Sunday Update

After our shortened last week, again we have news that I want to share which I think is more important than a mid month update on our performance—particularly since last week ended in the red again.

*First off is Max Deml from Vienna with a new solar small cap he just added to his Photovoltaik Index after two other stocks exited. He only lets 30 companies into this index, and most of them are local European trades we cannot join in. But today there is an ADR, so I am telling you about ReneSola Global Ltd.

The company, which makes LEDs, solar energy parks, silicon, wafers, and modules issued 2.5 mn new shares on Jan. 11, at $16/share, raising $59.6 mn. Note that each ADR equals 10 local shares.

Also note that the stock trades at $33.55 after the issue or double what it got for the new shares and had a market cap of $2 bn (euros 1.65 bn).

The parent company is American, out of Stamford CT, NYSE-listed as ReneSol (ticker SOL) but its head office is in Luxembourg, a European tax haven. It has the ability to build for solvent utilities and commercial companies. It also does supply chain management and just-in-time energy collection, storage, and logistics. It also provides guarantees and after-sales service and parts.

Since it listed in 2008, ReneSola has shipped or supported 12 gigaWatts of solar products, to customers in 40 countries. It signed a RMB 2 bn cooperation agreement with China late in Nov. via a jv called Renesola Energy Nantong Co. Ltd, joining its China based Renesola Yinxing.with Zhongnan Industry, in the Hainan area, where it will manufacture solar pv products. It has subs all over the world, like in Romania where it just sold its solar parks under a build-transfer deal.

It has cash flow but is no earnings yet but expects to turn the corner this year earning 31¢/sh. Ir has a highly volatile trading history having in the past year traded at $35.77, its high, and (hold your hat) 85¢. As with our play on geothermal (Ormat, ORA, sold down) it gets investors in part because they want to tick all the boxes in green energy. I think that I will wait for a lower price before jumping on board but I am an old skeptic. Max is an enthusiast. While this is not GameStop (GME), it comes close.

*In Barron's this week Rupal J. Bhansali says to buy Microsoft, which I already own; SNAM, an Italian ute without ADRs; Munich Re, which costs $24260 for a round lot and obviously doesn't want retail investors in its reinsurance business; and Telefonica Brasil, VIV, trading at $8.19. Apart from the appeal of anything called Viv to someone called Viv, this is a way to get dividends with a tax advantage she cites, for “return of capital” which we already have run into with Harry Geisel's pick of Atlantica Yield, AY.

It is a sub of Telefonica de España's wireless phone system with Telecom Italia's land lines which the local government wants to rationalize. She thinks it a bargain but the consensus is that it is overpriced. However I love the idea of another return of capital play which gives you 7.5%. Note that another roundtable member, Mario Gabelli, tips Deutsche Telekom, which has no ADRs and a taxable 3.9% yield.

*While I am a believer in gold as a way to protect against financial crises and inflation, I am moderate also about the yellow metal. But for whatever it is worth I fear that the Biden move to pour out money to the needy and also to double the minimum wage will result in future inflation, even if Janet Yellen is saying to “go big”. A.G. Thorson, who produces Gold Predict, writing in to which I also contribute, thinks I am not worried enough. He expects that the spending this month will trigger a 10-yr rise in the gold price to $8500 per ounce at the end of the next decade.

Nor is he the only one. Barron's this week quotes Jim Paulson, strategist of Leuthold Group, who thinks the 41.9 trillion is excessive, because fiscal and monetary policy are already greater than in the past when unemployment was at comparable levels (11.7% according to the latest numbers.) He argues that “the job market will come back to life” quickly and we will end the year with a fully employed economy and “massive excess stimulus.” His years for comparison are earlier low points; 1982, 1990, and 2007-09. Moreover he says the rebound already has quickened new hiring. There is too much stimulus going on with M2 money supply up 25.1% according to the latest figures, and the fiscal deficit 4x as high as in 2014, before the covid. The federal tax is now about 40% on dividends but this cannot contiune.

And moreover there will be new taxes for high earners and corporations, back part of the way to where they were before 2017 when the Trump cuts were made. Higher corporate taxes to fund all that help will zap dividend income and stock repurchases and the level of tax will jump. I am conflicted. I don't want people to go hungry but I also don't think the checkout girls at my friendly local supermarket are worth $15/hour paid by me. Mario Gabelli is also long gold at the roundtable.

*Another stock well viewed on sites this weekend is Mercado Libre of Argentina which hit a new year's high last week. MELI raised $400 mn with 2 series of notes last week which have convertible optional attachments. It also is working with Amazon World Service to boost its tech in sales, finance, and markets in Latin America. It is something like a combo of all the tech plays in the USA as there is no real competition. The stock has done brilliantly.

*Cosan successfully completed the proxy vote to merge its Bermuda and logistics arms into the parent company, although many shareholders simply bailed out of fear of what it all meant. I think I will buy some more now before the CZZ stock turns into CSAN. Note that the withdrawal was unnecessary as the Brazilian company will give withdrawl rights to shareholders who did not attend the Jan. 22 conclave or vote their proxies (as I did). They have until Feb. 23 to exit the company at the price of Cosan Log, the successor parent. Don't exit but consider buying more if the price falls dramatically lower. This legal complex scared many investors..

*Vale of Brazil, sold, has opted to invest $1.1 bn in lithium, after its steel mills lost value and also were hit with $2 bn in fines for tailings dam failures which killed dozens of people in the area where they stood. I don't want to follow a trend with a company whose record is so bad. VALE is still in the doghouse. The state of Minas Gerais wants Reiais 40 bn and Vale is offering 29 bn, according to Reuters.

*Investors, the UK raters, rated Johnson Matthey a “bull” yesterday. We have tipped JMPLY for a while as it refines and sells prceious metals, notably the platinum group helping to clean up auto exhaust.

*Aurinia Pharma rose 14% last week because the FDA approved its lupus nephritis drug voclosporin, called lupkynis, along with immuno-suppression for adults with lupus.. AUPH is still cheap at $14.86 vs a high in the past year of $20.48 and a low of $9.83. It is Canadian. My college friend with lupus died too soon.

*Brookfield Renewable Partmers L.P. is raising cash by issuing new preferred shares. Analysts are mixed on whether this is good for existing holders, but the company and its precessor (Brascan) have a history of mistreating its owners, despite being Canadian and therefor nice, so I am a nay-sayers. The management is still headed by Bruce Flatt who underpaid other owners belore the name change 15 years ago.

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