Pick of the Week: AMSC

Sometimes you have to step back from the headlines. You may have seen Crude Oil close at $133.17 today. These prices indicate distressed drivers will be shelling out even more cash at the pump this summer. Let’s move beyond these astronomic prices for a moment and think about what this means for the market.Every day, higher crude oil prices are forcing major customers to look for alternative sources of energy. According to the Department of Energy, just half of each barrel of crude is used to produce gasoline. The rest is used in everything from asphalt to jet fuel — bought by customers not driving cars: municipalities, utilities, and manufacturers. These entities are searching for cheaper ways to keep the lights on and avoid paying skyrocketing crude oil-based prices. Creative CEOs and CFOs are combing the horizon for other sources of energy. They’re coming up with some great alternatives. Here’s what they’re finding.
1 – Wind: The United States estimates wind will generate 20% of the nation’s electricity by 2030. This DOE report chronicles how the U.S. expects wind-generated consumption to grow 20-fold in the next 21 years. Boone Pickens recently ordered 667 wind turbines for the Texas panhandle, as he expects to capitalize from this trend. Still, the market hasn’t priced in these expectations into wind energy stocks.

2 – Solar: Last week, we documented the opportunities available in solar stocks. Solar companies have exploded as crude has risen. Western states, awash in the sun, continue installing solar panels. Chinese and Canadian companies are moving towards solar technology as well. We expect solar opportunities to continue rising in this exceptional market environment.

One of the best places to invest in wind and solar energy is American Superconductor Corporation (AMSC). AMSC is a unique provider of alternative energy to non-consumer customers. This company is positioned to greatly benefit as more companies seek out non-crude oil energy sources. Last year, AMSC generated 65% of its sales in wind power energy. As they continue taking on more wind customers, they’re also growing into the solar thermal space. This year they’re partnering with Spain’s Abengoa SA. AMSC will help connect Abangoa’s Western U.S. solar farms to the electrical grid. Moreover, 70% of AMSC revenue is generated outside the United States, so it’s a globally diversified pick.

Two weeks ago, AMSC estimated their revenues would rise between $165 and $175 million, above analysts’ expectations. This is up to +56% more than last year’s fiscal results — a huge jump in revenues. The market believed it by handing AMSC a price boost and an all-time high close. However, the stock has since settled lower, making $30 look like an attractive entry point for a healthy piece of the wind and solar energy market.

The American Superconductor chart suggests tremendous upward momentum in a 5-month uptrend. Although it’s a small-cap stock with implicit volatility, the increased volume in recent weeks suggests it’s on many investors’ radar. Look to AMSC to profit from companies seeking alternative wind and solar energy sources.

All the best.