Power-One Looking to Add to Recent Momentum

Trading Strategy

We do not have any plans on adding this
stock to the portfolio at this time, however we
do see enormous potential. Although this
stock is priced a little high for us, the mere
100 million shares outstanding and small
market cap has our interest, and we feel the
stock could still see substantial moves from
a percentage standpoint.

Earnings will be released on February 4, and
it will likely be very important for the company
to hit it's guidance on all fronts and possibly
even beat to avoid being taken down a bit.
We believe any position in this stock should
be at least paired, until earnings are
released. Judging from the growth over the
last two quarters, the guidance for the end of
the year seems to be conservative.

It is important to have realistic expectations
for the stock. We can likely expect any gains
to take twice as long, and be half as much as
compared to the last 18 months or so. This
could still be pretty stellar, however, and we
feel that if the company beats estimates
once again and guides a little bit higher, the
forward and trailing P/E's will be so low that a
50% gain in a fairly short period of time
would not be out of the question.

What are the Risks?

As of January 14, 2011, 48% of the shares
were being held short, an extremely high
level. This could simply be a function of the
2000%+ climb, or it could be pessimism in
the overall alternative energy market. Either
way, the shorts will add a ton of volatility, and
any reaction to the coming earnings will
probably be a bit more volatile than usual.

The company's earnings can also change
based on foreign exchange rates. A
significant amount of the company's
business is done in Europe and Asia, and
they have not engaged in any hedging
activities yet. Also, the company still has
some significant debt, and any increase in
interest rates would have an adverse effect.
In the current environment, foreign currency
and interest rates are expected to see quite a
bit of volatility in near to mid term.

Bottom Line

Buy $10.00

Sell $15.00-$20.00

Stop Loss $7.85

Time horizon: 3-9 months

Position Size: Small - Medium