Hey Kyler, thanks for taking the time to provide this overview! I'm going to be a bit of a party pooper, but I believe you're only seeing the surface of this iceberg. I'll approach this comment with a bunch of questions ;D
- Have you looked at ferro and metallurgic silicon?
- Have you tracked energy prices and regulation?
- Have you looked into unit economics for polysilicon?
- Have you broken down the economics of a solar panel?
- Have you looked at milky quartz producers?
- Have you looked at Brazil's production capacity?
Hey Alejandro appreciate all the questions! My research is meant to be very simple. My philosophy is if I need to know in extreme detail all about a company, their industry, etc then it is not an obvious enough opportunity. If you need to get down to the penny what their profit will be a couple years out per unit then at least for me it is not a good enough buy.
Now that does mean I may miss some emerging trends under the surface that are just starting. But they are just that, just starting. So they will likely not materially affect demand for, in this case, polysilicon in China over the next 5 ish years. But maybe I am wrong there!
One thing though I do keep basic tabs on is Daqo production costs and their current selling prices in China. Because if that works then nothing else really matters.
Just my thoughts though. Would love to hear back though if I missed something obvious!
Kyler, before getting back to you please know that all my comments are embedded with super good vibes. Pls don’t take any of it as harsh criticism or me attacking you.
You’ve done 10% of the research for the company. I only start investing when I know about 50%. I’m not talking about going down to the penny in terms of profit, I’m talking about understanding the product, the value chain and unit economics. All of these are vital for a thesis.
You may be right in the conclusion, but with the info you have you really don’t know. I really encourage you to dive in deeper. I think it’s a great opportunity, but we (or at least I) don’t have the full picture.
I’ll probably publish a thesis in a few months with my own findings. It’ll be supported by your work tho, so thanks for everything you’ve done so far.
Hey Alejandro no problem at all I appreciate the thoughts from another perspective! My process is on 10% of yours and I am sure yours is 10% of some else's.
There are so many ways to make money investing. Some people don't look at fundamentals at all!
In the end though all that matters is your returns.
I will definitely look out for your analysis though. I always love reading business analysis, especially on companies I already own.
Great overview, but I think you're overly optimistic with the prices of the next peak. It would require a massive supply shortfall and I don't see that happening.
Hello Milo's, I appreciate the comment! My analysis is meant to be very simplistic. I believe if you need to get really down to find an exact number forecast then it is not an obvious enough idea.
Regarding a supply short fall I think if the industry is allowed to operate without intervention then just like all previous cycles as shown in the charts. We will get a supply shortage. If the Chinese government steps in to support higher cost suppliers though it will prevent some companies going bankrupt and supply will stay high. In effect keeping prices low. So it really depends if you think this cycle is different from all the past ones.
Even with the high cost producers leaving, selling prices will not reach former spheres because low cost producers like DQ, Tongwei and others have expanded their production capability so much that it will take demand more than a few years to catch up.
But DQ is so cheap and has so much cash that also a more moderate increase in prices will be enough to bring the share price much higher (though not the 100+ you sugested).
Great analysis. Two aspects may need some more research & thinking:
1.Why is the DQ ADR is so cheap compare to it's Chinese subsidiary? A 73% stake in Xinjiang Daqo is worth $4.6 billion in Shanghai stock market.
2. Why is price of polysilicon is 3-5 times outside China vs in China. It is a new phenomena, happened only in this cycle. It suggests Chinese polysilicon is not going outside China, leading to such low prices in China due to overcapacity. Geopolitics?
Hey Kyler, thanks for taking the time to provide this overview! I'm going to be a bit of a party pooper, but I believe you're only seeing the surface of this iceberg. I'll approach this comment with a bunch of questions ;D
- Have you looked at ferro and metallurgic silicon?
- Have you tracked energy prices and regulation?
- Have you looked into unit economics for polysilicon?
- Have you broken down the economics of a solar panel?
- Have you looked at milky quartz producers?
- Have you looked at Brazil's production capacity?
Hey Alejandro appreciate all the questions! My research is meant to be very simple. My philosophy is if I need to know in extreme detail all about a company, their industry, etc then it is not an obvious enough opportunity. If you need to get down to the penny what their profit will be a couple years out per unit then at least for me it is not a good enough buy.
Now that does mean I may miss some emerging trends under the surface that are just starting. But they are just that, just starting. So they will likely not materially affect demand for, in this case, polysilicon in China over the next 5 ish years. But maybe I am wrong there!
One thing though I do keep basic tabs on is Daqo production costs and their current selling prices in China. Because if that works then nothing else really matters.
Just my thoughts though. Would love to hear back though if I missed something obvious!
Kyler, before getting back to you please know that all my comments are embedded with super good vibes. Pls don’t take any of it as harsh criticism or me attacking you.
You’ve done 10% of the research for the company. I only start investing when I know about 50%. I’m not talking about going down to the penny in terms of profit, I’m talking about understanding the product, the value chain and unit economics. All of these are vital for a thesis.
You may be right in the conclusion, but with the info you have you really don’t know. I really encourage you to dive in deeper. I think it’s a great opportunity, but we (or at least I) don’t have the full picture.
I’ll probably publish a thesis in a few months with my own findings. It’ll be supported by your work tho, so thanks for everything you’ve done so far.
Hey Alejandro no problem at all I appreciate the thoughts from another perspective! My process is on 10% of yours and I am sure yours is 10% of some else's.
There are so many ways to make money investing. Some people don't look at fundamentals at all!
In the end though all that matters is your returns.
I will definitely look out for your analysis though. I always love reading business analysis, especially on companies I already own.
Great overview, but I think you're overly optimistic with the prices of the next peak. It would require a massive supply shortfall and I don't see that happening.
Hello Milo's, I appreciate the comment! My analysis is meant to be very simplistic. I believe if you need to get really down to find an exact number forecast then it is not an obvious enough idea.
Regarding a supply short fall I think if the industry is allowed to operate without intervention then just like all previous cycles as shown in the charts. We will get a supply shortage. If the Chinese government steps in to support higher cost suppliers though it will prevent some companies going bankrupt and supply will stay high. In effect keeping prices low. So it really depends if you think this cycle is different from all the past ones.
Even with the high cost producers leaving, selling prices will not reach former spheres because low cost producers like DQ, Tongwei and others have expanded their production capability so much that it will take demand more than a few years to catch up.
But DQ is so cheap and has so much cash that also a more moderate increase in prices will be enough to bring the share price much higher (though not the 100+ you sugested).
Just my opinion.
Great analysis. Two aspects may need some more research & thinking:
1.Why is the DQ ADR is so cheap compare to it's Chinese subsidiary? A 73% stake in Xinjiang Daqo is worth $4.6 billion in Shanghai stock market.
2. Why is price of polysilicon is 3-5 times outside China vs in China. It is a new phenomena, happened only in this cycle. It suggests Chinese polysilicon is not going outside China, leading to such low prices in China due to overcapacity. Geopolitics?