This is a free “Trade Alert” for all my readers. This is a big move in my portfolio and I don’t want to leave you hanging because of an ordinary technicality like a paywall.
History:
I started buying ENPH 0.00%↑ in July 2019 at $20.35.
Enphase was one of the first stocks I identified that went on to be a 10-bagger, before crashing led by global interest rate hikes, NEM 3.0 in California, Trump and competition from China.
The Trade:
Yesterday, I sold my entire ENPH 0.00%↑ stake and moved the proceeds to FSLR 0.00%↑.
This was more than just another tax loss harvesting move: Parking the proceeds in FSLR 0.00%↑ while waiting for the 30 day wash-sale rule to elapse, makes this trade very interesting and might even produce relative alpha above and beyond the tax loss benefits.
Why FSLR? Why Now?:
I still like Enphase Energy and still want to hold 5% of my net worth in Enphase Energy Stocks. But I was sitting at more than 60% losses in Enphase. In recent monthsFSLR 0.00%↑ has also pulled back, along with the entire renewable energy ecosystem (except nuclear) too proving an opportunity.
Enphase Energy’s Forward P/E is 35.30 and Forward PEG 0.63.
First Solar on the other hand has a Forward P/E of 12.34 and Forward PEG 0.38.
I shouldn’t have to say it but out conclusion is obvious. Both ENPH 0.00%↑ and FSLR 0.00%↑ look like great buys right now (if you believe the forward earnings projections).
However, it is also clear that on a relative basis, FSLR 0.00%↑ is far cheaper. Adding to it the fact that ENPH 0.00%↑ has been facing some competitive pressures from China recently and FSLR seems more protected by trade laws as well as it’s patents, FSLR 0.00%↑ presents itself as a better alternative to ENPH 0.00%↑, at least based on how things stand right now.
By selling ENPH 0.00%↑ and moving the funds into FSLR 0.00%↑:
I could take the largest tax loss in my investing career so far.
No opportunity cost: By reinvesting in a stock that gives me similar exposure.
It so happens that the other stock could actually be a better investment and could drive relative alpha.
Once 30 days are over, I will sell the excess FSLR 0.00%↑ and move those funds back into ENPH 0.00%↑. This will allow me to take tax loss again, on FSLR 0.00%↑ this.
Because of the way this switcheroo is structured, I never run the risk of not owning enough FSLR 0.00%↑ in my portfolio, which according to my is the biggest risk in pulling off this move. If anything, it makes that risk into an opportunity by doubling my investment in FSLR for 30 days.
But If FSLR is better, why invest in ENPH at all?
Yeah, that idea crossed my mind too. If we are going to make a move like this, do we really want to get back into a stock that is riddled with Chinese competition?
I am not a humble person but markets taught me humility. I don’t think I am not smart enough to pick between the two. I really like both the businesses and prefer having a diversified exposure across the two. It helps me hedge my bets, which I feel compelled to do for positions that are this large in my portfolio.
Having said that, if you have been un-sure about ENPH 0.00%↑ and are looking for a golden parachute exit, this is as good as they come. Don’t blame me for not providing you a ramp off.
But I’m staying in the lane. As mentioned earlier, I intend to sell the excess FSLR 0.00%↑ on the 31st day and buy back ENPH 0.00%↑. However, I reserve the right to change my mind if and when the facts change.
Borrowed Conviction Rarely Works
Past performance is no guarantee of future results.
The ideas discussed in this article should not be constituted as investment advice.