Stocks to Benefit from a 'New Energy Economy'

by: Bill Paul

Is there anyone who doesn’t think that with Barack Obama in the White House, clean and green won’t be hot in 2009, no matter what the state of the economy? Here are 10 publicly-traded companies that we think investors should look at carefully before the calendar turns and the new U.S. President details his plans for a green, efficient “new energy economy":

#10 centrotherm photovoltaics ag [FRA:CTN]: Shares of solar energy firms have been hammered, including for this German solar equipment manufacturer. But countries including the U.S. continue to pursue aggressive renewable energy standards despite the recession, and experts say solar power should be cost competitive with conventional electricity within two to four years. Thus centrotherm’s strategy “to establish ourselves globally as a provider of production plants for solar silicon and turnkey production lines for the manufacturing of solar cells and thin-film modules” appears to have a lot of potential. It doesn’t hurt that, in these trying economic times, centrotherm can pitch would-be customers that its equipment can cut their costs.

More immediately, the company, whose shares trade in Frankfurt, reported that its net income tripled in the first nine months of 2008. In a November 12 press release, the company forecast a strong fourth quarter and indicated that it expects to keep growing despite the global financial crisis.

#9 New Flyer Industries Inc. (OTC:NFYIF): A favorite of Tom Konrad at, this Canadian company is the self-described leading manufacturer of heavy-duty transit buses in the U.S. and Canada, as well as a leading provider of aftermarket services.

Thanks to the push for greater energy efficiency in transportation, New Flyer, whose shares trade on the Toronto exchange, looks positioned to keep reporting strong growth. Among other recent developments, the company just delivered the first 22 of 150 new plug-in hybrid transit buses to the Chicago Transit Authority.

The company most recently reported third-quarter earnings and revenue roughly the same as the year-ago period. It said its order backlog is up 20% compared with December 30, 2007, and that it continues to experience near double-digit growth in aftermarket services.

While municipalities will be hard up for cash in 2009, as Konrad recently noted, Obama’s fiscal stimulus should contain significant money for green, energy-efficiency related jobs. While new orders have slowed some, New Flyer’s order backlog is still at record levels.

#8 Waterfurnace Renewable Energy Inc. (OTC:WFIFF): This Indiana-based company makes and installs residential geothermal heat pumps. While its shares have fallen with the market, percentage-wise they have held up much better than many other clean, efficient energy providers, no doubt thanks to sales and earnings that keep rising in the teeth of, first, the housing crisis, and now, the deep overall recession.

Waterfurnace, whose product taps the earth’s constant 55 degree temperature to heat and cool a house or other building by heating and cooling water depending on the season, most recently reported a 56% increase in third quarter net income over the year-earlier period on a 41% increase in sales. The company said it continues to benefit from consumers’ penchant for wanting to save money and go green at the same time.

The company likely should continue benefiting in 2009, given that the recent Wall Street bailout bill passed by the US Congress provides significant tax credits for both homeowners and businesses that install geothermal heat pumps.

#7 Ormat Technologies Inc. (NYSE:ORA): Like Waterfurnace, Ormat’s shares haven’t suffered nearly as much as many other cleantech firms. The company’s geothermal power business should do well as the new Obama administration searches for sources of electricity that don’t cause pollution and won’t further destabilize the U.S. power grid. Geothermal is the only such source at the present time. (Solar and wind are “intermittent” power sources that are capable of impairing grid stability. Nuclear, while non-polluting, will take 10 years or longer to increase as percentage of total U.S. power generation.)

Ormat is the global leader in geothermal technology, considered by many experts to be a vast untapped power source that is about to revolutionize power generation. The company already operates a number of geothermal power plants in countries around the world, and can be expected to benefit from Washington opening up a vast amount of federal acreage to geothermal mining.

The company most recently reported third quarter net about the same as a year ago, beating analysts’ forecasts, on a 26% or so increase in revenue. The company also recently bolstered its credit lines and thus should be able to continue exploiting the new global push for clean power.

Shares of Nevada-based Ormat trade on the New York Stock Exchange. The company is a unit of Ormat Industries, whose shares trade on the Tel Aviv exchange.

#6 Energy Recovery Inc. (NASDAQ:ERII): ERII is a small California-based company traded on NASDAQ whose technology makes it possible to desalinate water at less expense through greater energy efficiency.

The noted green investment brokerage Ardour Capital just recommended that investors “accumulate” Energy Recovery shares on its belief that Energy Recovery’s technology could make it a dominant player in the growing water desalination industry.

The company itself just announced a large contract for its reverse osmosis desalination equipment for a huge project along the north coast of Algeria, just one of many countries facing critical freshwater shortfalls that play to the company’s strength. Energy Recovery also recently landed a large contract in Spain, leading the company to declare itself “the preferred supplier” of energy-efficient desalination equipment in the Mediterranean basin.

#5 AMEC Plc [LON:AMEC]: Traded in London, AMEC is a British engineering and project management company that probably isn’t on most investors’ radar screens. But don’t be surprised if it has a breakout year in 2009 as the new Obama administration puts the screws to coal.

Earlier this month, Southern Co., (NYSE:SO), probably the best operated U.S. electric utility, contracted with AMEC to install enhanced emissions-control equipment at a plant in Alabama. It was AMEC’s second major award for pollution-control upgrades in the U.S. in recent months.

AMEC also recently formed an alliance with the world’s leading oilfield services concern, Schlumberger (NYSE:SLB), the stated purpose being to “add every component of what it takes to put a discovery into production.” And it recently signed cooperation agreements with South Korean utilities that will expand its business in that Asian country.

The company said last month it is confident that its 2008 EBITA will be in excess of 6.5%, with improvement expected in the next two years.

#4 Japan Steel Works (OTC:JPSWF): Japan Steel Works' stock is traded on the Tokyo exchange and it is in the unique position of being by far the world’s leading manufacturer of such key components of nuclear power plants as reactor pressure vessels and steam generators.

The company’s order book keeps growing as new orders come in for new plants in China, the U.S. and Europe from such leading contractors as GE (NYSE:GE), Hitachi (HIT) and Areva (OTCPK:ARVCF). With the world possibly just at the beginning of a nuclear revival, Japan Steel Works appears to be very well positioned to take advantage, the company having just started a three-year-long program to triple its manufacturing capacity. The company also has solid prospects for heavy manufacturing for the chemicals, and iron and steel industries.

Hitachi, Areva and Mitsubishi Heavy Industries (OTCPK:MHVYF) each reportedly has small equity stakes in Japan Steel Works, which they acquired to insure that they are able to get the parts they need.

#3 Fluor Corp. (NYSE:FLR): FLR, whose stock trades on the Big Board, is likely to see a surge of investor interest the moment the Obama administration details its ambitious infrastructure revitalization program and it becomes crystal clear that Fluor stands to make a bundle from every aspect of that program.

Led by Fluor, a handful of giant engineering firms will need to be everywhere at once, building new power plants and lines as they rebuild roads and bridges. While we’ve identified Fluor as the company to watch in this area, investors should also pay attention to Chicago Bridge & Iron (NYSE:CBI), Foster Wheeler (FWLT), Halliburton (NYSE:HAL), Jacobs Engineering (NYSE:JEC) and McDermott (NYSE:MDR).

Indeed, the whole group should experience a sharp rise in stock prices as Obama announces plans to spend hundreds of billions to revitalize and, in the case of power grids, reinvent the nation’s critical infrastructure.

#2 Itron Inc. (NASDAQ:ITRI): ITRI is the NASDAQ-traded “smart” meter manufacturer whose sales would appear likely to grow strongly as the Obama administration seeks to develop a “smart” electrical power grid that will maximize energy efficiency, thereby reducing the need to build more fossil-fuel power plants to meet America’s steadily-growing power demand.

Itron’s stock has been moving higher recently as the company gets increasingly recognized for its water-saving meters as well. When you consider that the best way to save energy is by saving hot water, Itron would seem to have a doubly-attractive business model going forward under the Obama administration.

Don’t be surprised if the stock surges some time in January, for President-elect Obama has hinted at making energy-saving home retrofits one of his first energy and environmental objectives, which could put Itron’s meters in high demand.

#1 IBM (NYSE:IBM): IBM, the giant software and technology developer traded on the Big Board, may turn out to be the biggest beneficiary of the Obama administration’s dual goals of reducing energy consumption and capping carbon dioxide emissions, two multi-billion markets in the making.

IBM is going to be both “Mr. Inside” and “Mr. Outside.” It will be providing software and consulting services for many major corporations as they gear up to control their CO2 output under new government mandates. It will also be providing the system-wide software for smartening the power grid, making it more efficient so that people save money and the nation cuts its CO2 emissions.

At first it may appear to investors that, because IBM is so big, its burgeoning smart energy software and consulting services won’t have much of an impact on its bottom line. But it should soon become apparent that such services may become the largest single contributor to IBM’s revenue and net income within the next three to five years.

Disclosure: no positions