Whilst SCTY would never have qualified for investing in for Saul on the basis that it is yet to make a profit, SEDG has and does…Clearly the Paris agreement and the extension of the tax credits have been material to the success of these companies and stocks. Whilst it has come good for both companies for now, it highlights just how much of a binary bet I have been taking in these plays. Had I really learnt enough from Saul I would either not have been in them or have exited at the realization that this was more akin to gambling then investing.
I would be interested in understanding from Saul how he feels SEDG was a valid investment choice as opposed to an out and out gamble but for me now; had I been as ruthless as Saul has been on BOFI, ABMD etc I should have been prepared to exit - at a loss if necessary had I possessed his investing metal faced with what amounted to be an emerging red or black casino bet on the regulatory landscape. Whilst I might have hoped for these regulatory outcomes hope is not a strategy!
Ant
Hi Ant, While I really like Elon Musk, I feel that he is an idealist who wants to change the world rather than a company CEO who wants to make money for his companies. While I was lucky with a long run up on TSLA a couple of years ago, and have toyed with small investments in SCTY, I never could understand their finances or how they would actually make money. I have therefore been out of my small positions in SCTY for a long time.
You ask whether I thought SEDG was risky. Here’s what I wrote in the Mid-Quarter Review:
Isn’t solar a risky field to be in?
Heck, Yes! Government subsidies are supposed to expire at the end of 2016. Plus, the falling price of oil has not only killed the oil companies; any company related to solar has been killed too…
To summarize
This is a lot riskier company than SWKS. It’s younger, it’s much smaller, it’s headquartered in a dangerous place (although it’s scattering its factories around the globe), and it’s in an industry (solar), which will probably grow enormously in future years, but which right now is facing some big worries and headwinds. On the other hand, it has a product that everyone in the industry seems to want and need, and that it keeps improving and coming out with new models of, so that it’s growing incredibly fast.
As far as a valid investment choice, look, their revenues in 2014 (rounded off), were:
31,45, 67, 73
and in 2015, so far, have been:
86. 98, 115
Many companies would be glad to have the sequential quarterly gains they have each quarter as annual gains.
And their adjusted earnings, in 2014, I calculated:
(12), (06), 06, 09
20, 31, 36, ...
You could see the 36 cents last quarter coming, up from 6 cents. You can see at least 40 cents coming this quarter, up from 9 cents.
Sure, without the renewed tax credits, solar sales would slow, but solar panels would keep falling in price. Their revenue was going to go down at the end of 2016, but how much? At the rate they are growing, by the time they got to the end of 2016 their quarterly revenue would be about $200 million. If it dropped by 40% to $120 million and restarted from there, they’d be where they are now. On the other hand the PE currently, after the 40% run-up to $27, is 28. So it still is a risky position.
Best,
Saul
