First Solar CEO departs... Cuts guidance... The Digital Utilities... How to collect huge, super-safe income...
"[T]hings are about to get a lot worse for First Solar..."
In his October issue of Stansberry's Investment Advisory, Porter reinitiated one of his favorite short positions of the last few years, First Solar...
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The company has two big problems. First, its competitors can now make better solar panels for less, using polysilicon. And second, the Germans [whose government subsidized FSLR's sales] just came to their senses. Of the two problems, the German issue is the most important. |
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In any case, the future for thin-film solar panels (the kind First Solar makes) is grim. No one should have ever bought the damn things in the first place... And the company that made them couldn't make money selling them, even when the Germans were bankrupting their country to buy them. |
Shares of First Solar plunged more than 25% yesterday after the company announced Chief Executive Officer Rob Gillette would step down "effective immediately." It said Chairman and founder Mike Ahearn would become interim CEO. The market, no doubt, feared a fraud – a typical reason for sudden CEO departures.
After close of trading yesterday, First Solar announced the date for its next earnings report, November 3. And before market open today, Ahearn cut sales and profit guidance for the year and said the board wanted a shift in strategy. (It's focusing on cutting costs... a necessity, considering solar is one of the most expensive ways to generate electricity, and the German government is no longer subsidizing the technology.)
First Solar said it expected full-year profits between $6.50 and $7.50 a share, down from as high as $9.50. And it said sales would be between $3 billion and $3.3 billion, down from a forecast of $3.6 billion-$3.7 billion.
Fears of fraud abated. The stock rallied 14% today. Still, SIA readers are up more than 13% on the short in less than two weeks. But this short isn't over... We wouldn't be surprised to see some "accounting inconsistencies" arise soon.
Of all the ideas Stansberry & Associates has featured over the past few years, few have been as safe and profitable as Doc Eifrig's "Digital Utilities" income program.
This program has been income nirvana for investors willing to learn something new... and willing to do a tiny bit more work in return for safe, 15%-20% annual income streams.
As with most great ideas, we know most people aren't interested in this one. But today, we again stubbornly try to get you to consider a new investment technique that will undoubtedly make you more money, faster and safer, than just owning conventional stocks.
As Doc has highlighted many times (most recently here in DailyWealth), dominant blue-chip technology companies like Intel and Microsoft are past the hypergrowth phase of their corporate lives. They are now firmly entrenched as the leaders in their field. They generate huge amounts of cash, sport pristine balance sheets, and have thick profit margins. This allows them to pay out large and increasing dividend payments. They are as close to monopolies as the government will allow.
This "new life" for the likes of Intel and Microsoft has turned them into a new type of utility stock – what he calls "Digital Utilities." Traditionally, utility stocks have been local electric and water service providers that pay out regular dividends. Since a city only needs one electricity provider, these companies have no competition, but they are regulated by the government to ensure they do not gouge customers. They simply make a tiny bit of money every time you turn on the faucet or the kitchen light... and pass on a good portion of their profits to shareholders.
As Doc highlights, that's the case with Intel and Microsoft as well (except it's much better with these companies)...
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Intel dominates the semiconductor industry. Microsoft dominates the software industry. Each time you hop on the computer, chances are good these companies will make a tiny bit of money. |
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But Intel and Microsoft are even better than traditional utilities. They sell their goods and services around the world, so local government regulators can't control them. Regulators can't limit their profits, prices, and return on capital the way they can with traditional utilities. |
As we've noted many times in the Digest and DailyWealth, dominant dividend payers – like Intel and Microsoft – "sailed" through the August panic, while riskier assets like mining stocks, junk bonds, and shares of Netflix were hammered. These companies chugged along, generated huge amounts of cash, and increased their dividends and buyback programs.
Microsoft, for instance, announced a 25% dividend increase last month. Any rich, seasoned stock investor will tell you that collecting these types of safe dividends is the best way to get rich in stocks. But Doc has found a way to drastically increase the amount of income you can earn from these companies.
We know from reader feedback that Doc's research has radically changed the way they invest in stocks. We don't blame them... when you're safely collecting 15%-20% (and sometimes more) yields, conventional stock investing starts to sound like a loser's game.
If you're interested in learning more about Doc's strategy, make sure to watch the presentation he put together with S&A founder Porter Stansberry. Porter says if you're not using this strategy, you're missing out on one of the surest, safest ways to get rich in stocks. You can learn about it here.
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New 52-week highs (as of 10/25/11): Enterprise Products (EPD), short of First Solar (FSLR), Intel (INTC).
In today's mailbag… We said we were laying to rest the Social Security debate… but decided to let one more through… Send your e-mails to feedback@stansberryresearch.com.
"I read with amusement as 'seniors' rail on Porter essentially over his word choices, but not his position (the facts). I live in the biggest and grandest entitlement state of the all, California. Using some Ayn Rand phraseology… when the moochers exceed the producers and the looters enable generation after generation of entitlement indoctrination, we are screwed.
"Well folks, we are there; at a point of no return because too many people are 'entitled' to way too much assistance whether it's an unnecessary government job, food stamps, or Social Security. 'Take "their" entitlement but leave mine alone... it's "owed" to me' isn't going to fix the problem. Human nature being what it is doesn't give me much hope for my teenaged kids. Like Porter's word choices or not, he's right and that's probably what makes us mad. Don't shoot the messenger." – Paid-up subscriber J.B.
Goldsmith comment: Good point, J.B. People know there is a giant spending problem, but squeal at the notion of their entitlements being cut. That's why we are in a "no way out" situation.
Regards,
Sean Goldsmith
Santa Barbara, California
October 26, 2011