Tom A's Stock Picks

An alternative to LDK

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I did a lot of work on LDK: I analyzed the company in depth and from there I went on to review the entire solar industry. After completing my review, rather than make the call one way or the other on LDK, I would strongly recommend a smaller, but potentially more rapidly growing competitor: China Solar Titan (CST).

CST has a unique, patented method of converting Metallurgical Grade Silicon to the higher purity solar grade. To give you an idea of the importance of this process, please consider the following: Metallurgical Grade Silicon (98.5% pure) costs $1 per kg, while solar grade (6N, meaning six nines - 99.9999 pure) costs $200 per kg. CST's process is unique in that it does not rely on Trichlorosilane (TCS) and as such does not produce the pollutant silicon tetrachloride (STC). CST estimates their cost will be in the range of $1.19 to 1.91 per kg. There has been much environmental concern on these issues, as China is developing a reputation as a highly polluted country. The PRC is subsidizing CST because of the importance of their new, high and clean technology. Indeed, the academic work leading up to their process was performed at government expense.

The only drawback to the process is that it utilizes large amounts of electricity, approximately twice as much as the conventional methods. However, CST has a 40 year fixed price contract for low cost hydroelectric energy, reaffirming the government's commitment to make the process competitive. As an additional source of energy, they plan to set up a solar farm in the Ghobi Desert, which will supply their power requirements by tapping the area's abundant solar potential.

CST recently announced that they have pre-sold 400 gigawatts of solar wafers under a 20 year, fixed price contract to a large and as yet unidentified South Korean firm. This represents 85% of their projected production for the period. Also, a source close to the matter has stated that they also are in the final stages of negotiations with a consortium of Mideastern investors who are developing alternatives to petroleum energy exports. Their pilot plant has been producing for three months and has only recently achieved the required degree of purity, producing 2,000 metric tons per month. Total Construction Services (TCSI) is supervising the construction of their plant, in a modern suburb of Shanghai, P.R. China.

A person familiar with the investment thinking of Warren Buffett has intimated that the Oracle of Omaha will be involved, estimating that his stake will be similar to what he took in China Natural Gas (CHNG). The source quoted Buffett as saying he liked the Kaching from CHNG and figured he'd play double or nothing. I haven't talked to Warren for a while, but I gave him a buzz to ask his opinion. He said "Tommy, this stock is hot! Go for it!"

Watch for the IPO

Tom

PS April Fools