For anyone following, I sold out of my smallest position yesterday (CGNX) and put the money into a position again in SCTY.
Sold CGNX because, while they had a great quarter, they emphasized that it was a one time deal, based on a huge order from one customer, which was already filled. They are a good company and will probably continue to do well, but I had hoped they’d announce continuing big orders from this or other companies, which they didn’t. They sold off a little after the earnings announcement.
I sold CGNX at about $36.95 and bought SCTY at about $53.75. As I write, CGNX is up 6.2% and SCTY is up 10.2% from the sell and buy, but that is just luck and it could easily have gone the other way.
Thanks, Saul, for sharing your small position sale of CGNX and buy of SCTY.
I always enjoy seeing how a great investment mind thinks.
Still learning after all these years…
What made you decide to get back into SCTY now?
Saul, What made you decide to get back into SCTY now? Thanks, Tdonb
Hi, tdonb, I’m not exactly sure. Remember it’s my smallest position. I think I read somewhere that they are doing more installations than the next 50 installers combined and thought that that sounds like dominance. I also like Elon Musk. I also think that if they are doing this well while petroleum prices are falling, they ought to do even better when they inevitably go back up. But it’s not really clear in my head as to why now.
I also think that solar energy is coming inevitably. It may be in fits and starts, but if you look back a few years ago at how odd-ball it was, and think now how mainstream it’s getting. Wow, what a change!
This may be the article Saul read about them being top dog right now.
This may be the article Saul read about them being top dog right now.
Yes it was! Thanks wishitwas…!
Two things in that article were of special interest to me
1)The vertical integration seems to be a hallmark of Elon Musk operations. Tesla is in the process of building most of it’s components rather than relying on contractors. Better quality control, less shipping costs, better integration. The new battery gigafactory will have raw materials coming in one side and finished battery packs going out the other, all under one roof and one management.
There’s nothing new about vertical integration. It has fallen by the aside in many companies (including ICE autos) as their mature products become near interchangeable commodities, thus short term cost benefits become the dominant factor. That plus a shortage of reasonable priced capital and high fixed legacy costs means they no longer can do it all themselves.
2)The 43% increase in US electricity use during the last decade. That’s way more than population or industrial growth and presumably includes the Great Recession. What happened to explain this?
Server farms? Electrification of railways?
for a guestimate of future electricity usage
Under the moderate scenario, today’s most efficient appliances and equipment become the minimum standard, newly constructed buildings use 35 percent less energy, ratepayer-funded EE programs grow at current trends, and electric vehicles make up 2 percent of the registered vehicle stock by 2035. This scenario is very plausible.
IMHO , Electric vehicles will represent well over half of all new car registrations by then. Even if there are no breakthrough improvements in battery design, the present 7% annual improvement in battery price will mean that cost only 1/4 or so compared to what they cost now. Allowing for gigafactotries and mild breakthroughs it’s likely a battery pack that costs $10,000 now will cost $1500 or so by then. A price that will make ICE cars totally non competitive. They are non competitive now except for range and cost.
http://www.eia.gov/forecasts/aeo/MT_electric.cfm which seems to show declining electric energy demand growth for the last 50 years or so
Of course you can distort it by quoting 1982 to 2009 figures. Apparently recessions hit electricity growth hard.
Looking at the graph it appears the grid can handle the future. It could handle it better if some of the money the government now wastes were put into modernizing it, something that would benefit everybody.
What made you decide to get back into SCTY now? Thanks, Tdonb
Hi again, tdonb, Someone just posted this over on the SCTY board.
The gentleman from solar city is over my house right now, doing a site survey for the pending installation, and he reported that the company is signing up a new customer, on average, of one per minute right now. He also said that he and his colleagues were so busy that they’re going all over the territory and into other territories to help each other out, as they can’t seem to hire fast enough…
OTOH you would not expect an employee to say" business sucks, nobody likes our systems, the company is losing business and going broke"
. Even if it was true.
Not saying that applies to Solar City, I own some SCTY. Which long term has great future potential because like EV, the cost will come down while the cost of utility power creeps up. Short term the risk is too quick reduction of subsidies.
Admittedly the whole accounting issue confuses me. I prefer the long term loan approach. After all when people buy a house today they may take a 30 year mortgage on the house. This includes appliances like the stove, and heating/AC, stuff that will not last 30 years. Even the roof is unlikely to last a full 30 years. The potential of having solar built in to a new house has hardly been tapped. Built in costs less and is more cosmetically appealing. Design it so it can be replaced at the same time as your roof. It will be cheaper and better by then, combined replacement cuts labor cost.
Eventually somebody will design a practical dual use roof shingle- solar panel.That’s when will load up on companies making or installing them…
I like Elon Musk, but I saw this article on SCTY and the Author’s tesis is that It’s not worth it as an investment.
“Solarcity and Vivint may be growing revenues quite quickly but the kinds of profits that investors believe these companies can generate are an illusion. More importantly, their valuations are far too high, especially when you consider that they are simply striving to become utilities. They are striving to become utilities but with inherent cost and profitability disadvantages.”
Congratulations everyone for this wonderful board
Who used to work for a Company that made solar panels and went bankrupt in 2012 due to regulation changes an low prices from China
There are a continuing series of these bearish articles, all saying the same sort of things.
A 6% price disadvantage ? Even if his convoluted math was correct solar improvements even approaching Moore’s Law would render that wrong in a few months.
Need the grid for cloudy days? Batteries will make that unnecessary within a few years. Every Tesla on the road is a potential battery source in time.
SCTY is not striving to be a utility any more an your propane BBQ maker is trying to be a NG utility. Or Duracell trying to be an electric utility. All are furnishing an energy source that is cheaper or more convenient than the utility.
Utilities with high fixed costs, legacy health care and retirement costs, companies used to operating on a cost plus basis can do maintenance cheaper than a new upstart like SolarCity?Does anybody actually believe that?
SCTY overpriced? Maybe. But everything else is overpriced too, that’s what is called a late stage bull market. Will you be able to buy it cheaper sometime in the future? Probably, but it may be the depths of a bear market when most are too frightened to buy anything.
As is the case with Tesla I am more bullish on the concept than on the stock. There are reasons to be careful when thinking of buying SCTY. But you won’t find them in most of these articles. Many seem to be written by the same people, reshuffling their arguments like a deck of cards so they look a bit different each time. Somebody that needs the income from writing multiple SA articles probably isn’t a very successful investor…
OTOH you would not expect an employee to say" business sucks, nobody likes our systems, the company is losing business and going broke". Even if it was true.
Mauser, actually sometimes guys who work for companies are dissatisfied, griping, complaining and say they can’t wait to find a new job. You can’t completely discount an employee who is proud of his company and bragging about it.