Brendan Coffey is a specialist on "green" investing; in his The Cabot Green Investor, he looks to alternative energy firm American Superconductor (NASDAQ: AMSC).
Here's his review of the company, which is a player both in wind power and energy efficient wiring that can play a role in improved power grid systems.
"Long an R&D company, focusing on highly conductive wiring, American Superconductor made a game-changing purchase of an Austrian wind company, Windtec, in early 2007.
"Since the purchase, American Superconductor has become a primary supplier of turbine designs to Sinovel, one of China's three major turbine manufacturers. Sales to Sinovel alone have topped $600 million from 16 GW worth of 1.5 MW turbines.
"In China's turbine business, bigger is better, so now, AMSC is starting to ship 3 MW turbines to Sinovel as well.
"A unique wrinkle to American Superconductor's business model is it not only sells the turbine design, as most companies will do, but also attaches the condition that it gets the right to sell the electrical components into each turbine sold-it is the classic razor blade model of adding very profi table incremental revenue to an initial sale.
"Criticized that business is too reliant on Sinovel (and its two other current customers, Canada's AAER and Germany's Fuhrlander), AMSC is expanding its customer base.
"Over the next 18 months, it will start shipping turbines to another 10 companies in countries such as Turkey, India and the Czech Republic, as well as additional Chinese firms.
"Now, American Superconductor's original business-high conductive wire-is coming into its own. The company just sold 50 miles of its next generation 344 wire to Korea Electric Power, the first sizable sale of the wire (although 344 is used by power authorities in New York and Ohio in specific applications already).
"Since minimizing power loss along transmission wires is essential to improving energy efficiency, the 344 wire looks to be a compelling proposition since it is 10 times more efficient than same-size standard copper wire for transmitting electricity.
"AMSC expects to sell the 344 wire into electric grid upgrades in the U.S. and in Asia, as well as power cable, electromagnets and generators.
"AMSC rallied about a year ago as investors began to realize the impressive business its management had cobbled together. We sold AMSC out of the portfolio in two parts last summer at a healthy 42% profit after shares became overbought and looked too susceptible to a sell-off fed by aggressive short sellers.
"The shares did plunge as expected, but then actually showed good relative performance during the depths of the market troubles.
"The current rally started from a base at 18 after the Korea deal was announced. Improving volume and signs of fund accumulation indicate good support for shares. Right now, it may be a little overbought, so buy on dips."
Steven Halpern's TheStockAdvisors.com offers a free daily overview of the favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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