The New Power Fund – April Update

The New Power Fund
By Sam Jones
Exclusively for InvestorIdeas.com
April 23, 2007

Peter Lynch once made this bold statement to investors; “Invest only in what you know and understand”. Of course that does not imply that all information is understandable at present nor that we will have complete access to all of it. But we do the best we can toward that end and for those investing in the Renewable Energy sector, that means a lot of reading, observing and networking. Along with my daily push ups and sit ups, I look forward to at least one hour of reading about trends in the renewable energy sector. I find myself drawn to the work of others who are capable of identifying the real issues as well as proposing solutions regardless of the magnitude. Conversely I am almost disgusted by those defeatists who say, “too little, too late” and simply give up. I find that attitude to be nothing different than giving up on the welfare of your children or grandchildren – seriously.

This week, I was enamored with a fine piece of work in the New York Times magazine by Thomas Friedman, author of best seller, The World is Flat. He makes a few very important and unique observations that I would like to share toward our mutual inspiration. He states that going green in our energy use goes way beyond efficiency and economics. It has a direct inverse correlation to the pace of freedom (First Law of Petropolitics) in countries that are highly dependent on oil exports. Of course, he’s arguing again the root cause of unrest in the Middle East. In a nutshell, high oil prices drive authoritarian governments in oil countries to misbehave.

Friedman goes further to expand the global challenge to include clean energy solutions available at the “ China price”. The China price is the low cost alternative of high CO2 emitting coal fired power plants. There is an enormous opportunity for free market capitalism to drive technology and adoption of clean tech energy to this low price bar in developing countries in the next decade. But recent regulatory barriers to trade with China imposed by the Bush administration are once again a move in the opposite direction and we simply don’t have time for this madness. He suggests that for real change to occur in mass, we will need a supportive regulatory environment that is pro-earth. The earth doesn’t vote so the solution will not be pain free whether it comes in the form of a heavy gas tax or the much needed US adoption of the Kyoto Protocol. Either way, carbon emissions must be assessed a higher value in the future and that needs strict regulation and enforcement. We’ll need new leadership to say the least driven by the public outcry. We the people can be a powerful force in facilitating change globally. American’s love to bitch and we can be rather loud, vote with our feet and our money. Let’s talk about investing in New Power today.

The renewable energy sector is on fire again after a break for a brief 204 market days. For the remainder of this update, I’m going to tell you what I am doing with our New Power model in order to emphasize how we arrive at our investment allocations and why. This is not intended to be some myopic and self-congratulatory forum but to help you understand how to manage your own investments in the renewable energy sector.

The majority of the stocks are now trending higher and making money in this sector is relatively easy now. Total exposure to the sector is really the only thing to worry about when the bulk of securities are moving up. Our New Power strategy is currently under invested with 79% invested across 10 stocks, 1 mutual fund and 1 ETF. The truth is I missed a few buys and I’m afraid to chase any stock that has moved up 20% plus as many have. The lesson here is simple. Do not chase! If you missed something, there will be another opportunity. Chasing speculative stocks is a recipe for serious losses. With that said, this morning I added to our Suntech Power Holdings (STP) position bringing it up to a full 7% allocation from 4%. STP was actually in the Freidman’s article in the Times as one of the pure play Chinese manufacturers of Photovoltaic panels that is uniquely positioned to capitalize on Chinese demand for alternatives. Shi Zhengrong, the owner of the company is now one of the richest men in the world. “…if it takes off, China could do for solar panels what it did for tennis shoes – bring the price down so far that everyone can afford a pair”, he says. STP appears to be completing a very predictable consolidation after rising more than 60% in 3 short months. As a technical chart reader, I see an emerging inverted head and shoulders pattern which is one of the most prevalent bullish patterns out there. If the recent lows hold, the pattern suggests another robust rally out to all time new highs for this relatively new member of the NYSE.

Speaking of Solar companies, did I mention that I really like Evergreen Solar (ESLR). I’m being sarcastic of course – please read the last update if you haven’t already. We took a full position in ESLR in early January of this year and the stock has moved 48% through yesterday, not including a gain of 8% today. In the short term, it’s overbought and needs to correct down almost 16% before I would consider adding to it. But alas, we are fully invested so that decision is left to those that are not monitoring risk reward statistics over a rolling 30 days window. The message is hopefully clear. If one is to play in this arena, you need to be monitoring the hold universe of renewable energy stocks daily ranking and sorting performance metrics over the last 30 days. I would strongly suggest buying the stocks that are the most on a year to date basis because you will always find yourself buying my shares and others like me. At this point, I have no plans to sell Evergreen Solar beyond taking profits back to our original full allocation of 7%.

Two weeks ago, our rank and sort model also identified Capstone Turbine (CPST) as a new position meeting our risk/ reward criteria. Capstone develops microturbine technology for use in stationary distributed power generation applications. I ripped that off my real time quote descriptions if you couldn’t tell. In human terms they provide ultra efficient mobile power generators use in hard to reach war zones and natural disaster recovery centers. I have made a lot of money in CPST in the past two years with a couple simple trades but due to volatility, a full position in this stock is capped at 4%. We now own 4% after a series of three purchases in the last two weeks.

Other current positions are listed below. Our “New Power” model just made an all time new high yesterday which does not appear to be a resistance point of any magnitude. The Power Shares Clean energy ETF (PBW) is still 16% below it’s high of last May as a point of reference to the fact that selectivity matters, a lot. You can always view the details directly through our website if you’re interested. www.allseasonfunds.com

Current New Power portfolio

American Superconductor (AMSC) 6%

Cabot (CBT) 5%

Capstone Turbine (CPST) 4%

Entergy Corp (ETR) 5%

Evergreen Solar (ESLR) 9%

FPL Group Inc (FPL) 7%

Guiness Alt Energy mutual fund 10%

Power Share Clean Energy ETF (PBW) 10%

Itron (ITRI) 9%

Ormat Technologies (ORA) 5%

Sunpower Corp (SPWR) 5%

Suntech Power Holdings (STP) 7%

Cash 21%

Good luck to everyone, until next month

Sam Jones
President/ Senior Portfolio Manager
All Season Financial Advisors, Inc.
Registered Investment Advisor
www.allseasonfunds.com

TOP