The S&P and Dow are at record levels, but does it matter?
Yes, it matters for those of us who are invested in indexes. For individual investors, the scenarios can be different. Of my A- stocks, just about all of them have traded on their own terms, to the beat of their own drum, for much of the year. Even my favorite (but not necessarily recommended) small caps do their own thing with a lotta swing.
Take Hoku Scientific, for example. On zero news this week (unless you consider the announcement of the earnings report date a trigger point), traders took it from $11.13 (last Friday's close) to a mid-day high of $14.39 today. HOKU closed at $14.05. Bears who doubted that the Co would receive its $25 million credit line again may have been burned again.
(Update, 2:32 p.m. Hoku Scientific CFO Darryl Nakamoto confirmed this afternoon that the credit line has been approved.)
But at this new level, is HOKU still a buy? For the long-term investor who has faith that the Co will fulfill its contracts (worth $1.2 billion) over the next 18 months, the answer is clearly yes. At $14, $10, $12, the Hoku bulls won't fret in 2009 when the PPS has doubled, tripled, quadrupled or more. At least, that's the line of reasoning. Hoku is riding the crest of momentum that began a month ago with a series of contract news. Plus, the entire solar sector is riding a tsunami, led by First Solar. For bulls who want a bargain price in HOKU, however, now may not be the time to enter. Why? Today marks the first time in the past month that Hoku's stock has finished with a daily gain for three days in a row. On top of that, the run from Tuesday's close ($12.01) has been supported by weakening volume.
• Wednesday, 11.6 million shares
• Thursday, 7.1 million shares
• Today, 4.3 million shares
That indicates another period of consolidation ahead for the hottest stock of the past month. Hoku bears dream of a tumble back to the pre-solar contract $4 level, but that ain't happening. Instead, the floor for HOKU seems to be at $12 (June 26), and beneath that, no lower than $10. (The stock was at $9.84 on July 2.)
With options expiry and earnings ahead, the best approach for long-term longs may be to turn off the tube, turn off the computer, and enjoy some summer sunshine. For wanna-be longs like myself, the technicals say wait for a pullback. Yes, Hoku does retreat occasionally. Did so between June 26 ($12.08) and July 2 ($9.84). The PPS traded sideways for eight sessions before breaking through $12 last Friday.
Am I saying HOKU is due for another 18% pullback? Heck no. But if the PPS were to pull back that much, that would leave buyers with a bid of $11.52. I could live with that. Easily. But the Hoku rocket has definitely launched. I'm the guy who was hoping to get in at $9 after the PPS spiked to $12. I'll be surprised if it takes another eight days for HOKU to make another new high.
HOKU cyberwars: At YMB, paladinmercenary provides some astute analysis to back his bullish sentiment. Paladin argues that HOKU's 2007 target should be $24 based on book value and milestone payments. His '09 outlook includes a full polysilicon production of 200MT. At 10 times full book value, Paladin sees a market cap of $2.3 billion. If he's correct, based on the current total of 14 million outstanding shares, that would translate to $164 per share.
Disclaimer: Pupule Paul has no positions in HOKU or FSLR.
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