Revenue Growth Bullish for Green Stocks

On August 24, 2010, in Alternative Energy Stocks, Green Stocks, Solar, The Green Portfolio, Wind, by Andreas Schreyer
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With the bulk of the companies in the S&P 500 having reported their Q2 results, about three quarters of them have beaten analyst earnings expectations and they have done so with an impressive average year-over-year earnings growth of 38%. Improving earnings by itself is not necessarily a good business indicator, as during bad times companies can achieve profitability goals with aggressive cost cuts, e.g. layoffs. What is encouraging this time around is the fact that these earnings come from expansion of sales, with most companies in the large cap index achieving revenue well over the year-ago quarter, and over 60% of them above analyst revenue expectations.

Of even more interest to us is the renewable energy sector which did even better, with 80% of the companies in the Green Portfolio beating earnings and revenue consensus estimates, with a good number of them raising guidance for the second half of the year, a positive indicator for the health of their business.

A prime example of solid revenue growth came this morning from one of our recommended photovoltaic stocks, Trina Solar (TSL), which beat expectations handily with sales up 147.2% year-over-year (read the TSL earnings report summary.) This great green stock has returned a cool 72.78% in one year (compared to 4.02% for the S&P 500), and nearly as much (70.81%) since we recommended it in September 2009. The primary reason we liked Trina back then, and still like the company today, is because of their leadership in cutting cost/watt for their silicon solar panels faster than anyone else in the industry (read Picking Solar Energy Winners.). Their relentless cell efficiency enhancements coupled with manufacturing cost optimizations has led them to increase their gross margin (to 32.1%), instead of the profit squeeze many pundits had been predicting.

While some alternative energy sectors have been weak this year, such as wind energy which even saw a major earnings and revenue miss by bellwether Vestas Wind Systems (VWDRY.PK), the vast majority of the sectors represented in our Green Portfolio are growing significantly above market average, which should lead to continued outperformance from our green stocks.

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Vestas Breaks U.S. Wind Market Lull

On July 22, 2010, in Alternative Energy Stocks, Green Stocks, Wind, by Andreas Schreyer
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Finally, a sleeping giant awakens! After many months of eerie calm, or even headwinds for some of the companies involved in wind energy, there are some promising developments. The same day Google (GOOG) entered the wholesale renewable electricity markets with a major wind power purchase agreement (see announcement here), the world’s leading wind turbine manufacturer Vestas Wind (VWDRY.PK) announced a record-setting order for 570 MW, or 190 3 MW turbines, for Terra-Gen’s Alta Wind Energy Center near Tehachapi, California, USA. Read the full Press Release.

In 2009, Vestas was the largest wind turbine manufacturer in the world and third largest in the U.S., after GE Wind (GE) and Siemens (SI).

After a record breaking year for the U.S. wind industry in 2009, this year was always going to be a challenge and, sure enough, most wind energy-related stocks have struggled so far in 2010. The chart below shows Year-To-Date stock price performance of representative wind companies: American Superconductor (AMSC), A-Power Energy Generation Systems (APWR), Trinity Industries (TRN), Vestas Wind and Zoltek (ZOLT). For a more complete review of wind-related companies, read Opportunities in the Wind Energy Value Chain.

2010 YTD Wind Energy Stocks Performance

In the best of times, wind energy gets little coverage from the media in general and the financial press in particular. Compared to the solar market, which is broadly followed and reported on, wind gets short shrift. This is rather puzzling when you consider that wind energy has the lowest initial capital costs of any alternative energy technologies, and that the so-called levelized cost of wind energy (which includes all the costs of producing the energy over the plant lifetime) already compare favorably with conventional generation technologies like coal and gas.

The wind sector underperformance can be traced directly to the weakness in the U.S. economy (the largest world market for wind in 2009) to which most companies in the chart above have a high exposure, and the ongoing lack of a U.S. energy policy. Companies and investors are understandably hesitant to commit the capital costs for new projects and installations in such an uncertain environment.

If nothing else, the recent announcements indicate the U.S. wind market is not dead, and they might even mark a turnaround point for the wind industry.

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U.S. Offshore Wind: Up in the Air No More

On April 28, 2010, in Market Trends, Wind, by Garrett Beauvais
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We have not had much to celebrate in the wind sector since our November 2009 article “Opportunities in the Wind Energy Value Chain”, but today’s landmark decision deserves a celebration. After a mere nine years pondering the issue, the federal government has finally given the green light for the first offshore wind farm in the U.S., off Cape Cod (read The New York Times article). This marks a major milestone for renewable energy in the U.S.

Bordered by two oceans and thousands of miles of coast line, the U.S. has one of the largest offshore wind energy resources. Recent studies place the upper limit of our potential annual offshore wind production at 37,000,000 gigawatt hours, over 10 times the total U.S. annual electricity consumption.  Currently, electricity produced from U.S. wind farms satisfies slightly less than 2% of total U.S. electricity demand.  This is a far cry from the U.S. Department of Energy goal for wind power to supply 20% of the nation’s electricity needs by 2030.

While it is certain that many twists and turns remain in the Cape Wind project saga, including likely legal challenges, this decision opens the door for dozens of additional offshore projects that have been kept in limbo due to politics and NIMBY-ism (Not-In-My-Back-Yard).

Major companies involved in offshore wind turbines such as General Electric Co. (GE) and Vestas Wind Systems (VWDRY.PK) will undoubtedly benefit from the opening of this new gigantic market. This news comes just in time to put an exclamation point on our upcoming May issue of The Green Investor newsletter which happens to be dedicated to wind energy and offshore investing opportunities.

Disclosure: No positions.

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The Green Investor Update – April 19, 2010

On April 19, 2010, in Market Trends, TGI Updates, by Andreas Schreyer
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In this update:

  • The bull market is alive and well
  • Global competition heats up
  • Venture capital triples green investments
  • The Green Portfolio update and recommendations

The bull market is alive and well
The resumption of the rally in stocks we chronicled last month continued in full force since then. All major U.S. stock market indexes have broken out and set new bull market highs. Some, like the Dow Jones Transportation Average, are plotting ballistic charts. Pretty much all indicators are flashing bright green, with buy signals across the board. The only red flags come from the overbought conditions appearing in some of the markets, but we know from experience that these can last longer than what seems reasonable or logical.

As can be expected as we climb the wall of worry, there have been widespread concerns over many issues influencing the economy, from exploding deficits to a job-less recovery. Still, these concerns have been largely trumped by fresh evidence that the recovery is real, that it is global, and that it is accelerating.

A high probability indicator of what’s in store for the U.S. stock market comes from the Asian and emerging markets which have been leading the recovery and the stock market rally so far. They have not been setting new highs lately. After setting bull market highs last fall, they have been taking a breather with some of the more volatile markets experiencing substantial corrections.

China, for example, was down nearly 20% before starting its rebound rise. It has not yet reached the highs set in November 2009, but when these levels are breached, there is a lot of upside potential. The volatility in key emerging markets is likely to continue and even increase, but for those with a strong stomach, long-term charts continue to look extremely bullish. And that goes for key green companies that serve and benefit from these exploding needs.

Global competition heats up
As energy market numbers for 2009 start to solidify, there is an overwhelming sense of shift. It is both visible in the size and growth of the renewable energy markets themselves, but also from a supply-side perspective. The leadership in many clean energy technologies has been slowly but surely shifting from incumbent, American or European manufacturers, to Chinese, Korean or Indian stalwarts.

Most of the news is coming from developed nations cutting subsidies for renewable energy, such as in Germany, France and Spain. Energy policy is currently not at the top of the U.S. government agenda, as health care reform has consumed one and a half years, and financial reform now occupies center stage. In the meantime, emerging economies from Brazil to Singapore and China are making major investments in renewable energy. Just last week, China’s Development Bank announced plans to loan almost $12 billion to two solar manufacturers, Suntech Power (STP) and our preferred solar PV play Trina Solar (TSL). The industry widely views such loans by the Government bank as a direct subsidy as they are not expected to be paid back.

The rise of China and emerging markets is one of our major investment themes as we believe that geographic portfolio diversification is more than a risk management technique, but the likely source of much of our investment profits for years to come.

Venture capital triples green investments
One more indication that the worst of the recession is behind us comes courtesy of the venture capital industry which has been a reliable recovery indicator. Newly released data shows venture capital investments rose 38% in the first quarter of 2010 over the same quarter a year ago. More significantly, investments in clean technology companies more than tripled to $773 million. The green sector is still smaller than biotechnology, but it has been growing the most.

Private investment increases frequently foreshadow the resurgence of merger and acquisition activity. We look forward to the M&A action to heat up as The Green Portfolio features a number of attractive acquisition targets.

The Green Portfolio update and recommendations

Our portfolio of clean and renewable energy companies has resumed its march higher, but at a slightly more timid clip than the broad markets. Our positions gained an average of 2.83% since our last update, while the S&P 500 and the Nasdaq Composite indexes rose 2.82% and 4.34% respectively. Our green market proxy, the PowerShares Global Clean Energy fund (PBD) which tracks the WilderHill New Energy Global Innovation index, was up a scant 1.14% during the month.

Right on cue after having been bashed and downgraded by various analysts and pundits, the solar photovoltaic sector jumped to the head of the energy class as the biggest monthly gainer. A basket of Chinese solar stocks was up some 8.80%, but the solar energy stocks in our portfolio did even better with an average gain of 18.73%. Leading the pack with a 23.60% price rise during the month is our power conversion company which, with outstanding quarterly results that beat Street expectations and a major legal victory in a patent fight, has attracted investors and sent the stock to levels not seen since late 2007.

It is worth mentioning the 20.89% monthly gain achieved by Vestas Wind Systems (VWDRY.PK) which, after months of getting pounded by investors, appears to have established a bottom with a rebound that cut our paper losses in half. We still like the company and in fact, they are very well positioned in high growth wind markets. Wind energy will be the featured sector in our upcoming May issue of The Green Investor newsletter, in which we take a fresh look at some exciting developments in areas such as offshore wind.

Best regards, and happy Earth Day on April 22nd,
Andreas Schreyer
Founder and Managing Editor
The Green Investor
 http://www.thegreeninvestor.com/

_____________________________________________________________

Stop guessing which of the numerous green industry stocks will be winners. Get immediate access to all our analysis and Green Portfolio stock recommendations at no risk with our unconditional 30-day money back guarantee.

Become a member of The Green Investor today!

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The Green Investor Update – January 20, 2010

On January 20, 2010, in Market Trends, TGI Updates, by Andreas Schreyer
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In this update:

  • Markets begin the new year as they ended the last
  • European solar subsidy slashing rattles investors
  • Detroit offers glimpses of future energy efficiency
  • Government unveils $2.3 billion awards for clean energy jobs
  • Announcing our Q4 complimentary newsletter winner
  • The Green Portfolio update and recommendations

Markets begin the New Year as they ended the last
Thus far in 2010, the stock market has continued to confound those predicting a correction or worse. If anything, the uptrend in broad market indexes has accelerated somewhat over the last month since our December update. The S&P 500 gained 3.70% during the month and observers of the Dow Theory will have taken notice of both the Dow Jones Industrials and Transport indexes making new highs for the current rally, a reconfirmation of the bullish trend.

The news on the economic front has been mostly bad at home with the Treasury Department announcing that the federal budget deficit set a new record high in December, at $91.85 billion, and an up-tick in unemployment with 85,000 jobs lost which surprised most analysts. While investors were waiting for the corporate earnings reporting season to start, they seemed to focus more on fresh evidence from the International Monetary Fund that the world economy is actually recovering faster and stronger than expected, led by China and other developing Asian countries. A report from China showing December exports jumping by 17.7%, after 13 straight months of declines, was bested by South Korea and Taiwan reporting export growth of 46.9% and 33.7%, respectively.

Strong Asian exports also drove record imports of oil and other commodities, which triggered large flows of speculative funds and renewed fears of commodity bubbles and overheating emerging economies.

European solar subsidy slashing rattles investors
Less than a week after France cut their solar subsidies by 24%, the largest solar market in the world, Germany, announced their own version of the cuts which had been anticipated anxiously by the solar industry.

Some level of cuts had been widely anticipated and has been worked into the stock prices of the solar stock segment which has been correcting from its uninterrupted rise last year. As the details are digested by analysts we can expect some continued softness in solar stocks, especially as it dawns on many that the inevitable shakeup of this immature industry will get accelerated by these news. The consolidation is likely to be brutal for some companies but extremely rewarding for the winners.

In our analysis, we anticipate slower growth rates for the solar industry in Europe to be mostly compensated by higher demand from the U.S. and China, but a cooling off period for this overheated sector can only be healthy at this stage. We continue to believe that the low-cost/watt leaders will be the winners, provided they have very solid financials and the ability to scale globally in other growing markets.

For more details on this important topic and what it means for our solar holdings, please read “European Solar Subsidy Slashing: Bad News for Investors?”.

Detroit offers glimpses of future energy efficiency
Instead of the traditional SUVs, trucks and muscle cars, there was a lot of hybrid and electric vehicle hype at the just completed Detroit auto show. All the hoopla could not cover up two conclusions: 1) that true plug-in electric vehicles are likely to remain low-volume luxury items for years to come, and 2) that the invasion of hybrids is rivaled in gas mileage by new generations of small efficient gas powered cars, at much lower prices. What the U.S. auto industry must focus on is inexpensive, small, full electric city cars or risk losing even more market share to their Asian and European competitors.

Government unveils $2.3 billion awards for clean energy jobs
As part of the $787 billion American Reinvestment and Recovery Act, the new awards go to 183 projects in 43 states. These awards provide developers with an investment tax credit of 30% for facilities that manufacture particular types of energy equipment in the United States. The usual suspects, solar and wind received their fair share in addition to projects in smart grid, building efficiency and energy management.

Advantage was given to “shovel-ready” projects that have state and local permits in place and will be commissioned by February 2013, including about one third to be completed this year. The combined federal and private funding is intended to create some 58,000 jobs. Two of our Green Portfolio holdings, First Solar (FSLR) and Vestas Wind Systems (VWDRY.PK), were awarded about $70 million between the two of them.

Announcing our Q4 complimentary newsletter winner
We are pleased to announce that Jasper Walshe from the UK is the lucky winner of our most recent drawing for a complimentary 1 year subscription to The Green Investor newsletter, a $499 value.

The Green Portfolio update and recommendations
For the month since our last Update, as of the close on January 19, 2010, our Green Portfolio nearly kept pace with the broad market by gaining 3.57%, despite the pullback in solar stocks. Since inception last summer the aggregate portfolio return is 27.69%, about double the market at large.

This is where the advantages of a diversified portfolio and active management of your portfolio allocations come to light. While we are fully concentrated on the clean and renewable industry, our stock picks span the various sub-sectors with limited exposure to any one of them. As we recommended last month, we took partial profits on our Chinese solar stock and in doing so brought our solar allocation back to about 20% of the portfolio.

The weakness in solar photovoltaic stocks was more than compensated by strength in other areas of the portfolio, namely energy storage and wind.

*** Green Portfolio recommendation updates ***
(Only active subscribers of The Green Investor newsletter receive
updated recommendations for Green Portfolio positions.)

Our upcoming February newsletter issue will focus on a renewable energy sector we have so far left untouched due to timing reasons: bio energy. The biofuel industry, producers of starch-based ethanol from corn and sugarcane in particular, have been in disarray and a major source of losses for investors since they peaked in 2008. We now see strong evidence of new growth areas and we issue exciting new recommendations.

Best regards,

Andreas Schreyer
Editor
The Green Investor
 http://www.thegreeninvestor.com/

_____________________________________________________________

Stop guessing which of the numerous green industry stocks will be winners. Get immediate access to all our analysis and Green Portfolio stock recommendations at no risk with our unconditional 30-day money back guarantee.

Become a member of The Green Investor today!

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The Green Investor Update – December 18, 2009

On December 18, 2009, in Market Trends, TGI Updates, by Andreas Schreyer
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In this Update:

  • Developments at the UN Climate Conference
  • Utilities announce major alternative energy investments
  • The Fed keeps rate steady near zero
  • The stock market creeps higher
  • The Green Portfolio update and recommendations

Developments at the UN Climate Conference
As predicted, the United Nations Climate Change Conference underway in Copenhagen has been a hot topic on world news networks with all the attendant drama: stories about the giant carbon footprint of the conference itself (mostly caused by the 193 country delegations and world leaders flying to Denmark), developing countries threatening to walk out, hundreds of protestors arrested, and industrialized nations led by the United States offering a $100 billion deal to entice developing nations.

Since the conference has another day to go as of this writing with President Obama in attendance to rally nations to reach a political agreement, we will not draw any hasty conclusions and will leave the full analysis for the upcoming newsletter issue. However, as there is little chance of a detailed binding treaty being signed or even drafted by the end of the conference, we are confident that the immediate outcome will continue to confuse many of those trying to invest on the climate change theme.

Be sure to not miss our upcoming January newsletter issue which features The Green Investor 2010 Outlook. We reveal top renewable energy trends and the strongest green industry sectors for the year ahead.

Become a member of The Green Investor today!

Utilities announce major alternative energy investments
The news from alternative energy markets has been rather healthy over the last month, with a surprising number of new deals and developments being announced. Of particular note were major investment plans revealed by two of the largest utilities: FPL Group and Pacific Gas & Electric Co. Florida’s FPL announced their intent to spend $2 billion on wind energy during 2010. California’s PG&E for its part said it is acquiring a 246 megawatt wind farm from Spanish developer Iberdrola Renovables which, combined with the related transmission investment, will cost the utility some $900 million. There were also reports of a contract to build an 845 megawatt wind farm in Oregon and a 1 gigawatt offshore project in Northern Europe, to name two more. Such announcements and others indicate that investment in renewable energy is picking up despite the broader economic uncertainties and confusion about future emissions regulations.

The Fed keeps rate steady near zero
The Federal Reserve’s rate-setting FOMC committee met earlier this week and kept its key interest rate near 0%. Their statement included mixed views on the economy but, more importantly, repeated their pledge to keep rates exceptionally low for an extended period. While the immediate effect on the stock market was non-existent, low rates tend to be good for the markets.

Any negative effect of a strengthening dollar has so far been mitigated by a continued stream of better-than-expected results and outlooks from companies across various industries.

The stock market creeps higher
In the thirty days since the November update, the stock market has been creeping higher with the S&P 500 and Nasdaq Composite indexes gaining 1.24% and 2.91% respectively. The Dow Industrials and Transportation indexes even set new bull market highs on Monday, which some market timers view as a confirmed buy signal. Still, looking at most charts the market appears to be forming a top, but the longer it does this the more it comes down from an overbought condition which peaked in September.

The Green Portfolio update and recommendations
For the same 30-day period ending with the close on December 16th, our Green Portfolio gained 7.02%. Since August 3rd 2009 the aggregate portfolio return is over 23%, more than double the broad market index advance.

Once again it was a market leading large cap stock which underperformed all other positions in our portfolio, Vestas Wind Systems (VWDRY.PK), which dropped 11.37% during the month. Smaller companies have clearly had the edge of late, with several of our small cap holdings gaining around 20% for the month, including one of our early December stock picks which is up 19.17% since then. And, speaking of small cap leadership, we cannot gloss over the near double of our September Chinese photovoltaic stock pick.

*** Green Portfolio recommendation updates ***
Only active subscribers of The Green Investor newsletter receive updated recommendations for Green Portfolio positions.

Stop guessing which of the numerous green industry stocks will be winners. Get immediate access to all our analysis and Green Portfolio stock recommendations at no risk with our unconditional 30-day money back guarantee.

Become a member of The Green Investor today!

Happy Holidays and a Prosperous New Year from all of us at The Green Investor.

Andreas Schreyer
Editor
The Green Investor
 http://www.thegreeninvestor.com/

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Opportunities in the Wind Energy Value Chain

On November 11, 2009, in Alternative Energy Stocks, Green ETFs, Green Stocks, Wind, by Andreas Schreyer
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After having introduced the wind energy market and established why it has such a very promising future in “Wind Energy: Now Is the Time to Invest”, we explored ways to invest in this space, from the broad industry index approach of the specialized wind ETFs (FAN) and (PWND) to the targeted method of focusing on top wind turbine manufacturers such as Vestas (VWDRY.PK) outlined in “Finding Opportunities in Wind Energy”. For all practical purposes, this latest article could have been entitled “Investing in Wind Energy, Part 3” and it takes us to mostly unsuspected ways to invest in this vastly untapped source of renewable energy.

When it comes to the selection of wind energy stocks, a look at the value chain beyond turbine manufacturers reveals what are, in our opinion, some of the best ways to play this market. With the turbine manufacturers located approximately in the middle of the value chain, we first look downstream to where the demand is coming from.

Demand for electricity ultimately comes from the consumers, industry and individuals, but the demand for renewable energy mostly originates with the utilities that are forced by regulatory mandates to gradually decrease the percentage of their energy mix coming from fossil fuels. Utilities seldom develop their own wind farms; instead they acquire them from project developers or simply buy the electricity from Independent Power Producers (IPPs). Table 1 below lists some of the key downstream wind market participants: the project developers, Independent Power Producers and utilities.

Table 1: Project Developers, Independent Power Producers, Utilities

Company Name Ticker Symbol Country
A-Power Energy Generation Systems APWR China
E.ON AG EONGY.PK Germany
FPL Group Inc. FPL USA
Iberdrola Renovables IBDRY.PK Spain
Nacel Energy NCEN.OB USA
Naikun Wind Energy Group NKWFF.PK Canada
Otter Tail Corporation OTTR USA
Western Wind Energy Corporation WNDEF.PK Canada
Xcel Energy XEL USA

 

The list is ranked alphabetically and includes some of the larger players in their respective fields as well as some emerging ones. Besides a couple of large U.S. utilities, many of the companies are either foreign or small (or both), but they all can be traded on the over-the-counter markets. The list also varies widely in terms of exposure to wind energy. Some, like A-Power Energy Generation, a small-cap Chinese Project Developer which has positioned itself masterfully as a wind pure-play to Wall Street investors, in fact generates the bulk of its revenue from waste heat cogeneration projects. At the other end of the scale we find companies such as E.ON, an $81 billion German energy behemoth which recently came to the attention of U.S. investors when they opened the world’s largest wind farm in West Texas. It might be a great energy company, but a wind pure-play they are not. To find pure-play wind companies you need to look to much smaller companies such as Nacel Energy, Naikun Wind Energy Group, and Western Wind Energy Corp. which, at $20 to $25 million in market capitalization, are not even ranked as micro-caps.

 

While no publicly traded utility company offers exclusive focus on wind energy, we like the U.S. utilities as they stand to profit from the long-term shift to renewables. With a market cap of about $825M, Otter Tail Corporation is a smaller utility but they have made great strides in incorporating wind in their generation portfolio. Larger utilities we prefer for their forward thinking strategies are FPL Group Inc. which already generates 10% of its electricity from wind, and Xcel Energy, as their NextEra Energy Resources subsidiary owns 25% of current U.S. wind capacity.

The last and maybe the most unrecognized but also the most promising segment of the wind energy supply chain can be found upstream from the turbine manufacturers. It turns out that wind turbine manufacturers are mostly system integrators and they outsource many of the critical components to specialized firms. Table 2 below includes a broad collection of wind components manufacturers which produce blades, bearings, transmissions, generators, towers, power electronics and other key ingredients.

Table 2: Wind Turbine Components Manufacturer

Company Name Ticker Symbol Country
ABB ABB Switzerland
American Superconductor Corp. AMSC USA
Ameron International Corp. AMN USA
Broadwind Energy, Inc. BWEN USA
Hexcel Corp. HXL USA
Trinity Industries Inc. TRN USA
Timken Co. TKR USA
SKF SKFRY.PK Sweden
Toho Tenax TINLY.PK Japan
Toray Industries TRYIY.PK Japan
Xantrex SBGSY.PK France
Zoltek Companies Inc. ZOLT USA

The list is a sampling of publicly traded companies and is by no-means exhaustive. Few of them are wind pure-plays, but this gives them some solid diversification and financial strength. While new wind turbine makers appear by the dozen, the components used in their assembly require very high levels of expertise and specialization. Many of these specialties have significant barriers to entry and the incumbent suppliers are not easily displaced. They promise to grow as fast as the wind energy market grows and their margins tend to be easier to maintain and several have the fundamentals to provide great investment potential.

 

Not all wind turbine components present good opportunities for investment. Towers, for example, are mostly outsourced to an ever growing list of local suppliers. With no real barrier of entry and transportation a permanent confining factor, the market for towers will continue to be very fragmented and local. Ameron International Corp. and Trinity Industries Inc. are two such companies which produce wind towers as one of many other businesses such as rail cars, barges, gas tanks, pipelines, etc. Almost at the other extreme in terms of industry concentration and geographic reach are gears and bearings which are in every wind turbine. There are a few very large global manufacturers like Germany’s SKF and Timken Co. who split the market amongst them, but in our opinion present little attraction as investments because they offer relatively low exposure to the wind market and modest profitability prospects. Much of the same statements apply to generator manufacturers which include large multinationals like ABB and General Electric (GE).

A different breed of wind player is represented by Broadwind Energy, Inc. which is providing a broad array of components and services for the wind industry. They build everything from towers to bearings and gears, and provide heavy haul transportation for the massive parts as well as complete wind farm maintenance and operation services.

With the industry pushing to ever larger, stronger and lighter turbines, carbon fiber blades have emerged as a substitute to fiber glass and other composites. Our list of manufacturers includes Japanese firms Toray Industries and Toho Tenax, a wholly-owned subsidiary of Teijin and the dominant US-based blades companies: Hexcel Corp. and Zoltek Companies, Inc.

On the power electronics front we have a large number of vendors providing anything from inverters, to wind turbine current-leveling and backup power for blade pitch control systems. ABB once more heads the list of the large players competing with specialist companies such as American Superconductor Corp. and Xantrex, which has now been acquired by French giant Schneider Electric.

The wind energy value chain features many more companies than we could list here, and not all we listed necessarily make great investments. There are several dozen companies to investigate among which many outstanding gems can be found by the informed investor.

Disclosure: No positions.

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Finding Opportunities in Wind Energy

On October 28, 2009, in Alternative Energy Stocks, Green ETFs, Green Stocks, Wind, by Andreas Schreyer
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Last Wednesday I published “Wind Energy: Now Is the Time to Invest” as an introduction to wind energy markets and a review of the reasons for which I believe wind offers a bright future for informed investors.
This year, an estimated 28,000 Megawatts (MW) of capacity are being installed worldwide, and by 2013 the new annual installed capacity will have more than doubled to 58,500 MW. The U.S. Department of Energy also projects dramatic growth with wind energy’s contribution to U.S. electricity supply to increase to 20% by 2030.
Probably the single largest challenge for a U.S.-based individual investor looking to participate in the growth in wind power is that the vast majority of pure play or significant industry players are foreign companies whose stocks are listed on foreign stock exchanges. A perfect illustration of the dilemma can be found in the list of wind turbine manufacturers in Table 1 below. The list represents the worldwide top 10 market share rankings in 2008.
Table 1: Wind Turbines Manufacturers
General Electric (GE) is the only U.S. manufacturer to make the list. GE manufactured over 50% of the wind turbines deployed in the U.S. last year and grew its global tower market share to 18.6%. It is now nipping at the heels of Vestas of Denmark, the world’s largest supplier of wind turbines, at 20% market share. Still, as we pointed out previously, GE makes a rather poor wind investment. For starters, it is nowhere near a wind pure-play and its participation outside the U.S. market is minimal. For example, in what is expected to become the largest wind market this year, China, GE holds only a 2% share and ranks #10.
If you could only buy one wind company it would have to be Vestas Wind Systems (VWDRY.PK) as the clear leader in the wind power industry. Vestas has a truly global reach, having installed wind turbines in 63 countries, and is one of very few industry players that can provide complete end-to-end wind power solutions. Vestas’ wind turbines account for nearly one-third of total installed global wind power capacity. Of the top eight country markets, Vestas is the #1 or #2 supplier of wind turbines except in China where they are a strong #4 with 10% market share, behind three Chinese manufacturers.
The list highlights the difficulty for the U.S. investor, as most companies are either private or traded on foreign exchanges. Just like the Vestas stock, a few others are also traded on the pink sheets as over-the-counter (OTC) American depository receipts (ADRs). This means they are not required to make the financial filings in the U.S. that are required for a listing on the major U.S. stock exchanges, and OTC stocks can present other dangers for the casual investor, such as very low volume and high bid/ask spreads which can erode profits.
For anyone only interested in taking a small wind position without investing time and effort, one way to simplify the process is to buy into the wind market as a whole via exchange traded funds (ETFs). Table 2 below lists the two specialized wind funds currently available in the U.S.
Table 2: Wind ETFs
Investing in ETFs presents the benefit of owning an entire basket of stocks in one shot, with the inherent diversification this represents, and the ability to easily participate in hard to reach foreign stocks. We wrote about the advantages of ETF investing in “A Guide to Investing with Green ETFs”. On the downside, investing in a broad static index tends to water down the best performers and results will typically lag a portfolio of handpicked stocks assembled by a knowledgeable and specialized analyst.
The good thing about stock picking is that there are dozens of great companies to choose from, including some long-term keepers from the top 10 wind turbine makers listed above. Even more exiting are the prospects one can find elsewhere in the wind supply chain. Upstream are the suppliers of the many critical components which the turbine makers generally outsource, such as blades, bearings, transmissions, generators, towers, power electronics and other key ingredients. Downstream are the wind farm project developers, independent power producers and utilities. Our next article in the wind series will explore the most promising companies in the extended wind value chain.
Disclosure: No positions
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