Buying Broadwind on GE, Gamesa Wind Energy Deals 16 comments
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Much attention is given to solar companies these days, amidst rapidly rising earnings and sales. To be sure the solar revolution is on and solar stocks are reminiscent of mid stage internet bubble fervor. But there is one tech - wind - that gets overlooked by a long shot. This is due in large part to the simple lack of wind energy technology companies that are publicly traded.
The behemoths in the wind world are European and not able to be traded on the U.S. market. Then there are five bulletin board listed companies of any worth at all in the wind industry that I can find: CPTC.OB, AWNE.OB, WWEI.OB, CWSI.OB and BWEN.OB. Of those 5, there is only one that has managed to make it out of the sub-par category and turned a profit on growing sales. Broadwind Energy (BWEN.OB) is the clear leader of the pure play wind companies traded in the U.S. (that I can find).
The Two Big News Stories
On Friday BWEN announced it is going to be supplying gears for GE's (GE) wind turbines. 
GE is somewhere around the third or fourth largest wind turbine producer in the world.
Tuesday BWEN announced it will supply Tower parts to Gamesa (GCTAF.PK), one of the top two or three wind turbine companies in the world.
So in four days, BWEN signs up to be a supplier to two of the top four wind producers in the world. This takes the company from a small, fast growing parts maker into a supplier to the behemoths in a very short period of time. The difference, to be sure, will be millions upon million in sales and earnings.
Past Earnings
Now to top it all off, BWEN was already growing swiftly and has been profitable. Its trailing nine month period ended September showed a profit of $0.03 versus a year earlier loss on sales of $8.0 million. The company has more cash than liabilities, and hence a strong balance sheet. They have delayed their 4th quarter filing for quite some time "due to the challenges of integrating three acquisitions during the past six months: RBA, Inc., Brad Foote Gear Works, Inc. and Energy Maintenance Service, LLC." I treat this as a small hiccup in the larger picture. Getting the books right the first time is probably better than coming back later and saying they did it wrong.
The future
As of yet the company is largely undiscovered. This is due in large part to its status trading on the bulletin boards versus one of the three exchanges. Right now the company probably has enough going on that it is not necessarily worried about its listing status, but sometime this year one can only assume it will push to become a listed company. Upon listing, BWEN will probably get more of the share appreciation it rightly deserves.
Disclosure: Author was planning on buying BWEN shares on Friday.
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This article has 16 comments:
In the U.S. you can buy Trinity (TRN) - they have a PE around 7! Most of their business is building rail cars, but they also have a fast-growing wind tower business that is bigger than Broadwind's, and much cheaper.
Repower is currently hot in Europe, it's a wind turbine manufacturer, and it currently produces the largest capacity turbine, 5MW, while their competitors like Gamesa and Vestas make turbines between 2 to 4 MW. Repower is flying atm, but i guess this is less of interrest for US investors.
My current position in wind energy in the USA is in NCEN.ob , a stock mentioned by a commenter here already. It's a very interresting company IMO, a development wind farmer, it is planning to get 80 MW installed by 2010 wich is for a wind farmer a very ambitious outook, and they are on track. Their stock has done great so far, going from 1$ in januari and now trading near 3$. It has a small market cap (60 million $) and to my calculations they only need to turn a few million $ profit a year to make this valuation right at a fair P/E for a fairly good growth company, wel devide 60 million by 15 (a low PE by all means) and you need a anual 4 million$ profit only, wich is small, and PE 15 is way to low for strong growth company's that are wind farmers.
Aother thing to consider is the ease for wind farmers to find customers, basicly just conect to the grid and sell, and if they get good wind they get profitable very easily.
Also to concider is takeovers. Due to high demand in turbine's in Europe recently there have been quite a few small wind farmers takeovers at hefty premiums.
To all Americans: Don't underestimate wind power. USA is big on solar, with good reason, but wind power is actually even closer to grid parity for the best wind spots, and the USA is very busy trying to close the gap with Europe. There is a lot of money to be made in this market, and valuations are far lower than that of solars atm. I think there is a golden opportunity in such stocks as NCEN.ob .
For disclosure, I bought some at 10.35 and sold those shares at 13.80. I also bought some at 10.95 which I still have and I bought a bunch yesterday at 13.90 and 14 based on the double bottom with handle base. I got lucky and got the Cramer bump today, but it would have happened eventually.
I am very curious if you think BWEN is till a buy after yeseterdays run up.
Any advice????
Iceberg
American Superconductor AMSC and Composite Technology CPTC.OB (which is mentioned at the start of the main article). They are both also involved in the power grid infrastructure.
Iceberg
Want a piece of Clipper, Vestas, and Gamesa? Try the Merrill Lynch New Energy Tech fund (MNE.L or MLGYF.PK). Buying European stocks really isn't hard--a lot of them trade as ADRs, or you can get an Etrade Global account and buy them directly on the London, Frankfurt, etc. markets. But they tend to have restrictions--Clipper is almost impossible to buy unless you have the right broker, and Vestas and Gamesa have 100 share minimums--a big chunk of change in the case of Vestas, which has tended to trade at very high P/E. So the Merrill Fund makes it easier to diversify.
I'm not necessarily recommending it at the present price--it could just as easily go down 40% as up. But for the long haul alt energy funds still seem like a pretty good bet to beat the market.