Thursday, December 5, 2013

Time for the Plug Power Pendulum to Swing the Other Way (PLUG)

Exactly 194 days after my initial bullish call on the stock, I'm pulling the plug on my hypothetical Plug Power Inc. (NASDAQ:PLUG) trade. There's little doubt in my mind the decision to suggest exiting PLUG now (if you got in on my May 24th advice) may have you asking if I'm nuts. After all, this clean-energy motor maker today just became the best thing since sliced bread, with shares up a whopping 36%. Indeed, I suspect the mere notion of jumping out now will prompt the same kind of eye-rolling I'm sure I got back in May, when Plug Power shares were trading at 31 cents apiece and the stock was still - for the most part - wallowing in its own weakness. All I'm asking from you is to hear me out.

First things first. I'm as much of a vocal supporter of clean-energy initiatives as anybody. I'm not interested in becoming a financial martyr to make that point, however. I'm a trader/investor to make money, and when I see an opportunity to make or prevent giving back some money, I take it.

Plug Power Inc. was the former kind of opportunity (the money-making kind) six months ago. Admittedly, it wasn't a popular idea I came up with at the time. Natural gas prices were still a question mark, and PLUG shares themselves - at first glance anyway - didn't seem all that interested or able in moving higher. The best clues are sometimes the most subtle ones though, and as I described back on May 24th, the seemingly-anemic cross above the 50-day and 100-day moving average lines were actually huge events, even if largely unnoticed. Once that ball gets rolling, the clues favoring the stock as well as the market's opinion of said stock tend to improve. Sure enough...

Without getting into the details of the Plug Power Inc. since then [you can read the details of the trade's development over time, as logged on August 5th, then August 26th, and then again on October 7th], the technicals as well as the fundamentals supporting PLUG got progressively better. They got so good, in fact, that thanks to today's jump, the stock's price may be a little - ok, a lot - too good for its own good.

If you're reading this then you likely already know what drove Plug Power shares through the roof today. On the off chance you haven't heard though, this morning's company conference call suggested profits would be achieved in the coming year. So why in the world would I want to be a seller of PLUG now? A lot of entirely-related reasons, the biggest of which is, I'm (mentally) up 240% on the trade since the hypothetical May 24th entry, and between that and the big gap left behind with today's jump, I suspect this is about as good as it's going to get for while. Takje a look.

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But again, what about the swing to profitability next year? I hear you, but I want you to hear this - the market's been pricing that prospect into the stock's price for a while (since May), and any valuation that was deserved that hadn't been factored into the price of Plug Power before today was certainly thrown into the mix today.

Or, as Baron Rothschild put it, "I made my fortune by selling too early." 

Plug Power Inc. is still a fine company, and truth be told, I'll probably consider buying shares back after a substantial dip. Right now though, we've got a bird in the hand it took us six months to catch. I'm not going to squander the opportunity no matter how unpopular the idea makes me.

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