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

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.

As solar installations show signs of rebounding, Trina’s aggressively low pricing should help it continue capturing market share. Even with its low-priced products, Trina has managed to maintain its solid operating margin:

Operating Margin (5-year Average)
Trina Solar 12%
First Solar 28%
Yingli Green Energy Hold. Co. Ltd. (NYSE:YGE) 12%
Suntech Power Holdings Co., Ltd. (NYSE:STP) 7%
LDK Solar -1%

Trina, and a number of other solar companies, are trading well below book value, which tends to be a solid valuation metric for the volatile solar industry. On a price to book basis, Trina is quite attractive, trading below top U.S. solar operator First Solar and other major Chinese operators:

Price to Book
Trina Solar 0.44
First Solar 0.78
Yingli Green Energy 0.87
Suntech Power
LDK Solar 7.19

First Solar recently saw an upgrade from Citigroup, putting a buy rating on the shares, following news that the solar company had bought the Macho Springs Solar project, a project that will be New Mexico’s largest solar project and power 18,000 homes when complete in 2014. Suntech, on the other hand, has announced stoppage of two of its three production shifts at its Arizona plant, where production costs are now elevated due to tariffs imposed by the U.S. government. LDK Solar is one of the companies still recovering from the 2012 demand decline. The company released guidance that shows 2012 revenue may come in well below estimates. The company expects revenue in the range of $950 million to $1 billion, whereas analyst expectations are at $1.4 billion for 2012.

Don’t be fooled

Trina is down over 65% the last five years, now trading around $5.40 with a sub-$500 million market cap, and although Griffin is taking an interest in the stock, the position is a relatively small one in the grand scope of his $56 billion 13F portfolio (check out other hedge funds owning Trina). Although Trina is well positioned in the industry, the industry itself is still speculative and volatile, as seen by Trina’s 3+ beta, so buyer beware.

The article Dear Trina Solar, I’m Back! – Billionaire Ken Griffin originally appeared on Fool.com and is written by Marshall Hargrave.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!