As Solar and Wind continue to fight for the best viability in sustainable energy, it may be unclear where investment dollars need to be put. Rather than guessing which one will see the most growth in the coming years, let's look at a couple of stocks that stand to win as long as the battle remains heated.
Despite wild price swings back in 2000 and again back in 2007 in most alternative energy stocks, they remain relatively unchanged from levels seen in the late 90s. Meanwhile, the Wind, Solar and Bio-fuels industry has gone from the research/trial stage into more of a refinement stage, with Solar and Wind being the only energy sources with positive long term outlooks. One small group of companies may be uniquely positioned in the space and are not tied directly to some of the same concerns affecting other Alternative Energy companies. These are the inverter makers, companies that provide utility grade power conversion solutions for commercial and utility scale renewable energy installations. Let's focus on the ones that work mostly with Wind, Solar and Bio-Fuels.
These companies products are made mostly from more traditional and cost stable resources, as opposed to the more volatile price swings in resources used to make solar panels and fuel cells. They essentially avoid much of the risk, but stand to benefit the most should things continue to accelerate in the Alternative Energy arena. Every time solar panels, wind turbines or fuel cells are made and sold for commercial and utility scale installations, these company's products are also needed. It has also been clear for some time that the commercial environment is exponentially more profitable than the consumer one.
Inverter shipments in the first quarter of this year were at record highs, and demand looks to outpace supply as the small handful of companies pump out product as fast as they can. Two companies that stand out are directly tied to the situation, SatCon Technology Corporation (SATC) and Advanced Energy Industries, Inc. (NASDAQ:AEIS)
SATC's balance sheet is not the greatest, but certainly sustainable. On June 17, the company added 12 million to its short term debt load. It has seen a little bit of quarterly revenue growth and has consistently shown a gross profit. Recently the company has announced several deals, and has introduced a few new products. This combined with some insider buying via stock options at around $2.25 may bode well for the stock in the short-to-mid-term.
On June 9, the company announced that Southern California Edison has selected it to supply photovoltaic inverters for at least 75% of its solar photovoltaic program project. The company also announced on that date that it was selected by Q-Cells (OTCPK:QCLSF) for multiple large scale solar PV power plants in Ontario. These projects will rank among the largest solar PV installations in North America.
The company claims that bookings for the first quarter of this year far outpaced total revenues for all of 2009. These bookings seem to be continuing into the second quarter. The stock is far from diluted, with only around 70 million shares outstanding. Institutional ownership currently stands at close to 50%, which is unusual for a stock priced this low.
AEIS only recently got involved in the inverter market through an acquisition of PV Powered Inc. The companies balance sheet looks a lot better than SATC's but it may have a little catching up to do with its products. The company expects revenues to increase from $21 million in 2009 to $40-$50 million in 2010, which is on par with the growth expected for SATC. AEIS has a tiny float and is almost entirely owned by institutions and insiders. The PV Powered Inc. acquisition was funded by 35 million in cash, and 15 million in stock. Dilution does not seem to be a concern going forward.
Disclosure: Unbiased, no position