Investing in China: Suntech takes a hit

Posted January 9, 2008

“When I checked up on Chinese solar power company Suntech Power Holdings (STP: NYSE) a few moments ago, I had to restrain myself from shouting an expletive across the room. It was that bad.” – Stephanie Grimmett.

by Stephanie Grimmett

Baltimore – (TFN): Ouch! I don't know about you, but I think I broke my nose on that dive.

What started out as just another week of post-peak dips for one of our favorite Chinese investments has turned into a doozy of a nosedive.

When I checked up on Chinese solar power company Suntech Power Holdings (STP: NYSE) a few moments ago, I had to restrain myself from shouting an expletive across the room. It was that bad.

The stock lost $8.80, or 11%, in the last five and a half hours (I’m writing this at 2:30 p.m. EST). That’s after it took a 10.5% slide on Monday.

But that Monday slide was fast. And it had all the characteristics of a large clump of institutional investors pulling out gains after the stock’s $88 high a couple of days earlier.

Today, though, the slide has been continuous through much of the trading day, and it’s made many an investor nervous.

We recommended Suntech nearly a year and a half ago. And we’ve made some beautiful gains from the investment. Based on our buy-in price of $24.95, we’re now at 168% gains, not bad for 18 months of work.

But we've seen a marked downtrend since STP hit an intra-day high of $90 on January 3. And it's caused that nervous tic in my right cheek to appear.

The news is nothing but good coming from Suntech. The solar company is still well recommended by analysts, and the Chinese markets in general are doing fine.

So why the slide? The same old profit-taking we’ve seen month after month in Suntech.

Solar power companies soared after the $100 oil announcement, and now investors are taking gains on that sky-grazing frenzy.

Like I said, we’ve seen this before in Suntech: The news is great, the company is solid, and the Chinese market is rolling along nicely, and, yet, STP will begin falling and keep falling for anywhere from a few days to a couple of weeks before it stabilizes and begins to climb again.

Investors like Suntech. They like it a lot. But they don’t seem to like keeping their money in the stock for very long. And in their games of Suntech hokeypokey they’ve lost out on some beautiful gains.

STP is going to level off and provide us with even better gains in the future. If you’re already in the stock, stay the course. And if you’re not, now may be a good time to consider a position.

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