Whether you call it renewable energy, alternative energy, clean tech or another name, powering up the planet by means other than fossil fuels is becoming big business. Even the oil giants all admit in their long-term forecasts that energy sources such as wind, solar, turbine, biofuel and the like will grow exponentially in the coming decades.
24/7 Wall St. has highlighted the prospects for seven alternative energy and clean tech companies that may have been overlooked by investors. These are all speculative companies, but they all potentially have exponential upside in the years ahead.
In order to qualify for this list, each company has to have a significant opportunity ahead that remains exponentially larger than the tapped opportunity to date. All of these companies are based in the United States, but almost all of them have an international presence and are not solely reliant on U.S. Department of Energy handouts.
Another issue to consider is that these are all small cap stocks. We used $500 million market cap as a guide, though some of the screened companies may have exceeded that mark marginally. None of the companies were over $1 billion in market cap, so they are generally not as well known as the largest solar players. Lastly, almost all of these companies now are generating direct revenues from existing operations.
We also only took one company from each subcategory within clean tech, renewable energy and alternative energy. These range from wind power and distributed power, cleaner coal, turbine systems, fuel cells, pollution control, ocean power, solar, biofuels and renewable chemicals.
Several things are driving alternative energy all at once in 2014 — and this is not politics by any stretch. The latest U.S. and international reports on climate change were catalysts for a renewed interest in the sector. Still, the United States is already using more solar power. The latest EPA targets went even further against coal. Europe’s dependence on Vladimir Putin and Russia for natural gas will also act as a support for alternative energies. Another issue is the spike in oil from Middle East turmoil in Iraq. If you simply remove politics from the scenario, many investors have already decided to look at this sector objectively and include alternative energy in the same portfolio as oil and gas as a cost-effective future of energy.
As with most renewable and alternative energy stocks, some have run into their share or problems over the years. All these companies have been around for a while, and most of their shares have previously traded at much higher prices.
One last note is that all of these should be considered highly speculative. Some of the growth scenarios could reverse for a myriad of reasons, both longer term or almost immediately. None of these stocks would fit within a “widows and orphans” suitability test for investors and fiduciaries.
1. American Superconductor
> Segment: Wind and grid
> Share Price: $1.60
> 52-Week Range: $1.25 to $3.06
> Market Cap: $127 million
American Superconductor Corp. (NASDAQ: AMSC) has significant long-term opportunities in both its wind-related project opportunity (Windtec) and in its grid technology (Gridtec). This is also one of the more complicated companies in alternatives and renewables as it has two operations that do not generally have the same business trends each quarter or each year. That makes this the longest of the seven summaries here.
UPDATE on July 16, 2014: American Superconductor reached a major accord of nearly $60 million in revenue in a deal with Exelon’s ComEd in Chicago. Our take – this may be one of the larger deals, but it is also likely the first of many such deals. Shares were at $1.60 on our first report, but they were up almost 20% at $1.92 and hit a high of $2.10 on that day on more than 10-times normal trading volume.
American Superconductor fell from grace after significant issues arose in China. In 2011, the stock fell from $30 down to under $5 and it has struggled ever since. Still, this is about the opportunity in wind and in grid tech, rather than just the past. There is an ongoing possibility that its woes out of China will become good again, even if a base case should limit that expectation.
AMSC has restructured its U.S. operations and already has a presence in Asia, Australia and Europe. What makes this one less risky than its past may indicate is that it has nearly $50 million in cash as a cushion, and its market cap of $127 million is only about 15% above its tangible book value — with a cash burn rate slowing down to acceptable levels while it still has access to the capital markets for raising cash if needed. AMSC also just received a $40 million follow-on order from Inox Wind (India). Gridtec may be losing money and suffer from lower sales currently, but this represents a major opportunity in the United States and abroad in the years ahead.
The company’s Windtec Solutions is a host of electronic controls and systems as well as wind turbine designs and engineering services. The turbine maximization is already in use in thousands of wind turbines around the planet. AMSC’s Gridtec portfolio focuses on interconnection, helping to maximize the transmission of energy into the grid and to help act as surge protection for systems. It also has high-temperature superconductor wiring rather than traditional wiring, which aims for up to ten-times more power than conventional cables.
There is almost no analyst coverage on American Superconductor. Revenues have been sporadic in both units, but large opportunities are coming from military and defense, and the longer-term opportunities remain in China. India and Europe are ongoing, and the company could capitalize on the failing infrastructure inside the United States easily as well. With total 2013 revenue down more than $3 million to $84.1 million, the company has already forecast that revenue is likely to be slightly lower again for all of 2014. Still, the reality is that both wind and grid can act as significant opportunities ahead, both of which have the potential for exponential revenue growth in the coming years.
AMSC is based in Devens, Mass., and has been consolidating its U.S. operation from its Middleton, Wis., facility. It has also been moving its Suzhou, China, facility to a new manufacturing operation in Timisoara, Romania.