The Case for SUNE Stock
Will SunEdison Inc (NASDAQ:SUNE) survive to see 2017? After watching SUNE stock take hit after hit, very few investors think that is an unlikely proposition. However, that kind of fear is usually an indication of underpriced stocks.
Warren Buffett always says to be “greedy when others are fearful, and fearful when others are greedy.” There’s a lot of wisdom in those words, but it’s really hard to put them into practice. It’s what stops good investors from being great investors.
So let’s give it a shot. If it works for the “Oracle of Omaha,” there must be something to it.
I actually tried this the other day and the results were surprising. The first thing to do is wipe your mind clear. It has to be a blank canvas. Then start jotting down some of the key points about SunEdison’s business model and financial position.
Try to put aside the legal drama for a moment. We all know that David Tepper (the billionaire investor) is suing the company, but I want you to consider the company outside of that isolated case. (Source: “Here’s how David Tepper’s lawsuit could really screw up Wall Street’s nightmare stock,” Business Insider, January 20, 2016.)
When you’re done jotting down the main points, write “INVESTMENT” at the top of the paper. Fold the paper and don’t look at it for two days. Go to work, cook, do laundry—basically do anything except think about SunEdison. You’ll probably be blown away when you pick up that piece of paper two days later.
I certainly was. I saw a business on the frontier of an energy revolution and I saw a company with $700 million in restricted cash and half a billion in sales. But more than either of those things, I saw a company trading at only 30% of its book value. (Source: “SunEdison Form 10-Q Filing,” SunEdison Investor Relations, November 9, 2015.)
In a nascent industry—which is growth-centric and requires physical product—a price-to-book ratio of 0.3 is absurdly low. By that consideration alone, SunEdison warrants a second look.
That being said, the anchors weighing on SunEdison are heavy. They make it difficult to be bullish on this once great company, but I still harbor some hope. After all, we’re talking about a company that still plans to install 3,700 megawatts of solar energy infrastructure this year.
In any case, we’re going to know more once the legal disputes are settled. Tepper and SunEdison faced off on February 16 at the Delaware Chancery Court. The judge is expected to deliver a ruling soon, so it may be best to hold off until those results are in.
But remember that we all need to freshen our perspective from time to time. I know that once the court case is finished, I’ll be able to look at SUNE stock with a fresh set of eyes.