Let’s talk about JA Solar (JASO).

This week the company got a real nice pop in sympathy with Canadian Solar (CSIQ), which posted the earnings report of a lifetime. The thing is, all these solar companies have been posting amazing numbers for a long time, but the Street hates the sector and hates the names.

I think that’s going to start changing, even as these subsidies start to fade particularly in America and in Europe, there is enough commercial and residential demand around the world to keep the top solar names growing at a very rapid clip.

Poor execution has haunted JA Solar, but management has beaten the Street in the past two earnings releases. They beat first by 1500%, and then by 433%, so consequently, in fiscal year ‘15 the Street is looking for $1.61. Three months ago it was $1.40.

The company has transformed itself. It was a cell maker to modules, now that’s 75% of their business. (A bunch of cells become a module, and a bunch of modules make an array.) In the most recent quarter, gross margin soared to 16.7% from 15.5% at the end of last year, and 6% just a year earlier. Global demand is growing rapidly -- 46 gigawatts this year, 49% of that is going to come from Japan and China, the two top markets for the company.

I think this is one of the most oversold stocks in the market. I’m looking for it to go at least to $13 – and a lot higher.

Now let’s talk about Conn's (CONN).

Conn's is a Texas-based retailer. This was a super-duper hot stock, that was unstoppable… until it collapsed. They missed the January quarter, and the stock got hammered. As a result, it’s a higher-than-average risk, but very attractive.

Last time they reported, they did beat. Same store sales were up 15.6%. Furniture and mattress same store sales were up 65%, and that’s a trend I think will continue. Home appliances were up almost 21%, home office almost 23%, consumer electronics was only 3%.

The company is expanding, they recently opened two new stores in Denver. The fear is that they have low-income customers who buy a lot on credit. Provisions for bad debt is 8.2% of outstanding, up from 6.5% two years ago, but the 60+ day delinquency has come down. It is about 8% now… it was 8.8% in January.

This stock was an $80 stock in the last 52 weeks. I’m not looking for that kind of recovery, but I think it rebounds to $50, probably even higher. I don't do this often, but because of the risk, if you do pull the trigger, I suggest a stop loss at $37.

DISCLOSURES

JA Solar (JASO)

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Family Owns

Firm Owns

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Banking

CHARLES N N Y N
JIM N N N N
TRACY N N N N
MATT N N N N
HITHA N N N N
KATE N N N N

(CONN)

Owns

Family Owns

Firm Owns

Investment
Banking

CHARLES N N Y N
JIM N N N N
TRACY N N N N
MATT N N N N
HITH N N N N
KATE N N N N

 

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