Dear Trina Solar Limited (ADR) (TSL), I’m Back! – Billionaire Ken Griffin

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CITADEL INVESTMENT GROUPPer a 13G filing with the SEC, billionaire investor and founder of Citadel Investment Group Ken Griffin has returned as a Trina Solar Limited (ADR) (NYSE:TSL) shareholder. He now owns 6.2% of Trina’s outstanding shares, over 252 million shares. The last time Griffin owned a meaningful stake in Trina was the fourth quarter of 2008, where his stake was over 135 million shares. This recent purchase is just one of Griffin’s latest moves, which includes a 5.2% stake in TiVo (reported earlier) and a 5.6% stake in clothing retailer Express.

Griffin’s big stake in Trina was short-lived last time, where he quickly begin unloading his shares the next quarter, and held a relatively meaningless stake before getting out of the company completely during the fourth quarter of 2011. How long will Griffin stick around this time? I believe that investors and Griffin both could see upside over the interim as the solar industry shows signs of stabilization, but not without inherent risks.

Trina and a number of other solar stocks, including First Solar, Inc. (NASDAQ:FSLR), Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE), Suntech Power Holdings Co., Ltd. (ADR) (NYSE:STP), and LDK Solar Co., Ltd (ADR)(NYSE:LDK) have been pressured over the past couple of years due to oversupply in the industry. Trina and Suntech, two of the larger China-based solar product producers, have been working on this oversupply problem; last year both began scaling back production, driven by a slowdown in Europe.

The headwind for U.S. solar companies is the notion that funding may be drying up. However, Trina has its exposure to the rapidly growing solar market in China. The capital intensive industry, which requires large upfront CapEx, has led to speculation over whether major alternative and oil & gas companies should buy up solar companies to better fund projects. One such case was when SunPower saw supermajor Total SA take a 60% stake in the company a couple of years ago for a price that was 50% above its stock price. This could be the norm going forward.

Industry drivers

The Chinese government is planning to inject additional capital to the solar space, which should help drive demand for solar products in the coming years. Industry consolidation should further help with supply issues, where a number of smaller manufacturers have exited the industry due to uncompetitive cost structures. Market research firm ENF estimates that the total number of Chinese solar products manufacturers dropped from around 900 to 700 in 2012.

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