a little on the effect of
the hedges on this up day. Obviously the hedges on SPWR and TSL are capping
the gains on the Fund to about 13% while the sector is up close to 18%.
However if it weren't for the short position in SPWR margin calls would have
come long before we reached this spectacular up day. Also since the recent
deal for SPWR was done at 8.80 if the sector keeps rallying that price might
limit SPWR somewhat and let the profits from long positions run. As for TSL I
had sold 9 Jan 20th' 12 calls for $0,44. So TSL
above 9,44 does not add anything to the Fund.
However, it should be noted that if the stock moves upwards of 9,44 it does not make a loss. It just caps the profit at 19,2% for the TSL position which is still very good. A
strategy might be to sell the stock and keep the short positions in options,
expecting the stock to go down back below 9,44. That
would negate the hedge and the cap, but it would also create a short term
uncovered short position on the options which would be very risky if TSL
keeps its momentum until Jan 20th' 12, so I won't do that. Jan 11th' 12
14:59 The solar market is rocketing higher on no apparent news
flow. The fund has regained all its losses and then some. Well it was on
pretty phony news that it went down so it is not expected the move upwards
comes on speculation also. It seems that some big player has opened positions
on the whole sector and making an index style investment as smaller firms are
up more than larger firms. So if the buyer is making a sector wide investment
the larger firms are absorbing the money while smaller firms shoot up 30%.
Still even FSLR which is the largest is up close to 10%. Jan 5th' 12
9:35 The market uncertainty and the degenerating EUR is surely having a devastating effect on high-beta sectors
like Solar. The Fund is down almost 20% but the good thing is the hedge in
SPWR is protecting against further margin calls. There are a lot of
fundamental investments news that is supportive of the sector, however and my
opinion is Solar will take off really big once the market stabilizes. The
only reason it is suffering is because of its high-beta however valuations
are still very cheap and none of the larger firms face cash flow problems. If
the Fund manages to avoid margin calls it will
probably one of the biggest winners. Dec 23rd' 11
9:48 The thing is SPWR deal supports the sector and will put
a takeover premium on other stocks but has effectively taken off SPWR off the
table as a takeover target. Although this deal has cost me dearly, once it
rubs on other solar stocks it will be great for the Fund. Also of note is
that the Fund is still on the positive on its SPWR position, what the deal
has rather done is it erased the huge offsetting profit on SPWR and has
invalidated the hedge. Dec 23rd' 11
9:46 The deal in SPWR has completely screwed up my hedge in
the Solar Fund. As expected margin calls came and I had to reduce my hedge
position in SPWR by 30%. Still the good thing is SPWR is only up 8% and has
not held up the premarket gains. It is also far away from the deal price as
it was a private placement and no tender will be forthcoming. Although this
deal has cost me dearly, once it rubs on other solar stocks it will be great
for the Fund. Dec 20th' 11
9:13 KKR invests in 4 solar projects in California. Despite
FSLR's guidance which totally wrecked the stock prices KKR's move probably
means Solar does have a strong future. Big private equity does not make a
move unless they are sure they will get stable cash flows. The Fund is not in
that bad a shape either given the 15% correction in the stock prices. Dec 14th' 11
15:54 I had to increase my short position in SPWR even more as
it moved down and the nominal hedge I had decreased. No complaints though as
I'm glad my hedge worked well. The Fund will close out this horrible day for
Solar stock with only a 5% decline compared to up to 20% declines in
individual components. One bad thing is the short position although a good
hedge has pushed up the margins so any more wild swings might bring about
margin calls. Still the day is over with minimal damage. Dec 14th' 11
11:02 I have raised my short position in SPWR to compensate
for both the rise in FSLR and also as SPWR fell the nominal short position in
the Fund fell also. Mainly I had to raise the nominal amount to be able to
keep the same hedge ratio in the Fund. Dec 14th' 11
9:52 I've decided to use the decline in FSLR as a buying
opportunity purely on valuation. This company is trading at 8X forward P/E
even with the lowered guidance, it is in no way financial strain and it is
still in a growth sector. There is of course the possibility it will move
lower especially if the market goes down but trying to catch the exact bottom
is a fool's game. Also if it gets any cheaper there will be a high
probability it will get taken out private at a hefty premium. If that happens
the whole sector would jump higher too. Dec 14th' 11
9:12 It's a horrible day for Solar stocks as FSLR guides
lower. My short position in SPWR will protect me somewhat but still the Fund
will take a huge hit. It's a good thing the Fund is not very leveraged so
there won't be any margin calls. I might even use it as a buying opportunity Dec 7th' 11
11:54 I did put on my solar trades. I took a long position in
FSLR, TSL and LDK with a short position in SPWR equal to a little more than
half total value of my long positions. I chose to hedge with SPWR based on
technical reasons. It is on a very strong downtrend and one of the more
shaky companies in the sector. In case of strong correction it should crash
down enough to offset the losses on the long positions. I also plan to sell
some covered calls since the market has still hasn't broken its downtrend and
the upside should be limited to 20 - 30% in the short term for my longs. Dec 7th' 11
10:22 There is some action in the solar stocks, especially
FSLR, due to the purchase of FSLR's Topaz project by Buffett's MidAmerican
Energy Partners. There are some good trading opportunities here but solar
stocks are high-beta stocks and I will wait until the market gets some
direction to put on my trades. Dec 2nd, 11 10:53 Sold some
out of the money calls in some financials roughly 20% above the current
price. I had to go with financials since implied volatility on the other
mega-caps were too low to be viable. |
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Since
Inception Performance Chart vs Equity and Bond
Benchmarks
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