First Solar (FSLR) is overvalued and faces a serious problem in the form of cheap polysilicon. Sound familiar? It should, it’s been the refrain from analysts since May. Today’s shot at First Solar comes from Gordon Johnson of Hapoalim Securities, on Tech Ticker.
Johnson says First Solar is a sell, with a target of $90. His argument trods well worn ground, but in case you missed it, here it is.
First Solar makes its panels out of cadmium telluride. Most of its competitors make panels out of polysilicon. Last summer, thanks to generous subsidies around the world, especially in Spain, the price of polysilicon shot up to $450 per kg. At such a high price, First Solar had an advantage on the competition.
However, the price has crashed to $60 per kg, and might fall even further, thus wiping out First Solar’s advantage. First Solar had told investors not to worry, that it could compete with lowered polysilicon prices. During it’s Q2 conference call, it signaled a slight change in its thinking saying it would give rebates to customers to lower the price of the panels. Another worry from Q2, the odd revenue recognition detailed by Barron’s, and refuted by e4.
Johnson likes Trina Solar (TSL) who are low cost leaders, and have worked through their inventory of overpriced polysilicon, and are now buying the cheap stuff, which ought to boost margins. He’s cautious of Yingli (YGE) because they’ve yet to write down inventory, and Suntech (STP) because it outsources manufacturing of wafers, is locked into higher polysilicon prices, and has accounting practices that are redflags.
In a separate segment, which is included below, Johnson also explains why solar stocks aren’t taking off along with the price of oil. Here’s a hint: Cheap natural gas.
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U.S. Manufacturing Grows For the First Time in a Year +++
By Courtney Schlisserman
Sept. 1 (Bloomberg) — Factories in the U.S. expanded in August for the first time in 19 months, helping lead the economy out of the worst recession since the 1930s.
The Institute for Supply Management’s factory gauge increased to 52.9, higher than forecast, from 48.9 in July, the Tempe, Arizona-based group said today. Fifty is the dividing line between expansion and contraction. Another report showed more Americans than anticipated signed contracts to buy existing homes in July.
The gains indicate Federal Reserve efforts to thaw credit markets together with the Obama administration’s “cash-for- clunkers” program and tax credits for first-time homebuyers are reviving demand. Factories and builders, which have accounted for half of all the jobs lost since the recession began in December 2007, may keep growing in coming months as sales rise.
“All the pieces are falling into place for a recovery to take hold,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “The stimulus should exaggerate the pace of recovery in the third quarter and then it’ll settle back down a little bit.”
Economists forecast the index would rise to 50.5, according to the median of 77 projections in a Bloomberg News survey. Estimates ranged from 49 to 53.5. Manufacturing accounts for about 12 percent of the world’s largest economy.
Pending sales of previously owned homes climbed 3.2 percent in July, exceeding the 1.5 percent median forecast of economists surveyed by Bloomberg, a report from the National Association of Realtors also showed. The sixth consecutive increase marked the longest stretch of gains since records began in 2001.
Other reports today showed manufacturing was gaining speed worldwide. China’s factories expanded in August at the fastest pace in 16 months, while European industry shrunk by the least in more than a year.
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Asian Markets Trade Up on Earnings
By Patrick Rial and Jonathan Burgos
Sept. 1 (Bloomberg) — Asian stocks rose, led by technology and mining companies, after Hon Hai Precision Industry Co. earnings beat estimates and China’s manufacturing expanded at the fastest pace in 16 months.
Hon Hai Precision, the world’s No. 1 contract maker of electronics, climbed 6.8 percent in Taipei, as it beat analysts’ profit targets by 29 percent. Rio Tinto Group, the mining company that got 19 percent of its revenue in China last year, added 2.2 percent in Sydney. Industrial & Commercial Bank of China Ltd. rose 2 percent in Shanghai, where the benchmark index gained following its biggest one-day decline since June 2008.
“I don’t see why the stock market should collapse,” said Khiem Do, head of the multi-asset group at Baring Asset Management (Asia) Ltd. in Hong Kong, which holds $7 billion assets. “We are not looking at a reversal of the growth trend in China. Technology is among the sectors benefiting from this global recovery, particularly those in Taiwan and South Korea.”
The MSCI Asia Pacific Index rose 0.4 percent to 113.86 as of 8:21 p.m. in Tokyo. Almost two shares advanced for each one that fell on the gauge. Speculation of a global economic recovery drove the index to the highest in more than 10 months on Aug. 14. The measure has fallen 0.3 percent since then.
China’s Shanghai Composite Index added 0.6 percent amid speculation yesterday’s 6.7 percent decline was excessive. Hong Kong’s Hang Seng Index rose 0.8 percent. China Life Insurance Co. and Ping An Insurance (Group) Co. gained more than 4 percent in Shanghai after UBS AG upgraded their ratings……
By Adria Cimino
Sept. 1 (Bloomberg) — European stocks fell for a second day on speculation the rally that drove valuations on the Dow Jones Stoxx 600 Index to the highest in six years has outpaced the prospects for economic growth. U.S. index futures slid.
Eiffage SA retreated the most since February after France’s third-biggest construction company posted a 64 percent drop in first-half profit. Royal Philips Electronics NV sank 4.1 percent as Exane BNP Paribas recommended selling shares of Europe’s biggest-consumer electronics maker and Stoxx Ltd. said the company will be removed from the Dow Jones Stoxx 50 Index.
The Stoxx 600 slipped 1.3 percent at 11:38 a.m. in London. The regional measure erased an earlier gain as an industry report showed European manufacturing contracted in August and a similar gauge in the U.K. dropped unexpectedly. Futures on the Standard & Poor’s 500 Index futures slid 0.7 percent.
Europe’s Stoxx 600 had earlier climbed as much as 0.7 percent as earnings from Vivendi SA and Taiwan’s Hon Hai Precision Industry Co. beat analysts estimates.
The manufacturing numbers show “that things aren’t as solid as expected, there’s a fragility,” said Guillaume Duchesne, a Geneva-based equity strategist at Fortis Private Banking, which oversees about $117 billion. “Economic statistics direct the market. The question is do we believe in a recovery that’s rather smooth or something that isn’t as good.”
A six-month rally has left the Stoxx 600 valued at 48.6 times profit, the highest level since June 2003, according to weekly data compiled by Bloomberg. The gauge gained 48 percent since March 9 as companies from L’Oreal SA to Goldman Sachs Group Inc. reported higher-than-projected profits and the German and French economies unexpectedly expanded.
Manufacturing Reports
An index of euro-area manufacturing rose to 48.2 from 46.3 in July, Markit Economics said. The gauge is based on a survey of purchasing managers and a reading below 50 indicates a contraction. A separate gauge of U.K. manufacturing unexpectedly fell to 49.7 in August from 50.2 in July, a survey by the Chartered Institute for Purchasing and Supply and Markit said.
Stocks had earlier advanced in Asia and Europe as China’s official Purchasing Managers’ Index rose to a seasonally adjusted 54 last month from 53.3 in July. The MSCI Asia Pacific Index gained 0.5 percent.
Eiffage posted the second-biggest decline in the Stoxx 600, losing 8.2 percent to 45.50 euros. First-half earnings slid to 50 million euros ($71.6 million) from 140 million euros a year earlier.
Philips dropped 4.1 percent to 15.12 euros as the company was cut to “underperform” from “neutral” at Exane BNP…..
Oil Trades Flat To Slightly Higher Over $70pb
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Benchmark crude for October delivery was up 38 cents at $70.34 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.
The contract Monday lost $2.78 to settle at $69.96 after a drop in stocks heightened investor concerns that the global economic recovery may be weaker than expected. China’s benchmark stock index fell 6.7 percent Monday while the Dow Jones industrial average fell 0.5 percent.
“As much as we would like to read into yesterday’s ‘weakness,’ we will not,” commented trader and analyst Stephen Schork, in his Schork Report. “As far as we are concerned, it was end-of-month volatility compounded by yet to be substantiated fears regarding China.”
Most Asian stock indexes rose modestly Tuesday, including China’s. European markets were moderately down.
“Stocks are a leading indicator of the economy, so if we have a slump in stocks, that’s one fewer driver to support high oil prices,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
Oil will likely trade between $65 and $70 during the next few weeks, Shum said.
“I don’t expect a big pullback because we are starting to see more signs of economic life,” he said. “There’s clear evidence that the global economy has reached a bottom.”
In other Nymex trading, gasoline for October delivery rose 0.81 cent to $1.82 a gallon and heating oil gained 0.70 to $1.82 a gallon.
In London, Brent crude was up 57 cents at $70.22.
By Bloomberg NewsSept. 1 (Bloomberg) — China’s manufacturing expanded at the fastest pace in 16 months in August, driven by record lending in the first half of the year, two surveys showed.
The Purchasing Managers’ Index rose to a seasonally adjusted 54 from 53.3 in July, the Federation of Logistics and Purchasing said in an e-mailed statement today in Beijing. A PMI released by HSBC Holdings Plc also climbed.
Gains in output, orders and jobs added to evidence that Premier Wen Jiabao can meet his 8 percent growth target for the year as a stimulus package counters falling exports. The Shanghai Composite Index plunged into a bear market yesterday on concern that the world’s third-biggest economy will slump as banks rein in credit growth to avert asset bubbles and bad loans.
“China’s equity market has taken a battering in the past few weeks, but the economic data suggests that the recovery remains on track,” said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong. “Beijing still faces the difficult task of managing liquidity conditions to avoid a bubble or a bust.”
Shanghai’s stock index closed 0.6 percent higher after tumbling 6.7 percent yesterday. Asian stocks rose.
New loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of June’s level, and may slump to 200 billion yuan in August, the Beijing-based business magazine Caijing reported yesterday without citing anyone…..
PetroChina Invests $1.7 bln in Canadian Oil Sands
By John Duce and Gene Laverty
Sept. 1 (Bloomberg) — PetroChina Co. has agreed to pay C$1.9 billion ($1.7 billion) for a stake in a Canadian oil sands project in its biggest North American acquisition, widening the search for energy resources overseas.
China’s largest oil company will buy 60 percent of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects, the Canadian company said in a statement yesterday.
PetroChina has acquired gas fields in Kazakhstan and a Singapore refinery in deals accounting for about a fifth of China’s $17 billion spending on overseas energy assets since December. Oil sands resources are harder to exploit than conventional fields and the Athabasca transaction underscores China’s determination to snare reserves, said energy analyst Gordon Kwan.
“The easy, lucrative oil projects are gone and what’s left are the more difficult challenging projects for the oil firms to tackle,” said Kwan at Mirae Asset Securities in Hong Kong.
PetroChina shares rose 1.2 percent to HK$8.66 in Hong Kong today while the Hang Seng Index rose 0.8 percent. The company’s market capitalization fell behind Exxon Mobil Corp. yesterday as the U.S. company regained its rank as the world’s most valuable company after shares in China fell.
PetroChina will provide funding for future extractions of the resource under the deal, Athabasca, a closely held company based in Calgary, said yesterday in its statement. PetroChina may deploy methods it has used in northeastern China heavy-oil projects to unlock oil trapped in Alberta sands, according to the statement.
Strategic Deal……
German Recovery Said To Be Far Away
By Kevin Crowley
Sept. 1 (Bloomberg) — Employment levels at British, French and German financial services firms won’t return to last year’s figure before 2013, according to a study by the City of London.
The U.K. will be worst affected by the job cuts and will have 10,000 fewer roles in banking, insurance and fund management in four years’ time than it did in 2008, said the report, commissioned by the municipality running the U.K.’s main financial district. Any resurgence in hiring depends on economic growth, said Stuart Fraser, the City of London’s policy chief.
“We’ll have slow growth for the next few years, and that takes us to 2013 to 2014,” he said in a telephone interview. “Hopefully by then we’ll be in a better balanced position to accelerate growth.”
European banks and financial firms have cut 140,000 jobs since the third quarter of 2007, when financial markets seized up after the U.S. subprime mortgage crisis, according to data compiled by Bloomberg. Firms will eliminate about 84,000 jobs in Europe this year, of which 35,000 will go the U.K., the region’s biggest employer of financiers, the report said.
Economic output from Europe’s financial services industry will shrink 6.2 percent this year, and will continue to contract in 2010 before beginning to expand the following year, the report said. The rebound will proceed at a “much more moderate pace” than the rapid growth between 2000 and 2007, said the report, which was produced by consulting firm London Economics.
‘Growth Efficiency’
“I’m fairly optimistic on the financial sector returning to profitability, but that won’t necessarily feed through to dramatic employment growth,” said Alistair Milne, a senior finance lecturer at London’s Cass Business School.
Financial firms will be focused on “growth efficiency” over the next four years and “earning money out of the staff they’ve got at traditional businesses” such as fixed income, equity trading and derivatives trading, he said.
Banks including Lehman Brothers Holdings Inc., which went bankrupt last September, have cut jobs in London. Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc have eliminated about 15,000 U.K. posts since being rescued by the government…..
U.K. Bond Yields Narrow To Their Tightest Spread In Years
By Esteban Duarte
Sept. 1 (Bloomberg) — Signs the U.K.’s real-estate market is emerging from the worst economic slump in decades are driving yield spreads on mortgage bonds tighter, according to data compiled by JPMorgan Chase & Co.
The yield over benchmark rates that investors demand to hold top-rated U.K. five-year mortgage-backed securities shrank 0.3 percentage points over the last month to 1.65 percentage points, JPMorgan data show. That’s near the narrowest spread, or gap, since July 18, 2008, and is down from as wide as 4.25 percentage points on Jan. 2, according to JPMorgan.
British house prices rose for the first time in two years in August, buoyed by a lack of homes for sale, London-based property research company Hometrack Ltd. said in a report yesterday. The data backed up reports from the government and mortgage lender Nationwide Building Society last month that showed property prices are rebounding from the deepest recession since World War II.
“The increase of home prices and the stabilization of arrears are giving some fundamental base to the recovery” in mortgage bonds, said Markus Ernst, a credit analyst at UniCredit SpA in Munich. “The overall credit market also became less risk averse,” he said.
The average cost of a home in England and Wales rose 0.1 percent from July to 155,800 pounds ($253,000), Hometrack said. The increase, the first since July 2007, left house prices 6.7 percent lower than a year earlier, the smallest annual decline in a year. Home values have fallen 12 percent since their peak in September 2007, the London-based firm said.
Fourth Straight Gain…..
U.S. Manufacturing Expected To Rise
NEW YORK (Reuters) – A key gauge of U.S. manufacturing activity likely rose in August, which would bring the index into positive territory for the first time since just after the recession began, according to a Reuters’ poll of economists.
The Institute for Supply Management’s manufacturing index is expected to have risen to 50.5 in August from 48.9 in July, according to a median forecast from a recent Reuters poll.
Estimates from the 78 economists polled ranged from a low of 48.9 to a high of 53.5.
A reading above 50 indicates the sector is expanding.
An expansionary reading on the nationwide ISM manufacturing index would come a day after the Institute for Supply Management-Chicago reported that its midwest business barometer rose to 50.0 in August.
The national Institute for Supply Management will release its August non-manufacturing index at 10 a.m. (1400 GMT) on Tuesday.
Ebay Said To Sell Skype To Private Equity
(Reuters) – Internet auction and services company EBay Inc has reached a deal to sell its online telephony unit Skype to a group of private investors, the New York Times said, citing two people briefed on its plans.
Andreessen Horowitz, a new venture capital firm headed by the Netscape co-founder Marc Andreessen, is likely to be among the investors in the group, the paper cited the people as saying.
London-based Index Ventures and Silver Lake Partners may also be involved in the deal, one of the people told the paper.
The paper added that the value of the deal, which is likely to be announced later on Tuesday, had not been disclosed.
EBay spokesman Alan Marks declined to comment on the report.
In May, EBay Chief Executive John Donahoe said a valuation of $2 billion would be low for Skype.
(Reporting by Ajay Kamalakaran in Bangalore, editing by Will Waterman)
SAN FRANCISCO (Reuters) – Yahoo Inc (YHOO.O) board member Carl Icahn has cut back his stake in Yahoo, selling nearly 13 million shares since last Thursday, according to a regulatory filing on Monday.
Icahn Capital reported that the overall Yahoo stake held by various Icahn-related funds was 4.48 percent, down from 5.38 percent as of June 30, according to Reuters data.
Icahn’s stock sales come one month after Yahoo struck a deal to outsource its search technology to Microsoft Corp (MSFT.O), a partnership Icahn advocated.
Since the deal was announced, Yahoo’s stock price has declined nearly 16 percent, closing Monday at $14.49.
According to Monday’s filing, Icahn remained optimistic about Yahoo’s long-term prospects.
Icahn sold his Yahoo shares to better “balance” his portfolio of tech stocks and because the window for Yahoo directors and offices to sell stock would be closing after August 31, according to the filing.
“The reporting persons continue to believe in the wisdom of the Microsoft-Yahoo search transaction and fully support the performance of the Issuer’s CEO Carol Bartz,” Icahn Capital said in its filing.
According to the filing, Icahn sold his Yahoo shares between August 27 and August 31 at prices ranging from $14.75 to $14.92.
Icahn amassed the bulk of his stake in May of 2008, according to media reports at the time, when shares of the company were trading in the low- to mid-$20 range.
(Reporting by Alexei Oreskovic; editing by Carol Bishopric)
Insider Selling Continues Its Record Pace
The insider selling statistics continue to represent an almost unbelievably low level of confidence by insiders in their own companies. The latest data out of Finviz showed an incredible $837MM in insider selling compared to just $13MM in insider buying. While we try not to read too much into the extreme amount of insider selling (insiders sell for many reasons that don’t always represent a lack of confidence in future prices) the drop-off in insider buying is quite alarming. Insiders only buy their own stocks for one reason: they believe the stock is going to rise. The total lack of insider buying can only be seen as a widespread vote of no confidence in the future prices of U.S. stocks. Although the selling data should be largely ignored, the incredible amount of sales has to make one wonder how much of the selling is due to insiders who simply want to cash out of stocks before they decline again….
The following chart from insidercow.com shows the sharp drop in the insider buying:
Click for larger image
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