And as we continue the rundown of the most successful teaser stocks of the year, here’s number two. This is a solar stock, so obviously it has done well this year (I think LDK Solar is the only one to come to mind that hasn’t ramped up consistently nearly all year). And in addition to being the second-best performer among the teaser stocks this year, this is a well known company, a leader in its field that has been recommended by many other newsletters … and, for what it’s worth, the most successful (by far) teaser pick that Tobin Smith has yet sent our way — it’s up over 150% since it was picked at the end of March.
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The following was submitted by loyal Gumshoe reader and Irregular Streetsifter, who has solved and written up a few for us before. Your friendly Gumshoe has done almost no editing, so this is Streetsifter’s work through and through … thanks!
Using their words, a “measly dollar” will buy you the solution to the two matching teasers from Ian Cooper and Christian DeHaemer, co-editors of the Taipan publication Red Zone Profits. But when you examine the details on the order form, you’ll see that after thirty days your one dollar trial subscription will be automatically renewed for $295 for every three months, bringing your annual total to a not-so-measly $1,180 per year. Both teasers promise to reveal a polysilicon manufacturer whose shares, currently selling for less than ten dollars, “will be trading at well over $50 a share” by next spring.
Of course, the Gumshoe can’t say whether the touted profits will ever materialize, but regular readers already know that you’re not going to have to pay even the first dollar to share the solution.
Both teasers (it’s really just one teaser posted by the two editors under their respective signatures) contain the following bullets:
• A company that just booked a $185 million deal to outfit a leading European solar technology company in polysilicon for the next seven years…
• One that’s signed another seven-year deal with a Fortune 500 electronics producer that could bring in $370 million…
• One that has been commissioned by the world’s largest solar module manufacturer for ten years and $678 million…
• One that is looking to bring in about $1.2 billion in the next ten years from polysilicon supply contracts.
With that many clues, the Gumshoe’s Cognolator (on loan to Streetsifter) doesn’t even need to warm up to operating speed before identifying the mystery stock as
Hoku Scientific, Inc. (NASDAQ: HOKU)
A Hoku press release contains confirmation matching the listed bullets. The seven year $185 million deal is a contract between Hoku Scientific’s subsidiary, Hoku Materials, Inc. and and Global Expertise Wafer Division, a subsidiary of Solar-Fabrik AG. The second seven year deal for $370 million is with SANYO Electric Co, and the $678 million ten year agreement is with Suntech Power Holdings Co., Ltd. The cumulative total of these agreements is $1.2 billion.
Tread cautiously through the polysilicon, however, since Hoku has already announced that second quarter revenue will be below analyst’s estimates, and the company is predicting a net loss of 1 – 1.2 million dollars. And their polysilicon production plant in Pocatello, Idaho is still under construction.
On June 6th of this year, the Gumshoe posted a solution to another Taipan solar energy stock, Sara Nunnally’s Material Profits Wildcatter tease for SOEN, and it certainly hasn’t qualified as a stellar performer. Whether Hoku will live up to the touter’s expectations is a subject for your own due diligence, but the solution comes to the tease – and the retention of your “measly dollar” - comes from your trusty Gumshoe, with thanks to regular contributor Streetsifter.
Now back to the Gumshoe’s words — I couldn’t resist adding a little bit. Solar teasers are thick on the ground, as Streetsifter says, and it’s getting so even your grandmother’s likely to be talking about the polysilicon shortage. It’s arguable whether we’re still in the “sweet spot” for polysilicon, in my personal (and probably flawed) opinion. I own one of the major polysilicon producers, MEMC Electronic Materials, and I’m growing nervous because every single major manufacturer is dramatically ramping up capacity to fuel the solar boom … and lots of little guys like HOKU are coming out of the woodwork with plans for a poly plant and a dream.
That’s not to say this isn’t a great one — but I wouldn’t assume, just because we have current high spot prices for polysilicon, that every chemical or wafer company that tries to exploit those prices is going to be successful. One need only look as far as LDK Solar, an upstart in this area and a favorite of Robert Hsu’s, that fell precipitously because it seems no one is really sure, still, whether they’re stretching the truth about their inventory.
If you’ve got a yen for solar, here are bunch of other solar and wafer teasers we’ve worked out over the past month or so:
SB-1 Energy Dividend
The Biggest Solar Energy Project Ever!
Robert Hsu’s Red Hot Solar Profits
Best to all, and extra thanks to Streetsifter for writing this one up for everyone!
Well here we are, just a day or two after checking out Robert Hsu’s latest solar teaser and we’ve got another one for solar. No surprise, I suppose, when oil seems permanently stuck over $80 a barrel it’s certainly true that solar and all other alternative energy plays are getting even more attention than they had previously enjoyed.
But anyway, this one is from Jeff Siegel for Agora’s Green Chip Stocks, and it’s got a very scientific sounding opening:
“Using a source officially discovered by NASA in 1978, a small California company has perfected a way to harness the ‘Earth’s Energy Budget,’ which NASA has measured at 174 Petawatts per day.”
That “Earth’s Energy Budget” business, as you may not know, is just the sum total of all the solar radiation that enters the earth’s atmosphere. And much of that 174 Petawatts does indeed hit the surface of the planet, though harnessing even a measurable percentage of that is of course an entirely different story.
Jeff notes that 1 Petawatt is enough to run New York City for more than 10 years, just to give you some idea of the scale.
But back to our clues — we’re looking for “Endless Energy: The tiny stock that’ll bring it to every home.”
This company sells what they call “Building Integrated Photovoltaics (BIPVs)”, which in essence are photovoltaic cells that, instead of being built into big frames and covered with glass, like traditional solar panels, are integrated into building products. So they sell membrane roofs that have solar panels built in, flush with the surface, and roofing tiles that are each little individual solar panels that I suppose must be wired together into some kind of system.
And that may indeed be enough to solve our teaser — there aren’t a lot of companies doing that. But let’s look at a couple other clues:
They have a market cap of about $55 million, and a share price of about 45 cents. He also talks about oil trading at $73 a barrel, so we know the ad is a little bit long in the tooth.
He compares this company to other firms that have had “disruptive” new technology in the solar energy arena, like First Solar.
And he talks about other things that will push the share price higher — an extension (he mentions eight years, which is what the solar industry has been pushing for a couple years) of the tax credits for solar installations, and the higher fossil fuel prices that should hit home over the next cold winter. The tax credits, as far as the latest info I read, currently expire at the end of 2008.
So what company are we talking about here?
The Gumshoe provides, of course: This little firm is …
Open Energy Corporation (OEGY, traded over the counter)
The shares have climbed a bit since this teaser was first written apparently — they’ll now cost you fifty cents a pop, and the market cap has climbed to $60 million from $55.
Which is, of course, immaterial if the company is really going to “profit more than almost any other solar manufacturer on the planet,” as Jeff tells us.
Right now, they’ve got a lot more debt than cash, they’re trading for about 12 or 13 times book value and annual sales. They’re very unprofitable and I don’t know what it will take to make them profitable, or even to bring in positive cash flow, but their sales have jumped about 200% year over year … so that’s something.
The company really does build BIPVs, and they do have real sales and real customers — they did indeed have installations on the Savoy Hotel in San Francisco, and at the University of Toronto, as mentioned in the teaser. They were also mentioned in a segment on the Today Show, though that was nearly a year ago — which to me makes it seem a little sad that they’re still preening with the NBC peacock on their home page. I suppose it provides some legitimacy, which always helps with an OTC microcap stock. This is the page that describes their main products, if you’re interested.
I certainly like the idea of solar power, and I noted in my teaser writeup of LDK Solar some of the concerns that I have about capacity buildout in the solar supply chain — but for the end producers, that capacity buildout should be largely positive. If they can get cheaper raw materials, that could only help.
My main fear for this particular company, aside from product-related concerns about reliability or longevity compared with traditional solar panels, is, as with so many other teaser stocks, competition. (I have no factual basis for being worried about reliability or longevity, by the way, I’m just concerned that their products look a lot less substantial than the solar panels I’m used to, which is, of course, their main selling point, too).
Beyond the fact there are many other companies that also offer solar shingles or tiles of various types for this same market (and I have no idea how this company’s products compare with their direct competitors), I would certainly also expect that the big solar cell manufacturers are also developing smaller profile, more integrated cells.
And beyond them, we also have the innovators at the other end of the spectrum — the nanotechnology solar companies that are creating really thin film solar power technologies, including a film that is sprayed or printed onto foil that would clearly leapfrog Open Energy’s technology and, if they are as successful as they believe, be much cheaper than even the big bulky solar cells.
I don’t say this to imply that this company will not be successful, or to scare you off entirely — nearly every company has competition. I just like to call attention to this a little bit, because one of the standard techniques of newsletter ad writers is to describe the massive market and get you excited about the potential, them imply that the company they’re teasing is the only one who can meet that market … which is almost never true.
In case I haven’t made myself clear, I’m no expert on solar power despite the dozens of solar teasers I’ve seen in the last few months. I certainly assume that the truly thin film producers are generally a little ways off from making a profit, and maybe their stuff won’t really work in the real world — there are certainly plenty of risks at the edge of innovation, as much as there are risks in relying on 1970s photovoltaic technology … I have no idea what the solar power industry will look like in five years, let alone 25.
So … there you have it. At least one little interesting solar cell company, which is trying to make solar power generation work better with existing building materials and techniques. Is this a stopgap, or a revolutionary development? Will their plan work, will they form a competitive and sustainable niche, and will they be able to generate a sustainable profit? I have no idea … if you think you know, please share with us.
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