Power-One Trumps The Debt Ceiling

Power-One's quarterly earnings release Thursday evening allowed me to relax on Friday. Instead of reading news releases and fretting over what to do next, I went to the movies to see Cowboys and Aliens. My PWER investment continues to make sense.

They posted a good quarter. Revenues continued to grow both year over year and sequentially. Profits were good and also grew. Guidance was basically maintained. The company sees renewed activity in Europe and made good progress in North America, China, and India. Selling prices didn't crater and inventory isn't piling up. I believe it was the most positive solar report this quarter.

The stock rose today in spite of Obama's debt ceiling issues and I believe it will continue to inch upward as thinking returns to the market. Power-One doesn't have the "Chinese accounting" baggage, sells inverters not modules, and has a power solutions side of the business that accounts for 40 percent of the company. Because of the foregoing I'm hopeful that it starts to trade at a premium like FSLR does in the module business. Today PWER is still very cheap on a PEG, P/E, B/V, and cashflow basis. That shouldn't last.

Now if I was just as confident and vindicated on JASO! I've added to PWER and am anxiously awaiting JASO's earnings release and guidance in mid-August.

Cowboys win.

An Opportunity To Buy Annaly Capital Management

I pity the fools that sold Annaly today in a panic. It might have been just market makers taking out stop losses at $14.05, but the sellers, either way, were abused as the stock immediately rebounded to the $16 level. I believe it will return to higher levels as people regain rational thought. A debt ceiling issue "may" affect the government's cashflow, but it doesn't hinder mortgage payments. People pay mortgages and GSEs only have to honor their guarantees upon default. A debt ceiling crisis isn't going to cause mortgage defaults.

If the debt ceiling or downgrade crisis affects Treasury rates and all other borrowers have to pay more, then mortgage rates will increase. Annaly will pay more for debt but so will the mortgagees that fund the bonds that Annaly buys. It's a spread business and NLY isn't a trader so they hold to maturity. They don't have to take a haircut if rates rise.

Annaly isn't overly leveraged, invests mostly in agency paper, and pays an enormous dividend which just got nicely bigger over the past couple of weeks. I've added to my position today and may do so again if the panic continues. The yield is now over 15 percent. Never bet the farm, but a few acres is warranted. I pity the fools that sold today and don't buy on Monday.

By the way, I know what I'm talking about because I brought Mr. T to Council Bluffs in the mid 1980s for the town's Pride Week Parade. Mr. T probably doesn't need the income Annaly throws off as his gold necklaces are worth a fortune today, but a retired banker can use dividend income and has thankfully increased his position.

Gimmee A Break. Do Something

Much hand wringing has gone on trying to solve the nation's debt ceiling authorization. You can't avoid the posturing, political theater, and warnings on the gravity of doing nothing and having the USA default. Well I'd rather face uncertainty than follow in the footsteps of Minnesota's crack team of legislators.

Minnesota's two week government shutdown has been resolved. Minnesota's budget is now balanced. How? Trickery and slight of hand or, should I say, slight of accounting principles. The NYTs reported today "both sides agreed to balance the state's approximately $35 billion budget by finding an added $1.4 billion in revenue through accounting maneuvers, delaying payments to school districts and borrowing money against expected future payments from the tobacco industry." Brilliant!

Expect the same type of shenanigans from Washington. I hope I can continue to peddle fast enough to stay ahead of our legislative idiots and grow net worth while not becoming too cynical. Harder to remain upbeat than to increase wealth.

ADD Isn't A Stock Symbol, It's How The Market Is Functioning

Attention Deficit Disorder describes the hyperactivity of children, adults, and the Market. Parents, teachers, psychologists, and bosses can deal with the former grouping, I'm affected by the Mr. Market. The inability of markets to concentrate on what is truly important is maddening, but often helpful. We are in such times.

Investors should care about earnings/cashflow and the prospects for future earnings/cashflow. Additionally, they should keep an eye on the market's earnings yield, the inverse of the P/E, in relation to available bond yields. Stocks should move when there is a likelihood of change in those variables. They shouldn't gyrate every nano second as unrelated news is announced. But that is the world we invest in today. A world dominated by children and supercomputers. It drives me crazy, but also offers opportunities in mispriced values.

The market has recovered nicely from its Greek worries selloff, lessening the number of bargain securities. One area remains. Solar. The solar companies, with the exception of First Solar, are being given away. The Chinese manufacturers are going to dominate the module business; they are not going to go away. Some may have accounting issues, others will merge, and they all may lose money for a quarter or two, but there will be winners and the market has killed them all. Choosing between them is difficult. I've chosen JASO, TSL,YGE to spread the risk, but they are all cheap at current prices. The ETF TAN gives good exposure to solar, but it has a big position in FSLR and that is the only solar stock that isn't being given away. Big Chinese solar is cheap, but not without risk. But, at some point the ADD boys and girls will like the sector again and prices will rise dramatically.

A safer solar play is Power-One, an American inverter and power management company. It also is very cheap and has a bright future, plus the safety of not being Chinese-whatever that means. The hyperactive crowd will find this one eventually also.

Time for golf, and like in golf, keep your head down and don't pay attention to the daily drivel. Watch for future earnings, earnings yields, interest rates and not much else. Act when the ADD camp is stupid.