November 25, 2009 ndash; Back in December of 2008 we wrote that: ldquo;Power (Nasdaq:APWR). We are also long-term bullish on APWR, which, like LDK, continues to post solid financial results and favorable guidance. The stock is trading at about $3.76, down $0.54, or 12.56%, about 5.2x its trailing 12-month earnings, about 0.6x trailing 12-month sales, and about 0.98x book value.

A-Power has amassed a backlog across its business of more than $1 billion, it has a solid balance sheet with no debt and cash of about $60 million, or $1.80 per share. The company has reaffirmed the fact that it expects to earn about $35 million this year, and $70 million next year. The stock is trading at 3.48x this yearrsquo;s earnings and 1.74x next yearrsquo;s earnings. At a modest 10x 2008 projected earnings, the stock would be trading at $10.86, a 188% premium to todayrsquo;s trading price.rdquo;

Back then we talked with fund managers and analysts who seemed to generally be buying into the conventional wisdom, that, lsquo;where there is smoke there is fire.rsquo; The smart money was betting against the stock, saying that there must be some baggage that the Street just doesnrsquo;t know about that is driving the stock into the ground. We saw it is a relatively low-risk opportunity to buy low ndash; and did. We also recommended as much to our readers. This morning, the stock is breaking out on volume, up about 10% to $16 (up 325% since we wrote that piece in December). We remain long-term bullish on the company, which has continued to announce business that rationalizes the performance of the stock.

However, given our general outlook on the broader markets, that they are totally overbought, we think a pullback could create some resistance to A-Powerrsquo;s stock at current levels, so we are writing some out of the money covered calls on the stock. We sold the March 20 2010 calls for $1.20, which, if you were buying the stock back in December would be reducing your cost average to about $2.60.

We recently also took advantage of what we thought was short-term weakness in the stock, selling puts (December 7.5 2009 Puts) for $1.30 on August 18, which would have obligated us to purchase shares of A-Power at $7.50 (cost average of $6.20) if the stock was trading below $7.50 on expiration date coming up in December. It doesnrsquo;t look likely. Today, that position is in the profit by 92%. Our rationale for selling calls this morning on the stock into strength is a hedge against downside risk for the broader markets, which could translate into downward pressure for A-Powerrsquo;s stock, and also an opportunity to lower our cost average.

By the way, we still like LDK (NYSE:LDK) which is the other stock mentioned in that December piece, which hasnrsquo;t performed as well over the same period, but has created several trading opportunities, as well as opportunities to establish attractively lower costs basis.

Important Disclosure: This information is intended to assist investors.nbsp; The information does not constitute investment advice or an offer to invest or to provide management services and is subject to correction, completion and amendment without notice.nbsp; Any such offer, if made, will only be made by means of a confidential prospectus or offering memorandum or management agreement.nbsp; It is not our intention tonbsp;state, indicate or imply in any manner that current or past results are indicative of future results or expectations.nbsp; As with all investments, there are associated risks and you could lose money investing.nbsp; Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment.

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