RE: RE: BNN Clip on Solar CellsFrom a technical analysis point of view, DFE is a troublesome one, at least to me. Their support levels were violated and their next supports are considerably lower than where they are now. Unfortunately, the lower highs and lower lows do not instill confidence. At the last critical point, they broke to the downside rather than the upside. That is the bad news...
When the technicals are broken, I look for some fundamentals for direction. That is where this company's flexible manufacturing business model kicks in - Jabil, an off-shore contract manufacturer, is manufacturing the panels for them at present. The book value per share (you can get that on the TSX site) is still close to $2 per share ($2.13 is what is displayed, though I think it is closer to $1.75?). Their expectations for the next 3-4 quarters are for marginal improvement, albeit within a tough business environment. Give DFE credit - they are open and honest - you can't find this in a lot of management, so I do really love these guys!
Solar = social responsibility, when the economy is good. Social responsibility is feelgood stuff. When the economy is difficult, social responsibility is also taboo. Corporations, like people, revert to Maslow's Hierarchy of Needs. They need to restabilize their foundation before they can focus any resources on the self-actualized (social responsibility) strategies. They need to get back to profit, and that means making tough economic decisions, throwing social and environmental decisions out the window. Their focus changes to one of maintaining shareholder value, through maximizing returns, optimizing sales and maximizing profits. When oil hit $140 per barrel, solar investments were win-win-win. Incentives made it lucrative, social responsibility made it feelgood, and cost made it an acceptable premium investment. Today, with oil barely over $70, profit at a premium to feelgood, and incentives still not reaching the marketplace, solar is not shining very brightly.
First Solar is arguably the industry's darling. It is trading down in the $125 per share range (Friday at $120, down from over $300 in summer 2008) and Suntech is off its recent highs by 25% (now at $15 compared to $90 in 2008). SPWR is down about 20% from its recent highs. The Canadian darling is DFE, and it alarmed investors when it reported sales for the quarter of $5 million. No amount of Abra-ca-dabra's will light the fire under DFE or the solar stocks until the economy as a whole has enough of a foundation built for management to make some discretionary, socially responsible decisions. It is interesting to see that improved results lately for the market as a whole is more a function of cost cutting than sales growth. In other words, the economy is not growing fast, but profits are improving due to cutbacks in corporate spending.
If you believe, like I do, that DFE has the structural and financial soundness to survive and eventually thrive, there should be some great opportunities for investing on the horizon. I believe in DFE, based on having Dr. John MacDonald at the helm and a solid management team who have been schooled by him.
I am a private Market Analyst, who completed my FCSI from Canadian Securities Institute in the late 1980s, after suffering a financial blow in the market in my early days of investing. Despite this, I was not immune to some downside grief in the 2008 meltdown, and caution that my interest in solar started from personal interest. I do not have any relationship with DFE or other publicly-traded company in this space. I do hold some DFE stock, but not a significant volume.