Based on the (gross margin) guidance for 2008, I am cutting back on LDK Solar (LDK) - I still like this stock as a 2009-2010 story as its new polysilicon plant will help it to reduce costs substantially but it's a long road to get that plant up and running... this is now more of a 2009 story. The sector is up this morning on good earnings news from Canadian Solar (CSIQ) but unfortunately LDK Solar did not partake, and is down 6% this AM. Again the results and guidance is not terrible - we just have limited upside for the next few quarters, especially if LDK Solar comes in at the lower end of its full year guidance (23-25%) and with a management that said 26-31% less than 90 days ago, it's a bit concerning that they have lowered their expectations so meaningfully in such a short period of time.

I am selling 350 of 650 shares in the low $35s to bring LDK Solar back down to 0.9% exposure (from 2.0%). If/when the stock shows relative strength and breaks back above its 200 day moving average I am willing to re-expand this position, but right now there are just easier short term opportunities in other spaces. If the stock pulls back to the low $30s (down 10% from here) I'll also consider adding this stake back. I anticipate this stock to be relatively range bound in the $32-$38 range for the foreseeable future - good for trading at least ;)

One day, when this polysilicon shortage subsides these names will have an easier time of it. But I'd rather have a larger investment when those headwinds subsist; between now and then it's going to be a tougher road to hoe for the companies which are not showing the same ability to offset the increased costs.

Long LDK Solar in fund; no personal position