On Monday, I told readers that I was getting out of companies some which I feel are likely to need to raise new money over the next couple years. I also provided a list of stocks I will be buying when I judge we’re near the bottom. This is the first in a series of short articles about those stocks.
I’ve mentioned Carmanah Technologies (CMHXF) in passing in articles about LED companies. I first became interested in Carmanah in 2005. The company’s integrated LED-solar lighting solutions caught my attention because they were (and are) economic regardless of the price of electricity; the savings come mainly from reduced installation costs. The downside of this is that they are unlikely to see the spectacular growth that solar photovoltaics will see as solar approaches grid parity in cost. They struggled with a strong Canadian dollar (loonie) driven by high oil prices. Because company expenses are mostly denominated in loonies, company earnings tend to fall with a rising oil price, making this company a poor hedge against oil.
Carmanah has done much to recapitalize the company and refocus the business since they were badly hurt by a rising loonie last year, but their currency exposure was unhedged as of their June quarterly report, so they are exposed to a rise in the value of the loonie (which I expect if oil prices recover.)
DISCLOSURE: No position.
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