FSLR Downgrade; Falls; Is Still Overvalued

Originally published at The No Buy List:


Barrons wrote about First Solar's weaknesses and competitive threats this weekend (Reuters coverage of Barron's commentary here), and an analyst, FBR Capital Markets, followed up Barron's with a downgrade on Tuesday morning.

The FBR analyst, who slapped an "underperform" rating on FSLR, mused that "recent checks indicate at least one of First Solar's top customers has already switched from First Solar to a silicon-based module vendor for a project that is currently under construction."

The Yahoo! article covering the analyst downgrade elaborated. "Hosseini noted that FBR's meeting with the KfW Bank Group, a Frankfurt-based development bank that lends especially to economic, social and ecological projects internationally, revealed that its year-to-date photovoltaic project backlog has shifted dramatically toward silicon-based modules compared with its 2008 thin-film-focused mix."

I have previously drawn similar conclusions on this blog and on Student Stocks. First Solar is a company that is ALREADY overvalued even before considering the significant, growing competition that they face from both silicon-panel makers and thin-film outfits. Though the share price unfortunately increased after my last article, I made (real) money in the past shorting FSLR from $280 to $140. Though shares have fallen $20 (10%) since the Barrons and FBR pieces, shares still should have plenty of downside room. I tried to short FSLR a few weeks ago (shares were at levels similar to today's price) but none were available.

I continue to dislike FSLR shares at this price, in this environment. I'd never go long, and I will be considering initiating a short position.





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Final Kindle Thoughts: Good Device, Way Overpriced

I have enjoyed writing about the Kindle and Amazon.com on multiple occasions over the past few weeks, so I decided that I'd try to bring everything together in one last post on this topic.

Both the Kindle 2 and the Kindle DX are attractive devices that perform niche functions spectacularly. If you're into reading books, both devices can make that hobby better. The Kindles have the ability to carry an entire library of books everywhere, and the ability to add to that library instantaneously from anywhere courtesy of a Spring-powered network. The e-ink in the reader is easy on the eyes, allowing for extended reading without the eyestrain that often comes from extended reading of an LCD screen.

One of the best aspects of the Kindle (which often goes unreported) are the thousands of free titles available for it. Virtually every book that is off-copyright can be read for free on the Kindle (as on any other e-book reader). A Kindle user can read all of Shakespeare, Mark Twain, and more without spending a cent on the literature itself. The content is often available for free in the Kindle store (which means easy wireless downloads anywhere) or can be found in PDF format, which the Kindle can also utilize.

That function, coupled with a price decrease could be the feature that expands the Kindle's market appeal. The current price of $359 is still prohibitively expensive, as the $5 bills saved on Huck Finn or The Merchant of Venice take way too long to add up. But if Amazon was able to offer Kindles to schools for a price closer to $100, the savings would add up and schools may be motivated to integrate the Kindle into textbook curriculum.

So my reoccurring analysis is that the Kindle is a solid device that prices itself out of practicality. The bookiest of bookworms may be able to see some savings and yuppies may buy the device for the "cool" factor, but it is not yet practical to substitute the Kindle for paper books. But more and more e-readers are entering the market, which should force Amazon to price its reader more competitively in the future. I don't doubt that there will be a day when many 7th-graders read Uncle Tom's Cabin on an electronic reading device. But today is not that day.

And the same overpriced thesis can be applied to Amazon shares. Amazon is a great company that has allowed me to make money (via selling on the website, not by owning the stock). As eBay continues to slide towards irrelevancy, Amazon will become even more dominant in e-retail. But shares are ahead of themselves, and the potential for medium-term price appreciation from this point seems minimal.

Lastly, I feel compelled to acknowledge that my affiliate promotion of Amazon.com has surprisingly generated some decent results. I have sold two Kindles and a few other miscellaneous items via my promotion links (like the one at the bottom of this post), which have generated almost enough money for me to pay for one half of one accounting textbook. So thank you for reading this blog, and I humbly ask that if you ever make any purchases from Amazon.com, please start those purchases by clicking the link below.

Support Student Stocks by purchasing anything from Amazon.com.

On a final note, I have started my summer internship and writing will take a backseat to my real work. But I plan on continuing to post regularly, so check back for the content that you can't live without. Also, visit The No Buy List, which is a more frequently-updated compilation of short ideas.

Why I Voted Against Barack Obama

I was reading some WSJ today and came across an article that linked to this graph, which I hadn't seen before.

Graph of US budget deficit:



Please vote against big-government supporters in the next election, no matter what political party they may be affiliated with.




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Follow up to Amazon Short-Call

Originally published at The No Buy List:

Though I myself didn't short shares of Amazon.com (AMZN) despite all of my recent negatively-slanted pieces, I am glad to report that shares are sitting lower than they were on every date that I published anything about them.

AMZN's recent decline can be attributed to the general market pullback, but looking forward, shares may continue to underperform. Below is a six month chart of AMZN:

Shares are still trading at $75 though the company is only expected to earn roughly $2/share next year. Even a 50% upward surprise (meaning yearly earnings of $3/share) still wouldn't make shares look cheap.

Looking at the chart, shares seemed to touch resistance (both 50 day moving average and some previous lows) today, so further movement downward could be looked at as a weak technical sign. Shares have also clearly broken the upward trend that began in march. Looking downward, there had previously been consolidation between $60 and $65, which could be a reasonable mid-term price if the wider market continues to correct. There's still a glaring gap between $50 and $57, but I wouldn't expect that to be filled anytime soon.

The bottom line, once again, is that Amazon is a great company but AMZN shares are still overvalued. I'm personally not initiating any short position at this point, but I'd rather short than buy long AMZN shares tomorrow.

And as always, if you're in the market for one of Amazon's new Kindle readers, please do through so my link below.

Buy a Kindle 2, Kindle DX, or anything else at Amazon.

Time to Short Treasurys?

Originally Published at The No Buy List:

Is it time to short treasuries?
Seeking Alpha contributor Larry McDonald thinks so.

Many market analysts and observers have been screaming to short Treasurys for months as rates have hovered near all-time lows. Even Warren Buffet has now acknowledged that the current treasury situation appears to be bubble-like.

I agree that the current Treasury bond environment is unsustainable, but "when" is the key unknown. I was early when I called for an oil-bubble implosion, and I have also been early on shorting stocks like FSLR and CMG. But yields for Treasurys can't really get much lower, so it seems like downside risk for the shorting instruments (TBT) might be more limited.

The article is worth a read, and you can check it out here:
Read "Rising Treasury Yields Could Mean Its Time to Short Them" at Seeking Alpha.



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E*Trade Monthly Statistics Give Investors Hope

Today, E*Trade (ETFC) released its monthly customer statistics, and the statistics were pleasantly surprising.

The full run-down of statistics can be found here on Yahoo! Finance, but I'll summarize some important stuff below:

Total gross new accounts:

75,624

Net new accounts:

29,393

End of period total accounts: 4,518,638

Total customer assets:

$

121,779,000,000

Also:

"Total Daily Average Revenue Trades (“DARTs”) increased 7.2 percent sequentially and 34.5 percent from the prior year to 230,345." Plus, "Asset flows continued to be positive, as the Company realized $300 million in net new customer assets during April, marking the seventh consecutive month of positive inflows." (quoted from linked article).

ETFC's brokerage business is obviously healthy, which is an encouraging sign considering the overall company's murkier picture. ETFC recently announced that it would sell $150 million in common stock, boosting capital reserves to meet regulatory requests. The shares would be sold "from time to time at market prices" by JP Morgan.

As I wrote in March, ETFC shareholders will have to wait and see if the thriving brokerage business can endure and outlast losses from the asset-holding component of the business. The capital raise and continued healthy customer statistics are promising, though the battle is likely far from over.

I have accumulated some more shares of ETFC over the past few weeks after shares fell nearly $1 from the recent highs near $2.50. I plan on continuing to occasionally buy shares on weakness as long as ETFC's business doesn't change materially.

On a final note, I'd like to criticize another analyst (partially because my material is often scrutinized by commenters here and on Seeking Alpha). Rick Aristotle Munarriz at The Motley Fool wrote this article, where he did a great job demonstrating that he knows nothing about E*Trade.

He writes "Either way this is a brokerage growth story." Sorry, Aristotle, but that is incorrect; it is a story of inadequate capital cushions to cover losses on portfolios of mortgages and other troubled assets. Any naive investor who thinks about buying ETFC shares based on that article will have been horribly misled.

It is very dangerous and unprofessional for Motley Fool editors to let that article hit the internet. As someone who has been criticized for not thoroughly researching, I don't know how a professional writer can publish an article where so much material information is omitted. Shame on you, Motley Fool.

On a related note, I'm available for hire for freelance writing. Motley Fool, if you're interested, feel free to contact me at studentstocks@gmail dot com.




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Time to Short Chipotle Mexican Grill?

How's this for a nice throwback - Short Chipotle Mexican Grill (CMG).

On this blog, I have written plenty about CMG's ridiculous valuation in late 2007 and early 2008. I was never actually able to short CMG shares, as I could never find any available, but that was ok - my initial call on October 31, 2007 was a bit early, and I would have probably covered as shares rose from $130 to $150. However, my thesis was eventually vindicated as shares fell from $150 to about $40 over the course of 2008.

Now shares have recovered back to about $80, and armchair analysts are once again labeling CMG shares as too expensive. Though company results have been impressive over the past few quarters, there appear to be some cracks under the surface that will cause a slip-up going forward.

Two article below are worth reading: The first, at Zachstocks, is a general overview on the bearish CMG case. The second is another piece at Seeking Alpha about recent insider sales of CMG shares.

Read the article "Chipotle - A Tasty Short Opportunity" at Zachstocks.
Read "Why are Insiders Losing their Taste for Chipotle" at Seeking Alpha.



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