The Flow Of Money After The Fiscal Cliff

Includes: AMRC, ENOC, RTNB
by: BayRidgeCapital

The 'Fiscal Cliff' has become a recurring theme amongst conversations and well documented in media outlets. Although it is leaving all of us with unanswered questions, we are hopeful we are approaching its conclusion shortly. During this time of limbo we should evaluate where the flow of money will go and which industries are poised to benefit from this reform.

Recently, I have come across several headlines detailing increased investments in the energy space, specifically increased budgets for energy conservation programs. In November, California voters approved approximately $2.5 billion in energy conservation programs through Proposition 39, focused on funding clean energy efficiency projects in schools and public buildings. NYC has enacted the Greener, Greater Buildings Plan (NYSEARCA:GGBP) targeting energy efficiency for over 15,000 properties with over 50,000 square feet in size. GGBP includes Local Law 84: Benchmarking, Local Law 85: NYC Energy Conservation Code, Local Law 87: Energy Audits & Retro-commissioning, and Local Law 88: Lights & Sub-metering. Lastly, the Senate deleted a provision in the defense bill prohibiting the military from spending money on green energy.

The above legislation coupled with Obama's reelection has given some visibility to continued spending over the next few years in the energy sector. The three companies below have faced their share of volatility and uncertainty, but in my estimation are positioned perfectly to benefit from the issue at hand being resolved.

EnerNOC (NASDAQ:ENOC) increases energy efficiency, improves energy supply transparency and mitigates emissions for commercial, institutional and industrial customers. Through EnerNOV's technology and services they help their clients use energy more intelligently and pay less for it thus increasing cash flow and profitability. They have a suite of technology-enabled energy management solutions including DemandSMART, EfficiencySMART, SupplySMART and CartbonSMART. The company expects full year 2012 revenue to be in the range of $270 million to $280 million, up from previous guidance range of $260 million to $280 million. Additionally, Raymond James upgraded EnerNOV to Ourperform from Market Perform and has PT of $15.

Premier Alliance Group (PIMO.OB) is a strategic advisory and consulting firm providing "Knowledge Based Expertise" for the Energy industry. To date the company has established themselves in California strategically aligning with Southern California Edison for example to implement their Automated Demand Response program. More recently they signed a definitive agreement to acquire Ecological which will dramatically add to their already impressive team and establish a presence on the east coast. The continued investment in California for energy solutions and the enforcement of GGBP in NYC has positioned Premier Alliance for strong growth in 2013. Revenue for the trailing twelve months totaled approximately $20 million and I believe it will dramatically accelerate going forward.

Ameresco (NYSE:AMRC) is a leading provider of comprehensive services, energy efficiency, infrastructure upgrades, asset sustainability and renewable energy solutions for facilities throughout North America. The company has faced some challenges recently with revenue during the third quarter down 28% to $163.9 million and guidance revised down to $640 million to $660 million for 2012 as compared to $728 million in total revenue for 2011. Delays to contracts in the pipe have played a large part in lower revenue and I expect much of the same during the current fourth quarter. Even still the company continues to move forward with projects having recently announced the completion of the first phase of energy saving with NASA Wallops Flight Facility and the expansion of market share in Ohio with an Energy Savings Performance Contract with the Lorain County Joint Vocational School.

All 3 companies have a strong backlog and bright future with Obama's re-election, the passing of reviewed legislation initiatives and should benefit once we are off the Fiscal Cliff. These stocks are already beginning to react positively based on the fundamentals and impending critical events; however, it is my opinion that we will see much higher share prices based on momentum and likely catalyst in 2013.

  • ENOC - Low of $10.69 on December 12th, today at ~$12.32, +15.2%
  • PIMO - Low of $0.55 on December 12th, today at ~$0.85, +54.5%
  • AMRC - Low of $9.18 on December 10th, today at ~$9.84, +7.2%

Disclosure: I am long PIMO.OB, ENOC, AMRC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.