Eileen's picks

A "make up" purchase

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As profit-taking on high-flying foreign stocks set in with a vengeance yesterday, I got to offset the depressing feeling of sinking in the ratings with thankfulness that I had safely stowed $100,000 in cash while prices were at or near their highest.

I also found I had to make a purchase because as stock prices dropped, the percentage I was holding in cash was nearing 35%. In real life that would be fine, but as we're all aware, a competition is not real life, and I didn't want to risk non-compliance as we're nearing the point non-compliant portfolios will be eliminated from the competition.

So what to buy?

I hadn't made up my mind yet on large cap US stocks, so I went back to one of my original choices that never made it into my portfolio. I would have liked to buy PBW, an exchange-traded fund specializing in alternative energy, but once again competition rules stood in the way. So I looked for a single stock that was as much of a broad-based choice as possible.

I settled on LDK Solar Co., Ltd. (LDK), a manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells. LDK sells multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar modules. The company went public June 1, and it is helping China meet its pre-Olympics clean air objectives as well as selling to companies all over the world. A friend who lives in Washington State tells us they see and smell the pollution from China on certain days, so it's a positive sign for all of us as well as LDK that China is investing heavily in alternative energy.

StockScouter doesn't cover foreign stocks, and it's too new for StarMine to have reliability data yet. Morningstar rates their profitability an A- and the 2 analysts covering it say (and have said through its meteoric rise) "Hold".

Argus Research said on August 24:

"We are initiating coverage of LDK Solar Co. Ltd. (NYSE: LDK) with a near-term
HOLD rating and a long-term BUY rating. LDK is a Chinese startup manufacturer of
multicrystalline solar wafers, the primary component in photovoltaic solar energy cells.
The market for solar energy is growing rapidly thanks to the increasing demand for clean,
renewable energy, though solar power still depends on government subsidies to be
competitive with fossil fuels. LDK is looking to expand its business outside of China and is
rapidly adding manufacturing capacity. While LDK's long-term prospects appear bright,
the shares have risen substantially since the June 1 IPO, and we remain cautious about the
stock at current prices."

After dropping more than 10% yesterday alone, LDK hit my limit order price of $58 just before the market closed, and I bought about $17,000 worth, enough to keep me in the 29% - 31% cash position I am aiming to maintain until the October earnings reports are over. The first time I bought LDK (when it landed in my practice portfolio) I bought it on August 16 when it hit my $34.50 limit order price, and since then it's risen to a high of $76.75, so I'm reasonably confident in my current purchase price.

Now -- barring more plummets that don't trigger my limit orders -- I just watch my compliance numbers, read your posts and research until earnings season is over.