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Author: TMFGebinr Big gold star, 5000 posts Old School Fool Supernova Phoenix 1
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Subject: Re: PWER - what lies ahead Date: 1/25/2013 11:23 AM
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Is it a value trap as it business slows down?

This one I understand a lot better than I understood Nam Tai.

It is possible. Note, however, that the whole renewable energy industry, primarily solar, is in a funk for pretty much the same reasons -- lower subsidies from governments that had traditionally been paying big subsidies (e.g. Germany and Italy). And the desire to use renewable energy waxes and wanes as the price of more familiar (and therefore comfortable) sources of energy, namely oil and natural gas, rises and falls.

Lower subsidies means less demand because solar is still not at grid parity in pricing (yet -- it continues to get closer and it is at grid parity already for some areas like southern Italy). And lower demand results in lower prices which means less profit for panel makers. Then again, they have lower costs of manufacturing, too, as technology improves and material prices decline.

The hype of yesteryear is probably well and truly over, but the long term trend of more and more renewable energy, especially solar, is still present. Power-One remains a strong contender in the inverter business and is growing its global reach to service more of North America (where legislative mandates still mean lots of activity) and Asia (where China is a big player) and rely less upon western Europe (where those subsidies are drying up).

The price has been bouncing around $4 for quite a while, with occasional moves up and down a bit. That's probably unlikely to change, but I'm holding the position in the MUE port and my personal holdings, as well.

I have six losing positions in the MUE port right now (based on average basis): PWER, BPI, DNDN, GME, FCX, and RIG. Three of those (FCX, RIG, GME) are down 7% or less (and GME is down only 0.4%, so basically flat). The remaining three are down 34.5% (PWER), 37.6% (DNDN), and 52.1% (BPI). Of those, I'm still quite confident in the eventual success of PWER and it is at the largest invested position I'm allowing of 7% of investable funds (which I increase at the beginning of every year, as I continue to receive $1000 per month). Dendreon and Bridgepoint Education are less than 2% of funds and likely to remain there.

Today's broadly-viewed situation at Power-One is likely to remain for a while and I don't expect the price to move back up for a while, with no definition given on how long "a while" will last in either case. Whether that means it's a value trap or not is up to you and others to decide.

Cheers,
Jim
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