Stock Gumshoe

Just a quick note here for you, no complicated teaser to suss out.

I received a brief email from Steve Sjuggerud, one of those Daily Wealth missives, and in it he teased a recent recommendation as follows:

“For my paid subscribers, I uncovered an extraordinary opportunity – the “Hillary Trade.” I found a tech stock that happens to own half of a solar power company… and its stake in the solar company is worth more than the tech company’s entire stock market value!

“Out of respect to my paying subscribers, I can’t share that opportunity here. But there are other ways to make this bet… and spread your risk… For example, you could own one of a handful of alternative energy exchange traded funds (ETFs), like the PowerShares WilderHill Clean Energy Portfolio (PBW).”

Now, I obviously can’t be certain because that’s a pretty limited clue, specifics-wise … but I think I can be almost certain that this is teasing …

Cypress Semiconductor (CY)

Avid readers will remember that we looked at this one a little while back, as part of a writeup of a Navellier solar teaser … Cypress does own a bit more than half of SunPower, which technically isn’t quite worth more than CY’s market cap, but it is getting close, and you could make the argument that half of SunPower is worth more than $4 billion if you argue that SPWR is currently undervalued, as some folks do. Nothing of substance has changed at either company since the comments in this space a couple weeks ago.

I don’t know whether or not they’re right, but I do appreciate that SunPower is the big American company in this business, with the most efficient traditional solar panels and a good distribution network, and if Sjuggerud’s “presidential trade” is right and we’re going to see even more investment in solar energy under the next administration, this would be considered one of the leading companies to benefit — along, of course, with the other big ones like First Solar and Suntech power, and probably many of the tiny ones, too.

And just as an aside, my next door neighbor here in Washington, DC just had solar panels put on his roof, which he calculates will take about 20 years to pay for themselves even with the (fairly modest) federal tax credit — the city apparently doesn’t throw in more credits like California does. But who knows, if natural gas goes much higher and skyrockets electric rates, or he gets to sell his carbon credits someday, he might get to cut that number down significantly. And there’s the psychological benefit, too, even if you don’t consider the environmental benefits — he does seem to get a bit giddy when he stands out by the electric meter on a sunny day, watching the numbers roll backward.

The panels were put in by an authorized SunPower provider, by the way, who bragged about that connection with big signs on his truck.

And no, sadly, the installer was not Akeena Solar.

So I’ve now covered teasers for many of the big solar companies, including SunTech Power and Trina Solar from China … but here’s yet another solar company tease.

This one comes from Andrew Gordon of The Wealth Advantage, which will run you about $1,000 a year (though they’ve got a “free trial” period like most of these guys). In exchange for your subscription, you get a copy of the special report, “Solar Windfall: Get Rich With The Best PV Maker.”

And Andrew Gordon is also actively recommending SunTech, by the way — he gives that one up for free in his email ad. But he reserves this second PV idea for paying customers. Don’t worry, the Gumshoe reserves it for anyone who wants to read the rest of this writeup, for free.

This one is not an argument — as we saw with the Chinese companies — that they’ve got the lowest cost PV cell or that they can produce the highest volume most quickly. They’re arguing that this company instead has the best, most efficient cell, which is going to be key to making solar power competitive with dead, rotten dinosaurs in the absence of government subsidies.

This company’s claim to fame is that they’ve developed a more efficient cell that converts energy at 22% efficiency, better than the standard 15% or so that current cells get, and they have a panel that can generate 315 watts, which I guess must be particularly impressive or they wouldn’t brag about it.

So, the other details:

Revenues have gone up by 2,200% in three years ($10 million to $230 million).

“They’ve stated publicly that they want to push down their operating expenses to only 10%”

They should have 200MW of capacity by the end of this year, and double that within three years.

They IPO’d last year (just like Suntech and Trina and some others)

So what is this “best PV maker”, according to The Wealth Advantage? Well, you can find out by subscribing if that’s your thing, and you’ll probably get an interesting report and some follow-up information.

But if you just want the name of the company, and you don’t want to pay for that — since you’re a competent adult and you can do your own due diligence, thank you very much — well for that, you can just come to your friendly Gumshoe. Let me just tighten up the straps on my cogitationizer for a moment …

OK … this photovoltaic maker is …

SunPower (SPWR)

And actually, “last year” is slightly wrong for their IPO — the initial spinoff from Cypress Semiconductor, which still owns the lion’s share of this company and has slowly been selling off wee chunks to the public markets, was at the end of 2005. So it’s possible they’ve been flogging this email for a few months, or that I was forwarded a slightly stale one.

And for full disclosure, this is a company that I have a loose connection with — I own some call options on Cypress Semi, primarily because of their Sunpower ownership. Cypress bought Sunpower a while back, when it was a tiny unprofitable pv maker with a good idea, and plowed some cash in to build them into a major player. They’ve done that, and now Sunpower is really the only thing valuable that people see in Cypress — Cypress owns roughly 2/3 of Sunpower, and is trading for about 3/4 of Sunpower’s price, so you can see the other parts of Cypress don’t get much love.

(If you want to do the math more precisely, Sunpower’s market cap is about $4.6 billion, Cypress’ market cap is about $3.5 billion, and I think the last reported ownership percentage by Cypress was 65% of SunPower).

So if you think SunPower is a good investment, it might also be worth looking at Cypress — the theory goes that if SunPower is fully spun out it will be worth more as an independent company, and therefore Cypress would get more than the current value for their shares, which would mean that you essentially get Cypress’ semiconductor business — which no one likes very much, to be sure, but which must be worth more than “nothing” … for free. Phew.

So there’s some meat for you to chew, but don’t let the fact that I own some shares color your understanding of the situation — I’ve owned these LEAP options for a long time, and haven’t spent any time with the financials lately to understand whether it’s still a reasonable investment (aside from the fact that you don’t know me from Adam, so why would you care what I think?)

So let us know what you think, eh? Maybe we’ll all get smarter together.

And just as an aside, I think it’s time we all felt a little sad for Evergreen Solar and First Solar — they’re not getting any teaser love from the newsletters during this latest solar boom, at least not the ones I’m seeing. Poor guys.