Money and Investing Thoughts

Silver Wheaton (SLW: 35.96 -0.69 -1.88%) has purchased the silver production from another mine. It looks like this mine could provide 600,000 oz. of silver per year for 25 years. Over the last couple of years SLW has significantly the amount of silver mine production they control. The goal is the purchase and resale of 25 million oz. per year. However, sales has been stagnant in the 15 million oz. per year range for the last 4-5 quarters. I really like the structure of this company, but earnings need to start keeping up with the valuation soon. First quarter earnings should come out around the end of April.

Silver Wheaton’s stock price has a tendency to run up in the month before earnings, then drop afterward. This chart show the earnings and comparison to the silver ETF (SLV: 32.69 -0.67 -2.01%) for the last year. Click on the chart for a larger view.

Silver Wheaton Acquires Life of Mine Silver Production From Mercator Minerals: Financial News – Yahoo! Finance

Once again it is time for the the update of last week’s performance of the New Energy Index-NEX. The NEX covers about 90 global renewable energy companies in 7 sectors. The NEX is the benchmark for the PowerShares Global Clean Energy Fund ETF (PBD: 9.73 +0.259 +2.73%).

Last week NEX ended the week at a positive 0.4%, pretty much matching the S&P 500 and NASDAQ. The “other” renewable sector was tops with a plus 2.2%. This sector is mainly mini-hydro and geothermal development. Wind energy was up 1.3% and solar energy pushed back positive 0.4%. Solar had been taking a beating in the previous few week, but last week some of the China solar companies had a nice positive bounce (see below).

Power storage was the dog sector for the week, down 2.6%, let down by the French battery maker Safte.

NEX and PBD seem to currently be tracking the overall market. Longer term, renewable energy should outperform the overall market, but that will probably wait until investors turn more positive overall. Now the winners and loser from the index last week:

NEX top gainers since 11/03/08
JA Solar Holdings JASO + 18.6%
LDK Solar LDK + 16.7%
Yingli Green Energy Holding YGE + 16.7%
American Superconductor AMSC + 13.3%
Sechilienne Sidec SECH + 13.1%

NEX top losers since 11/03/08
Schmack Biogas SB1 - 22.3%
Zhejiang Yankon Group 600261 – 16.1%
Saft Groupe SAFT - 13.5%
Aventine Renewable Energy Holdings AVR - 13.1%
Comverge COMV - 12.9%

Note: I currently do not have a position in PBD.

The company listed above, more commonly called COPEL (ELP: 23.11 +0.02 +0.09%) released 4th quarter and 2007 year end results yesterday. I have not seen anything yet on Yahoo Finance, so I went to the website and dug out the earnings report press release. Fortunately, they have an English version, unfortunately all results are in Brazilian Reals, so the only numbers that make a lot of sense are the percentage changes.

As background, COPEL is the power company for the Brazilian state of Parana, in the southern part of the country. The state government owns 58% of the common stock. This company is an infrastructure play on a growing area of Brazil. Past growth has been explosive, but the company seems to be settling into a more stable growth pattern.

Here are some of the figures I pulled from the earnings press release:

• Net operating revenue (total revenue minus a bunch of acronyms) was up 10.9% for the year. Q4, 2007 was up slightly over Q3.
• Total energy consumption for 2007 was up 6.8% over 2006, driven by an official 6.6% employment increase in the state.
• Net income for the year fell 10.9% due to a 16% increase in operating expenses, primarily due to a 13.3% increase in depreciation and a 26.4% increase in “financial compensation for the use of water resources and concession charges – Aneel grant.” ANEEL is the national electric energy agency.
• Net income in the 4th quarter was up 15.7% over Q3 and 0.6% higher than Q4, 2006.
• The net per share for the year was R$4.0, giving a trailing PE of 7.3 based on today’s Brazilian market price of R$29.50.
• The proposed dividend works out to 24% of net income, or 3.2% of the current share price. The dividend will be submitted to the shareholder in April 2008.

COPEL is happy to point out in the news release that the share price increased 29.5% (NYSE) for 2007. I believe this is a steady way to partake in any growth in the Brazilian economy.

Note: I currently do not have a position in ELP.

Another week and another downer for renewable energy. The NEX lost 4% for the week ending Friday, in line with the NASDAQ (-4%) and the S&P 500 (-4.4%). All sectors in the index were down led by hydrogen and fuel cell at a minus 10%. Solar energy continued their negative ways, led by the Chinese solar producers. The sector finished the week down 7.2%.

Solar stocks were a hot item in 2007 and many reached lunar valuations. Solar energy stocks are about 30% of the NEX. The solar index tracked by Cleantech Media has fallen 42.5% year-to-date. I believe solar energy is still a growth industry, but as I mentioned last week, there are plenty of challenges.

Only one sector in the index, power storage, managed a positive return at +0.9%, becoming the only positive sector for the week. Wind energy blew neither hot or cold and remained unchanged.

With oil at $108 with predictions of $200 and natural gas prices rising, renewable energy will at some time come back into investor favor. As I look for a bottom, I will be watching the ETF that tracks the NEX, Powershares Global Clean Energy Fund (PBD: 9.73 +0.259 +2.73%). You can keep an eye on it at this site’s 20 Stock Portfolio. Now on to the winners and losers for the week:

NEX top gainers since 04/03/08
Theolia TEO + 11.5%
Saft Groupe SAFT + 10.1%
Gamesa Corporacion Tecnologica GAM + 10.1%
Power Integrations POWI + 7.0%
Solar Millennium S2M + 6.6%

NEX top losers since 04/03/08
EnerNoc ENOC - 29.9%
VeraSun Energy Corp VSE - 24.3%
Japan Wind Development 2766 - 23.4%
Brasil Ecodiesel Industria e Comercio de Bioc ECOD3 – 20.5%
Yingli Green Energy Holding YGE - 20.4%

Source: New Energy Finance

Note: I currently do not have a position in PBD.

Well, it appears the little guy, Thornburg Mortgage (TMA: 0.00 N/A N/A) is being squeezed out of business by the holders of its reverse repurchase agreements. TMA filed yesterday that J.P. Morgan Chase will exercise its rights to seize the collateral because Thornburg has not come up with an additional $28 million for margin requirements. This is after TMA has provided what appears to be $570 million towards the account.

I see J.P. Morgan (JPM: 38.28 +0.73 +1.94%) getting the assets at values far below what they will eventually be worth, but first they sucked all of the cash out of Thornburg they could get.

The big banks win several ways with this. First they drive a small, but efficient company out of the jumbo mortgage business leaving the big boys more opportunity to gouge their jumbo mortgage customers. And they get that company’s assets at fire sale prices which in a year or two will show up as nice trading profits on their balance sheet.

I may be wrong in my analysis here, but it make sense to me. It appears that the only think that can save TMA at this time is a deep-pocketed white knight.

Note: I am long TMA.