PLUG Power: What There Is To Learn

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May 6, 2014 Featured: Home Page, MARKET, Uncategorized 0 756 Views

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This is my first post on this new site so if you are new to following me, welcome! If you have followed me for some time, thank you! I hope that you have both enjoyed and gotten something of practical use out of what we’ve had to say.

I wrote an article about Plug Power that was published on Seeking Alpha earlier today outlining many things that have come to light in terms of Plug’s future prospects, prospects which are bright from just about any measure. Part of the point of the article was to discuss how Plug seems to perform in the current position it is in. Since Plug is creating a new story, which I will call the “2014 and beyond” story, any stall in the story-line reverts Plug back to its previous story titled “everything up until 2013.” It appears the market needs constant reassurance and to some extent that is understandable. But to know what there is to learn about trading PLUG one need only look at its recent trading history. If you overlay positive price moves with company news and fuel cell industry news in general, it paints a fairly consistent picture. By contrast the biggest pullbacks have come on no news of a positive revenue nature being reported for long periods, because an investor update lacked the news everyone was really waiting for, or because any number of identified shorts have written preposterously negative articles casting doubt on just about anything and everything PLUG usually citing data points for which there have been significant and often numerous updates.

There is a substantial short in the stock which for now is controlling the price action. For those who bought the stock between $7-10 many are surely kicking themselves, either doubting their original investment thesis or because they would have liked to have sold high and bought low (doesn’t everyone). I understand both perspectives, especially if an investment was made that was light on research. Even if you did your research and understand the inordinate opportunities for Plug in a few of the markets it has identified, it is still likely that you wish you had sold and bought back at these levels though by contrast you are likely able to tell yourself that you simply missed one turn. A consistent problem for investors who trade daily and watch their stocks in a similar fashion to watching paint dry is that they almost always feel the need to “do something.” Sometimes you miss a move. If your thesis was right not only won’t it be fatal you’ll get another chance to  benefit from a future move. Most truly fatal market moves are made not because something needs fixing but because it is human nature to jump in rather than maintain patience.

To me it makes little sense that a company with $116M more in the bank than when it made its March move to $11.72 sporting a valuation of $1.6b+, in addition to a new acquisition and an eagerly awaited announcement of who their North American automaker GenKey client is, could be trading at a level that is factored at about 45% of the March number (with the increase of outstanding shares). What does make perfect sense is that the market is waiting for more details of partners and revenue. This is what gets attention where Plug is concerned…and little else.

So I believe Plug is a screaming buy and am putting good money to work in the age old practice of averaging down. Why am I doing that? Because I don’t short stocks  and when I did not sell around a core on the morning of the latest investor call, and saw the stock slip into the $6′s, I determined then that I was not a seller. Was I wrong in this assessment? Perhaps, but only for the time being. And this gets back to my core argument in this post. I try not to trade where I need money any time soon. If I need money in short order I generally don’t start a new position. If you don’t need the money selling here sure seems like folly. Could Plug go lower? Sure. Does it make sense that it would? Not to me. Will there be numerous announcements of considerable import throughout 2014 that will cement the “2014 and beyond” story? I’m betting heavily on it. There are many astute investors who have put up considerable sums to back Plug’s progression. Barclay’s, Morgan Stanley and others did not stir up their investor base for no reason. They bought and sold a story – a story in its earliest chapters.

 

 

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