It’s during moments of mass market liquidation, when asset holders would rather sell than wait for rationality to resume, that buying opportunities surface.  The recent crash in oil prices has sent the whole energy sector into freefall.  Much of the energy complex is tied to oil prices, but certain high quality businesses such as Western Refining and SolarCity could do well long term irrespective of oil prices.

As mentioned previously, I’ve formed a preliminary hypothesis that SCTY is poised to be a large winner in the exponentially growing solar energy sector.  The market value of the company is currently quoted at ~$5bn, implying lofty expectations for future growth.  There certainly isn’t a large margin of safety in the price, but there appears to be a margin of safety in the company’s business model.  However, it may prove to be too difficult a business to reach conviction on as some elements of the analysis may always be a black box – accounting, regulatory environment (subsidies, net metering policy), and competition from utilities and banks.

I’m continuing to do work on SCTY and some other names in the energy sector to see if an investment opportunity exists.