Why We're Nuts About Acorn Energy

Acorn Energy (Nasdaq: ACFN) likes to take a stake, if not outright purchase, struggling companies that have invested millions of dollars and spent many years perfecting their innovations. These companies are just beginning to reach the "Tipping Point"; in other words their technology is now ready to be profitable in the market but they may not have the cash or resources to scale up. This method has worked extremely well for Acorn in the past, having successfully brought several companies public and turned private companies profitable.

What does Acorn's current portfolio of companies have in common? For starters, they're green. From catalyst regeneration technologies and services to reduce noxious emissions by fossil-fuel power plants, to improving efficiencies of the electric grid, to delivering mail in Germany. There's even sonar technology that allows owners of fossil fuel infrastructure assets such as oil rigs, pipelines and oil terminals to protect their investments.

Acorn's portfolio is one that is focused on profitable clean tech and making the world a better place to live. ACFN is truly an undiscovered stock; where else can you find a green profitable company with a P/E of 1.71 and EPS of 2.45?

For those investors that acquire ACFN in its current range, we believe their world will soon be a greener place too.

Profile

Acorn Energy is a "green" holding company focused on improving the efficiency of the energy grid and reducing the environmental impact of the energy sector. ACFN has virtually no debt and as of August 13, 2008, has a cash balance in excess of $19.0 million.

Acorn Energy's operating companies leverage advanced technologies to transform the existing energy infrastructure. ACFN's strategy is to take primarily controlling positions in companies led by great entrepreneurs and add value by supporting those companies with marketing, strategy and business development.

Acorn Energy is a global company with interests in seven companies. ACFN has equity interests in three listed companies: 552,500 shares of Comverge, (listed on the Nasdaq Global Market), 407,000 shares (31.4%) of Paketeria AG (listed on the Frankfurt Stock Exchange), and 15,714,285 shares (23.8%) of GridSense (listed on the TSX Venture Exchange). Acorn has controlling or significant interests in four private companies: CoaLogix, (85%); Coreworx (100%); DSIT (72%); and Local Power (10%).

ACFN Investor Highlights

• ACFN has virtually no debt and as of August 13, 2008, has a cash balance in excess of $19.0 million, including $2.5 million of restricted cash.
• Sales in the first six months of 2008 increased by $6.2 million or 359% to $7.9 million from $1.7 million in the first six months of 2007.
• Recently announced its CoaLogix subsidiary secured two new contracts for catalyst regeneration totaling over five million dollars. CoaLogix's current backlog in regeneration contracts represents about three times its entire 2007 revenue.
• These awards bring the total SCRs under management to over 10,000 MW. The total "fleet" of SCR catalyst in use in the United States is about 145 GW for coal plants and about 50 GW for gas fired plants, representing a major growth opportunity for CoaLogix.
• Recently completed its acquisition of Coreworx of Kitchener, Ontario, provider of the Coreworx[TM] suite, the world's leading software tool for capital project information management and collaboration. Coreworx is currently utilized to help manage the construction of hundreds of major capital projects, including offshore oil production, refineries, mining operations and power plants around the world.
• Announced that its Paketeria affiliate in Germany has deepened its partnership with the Volksbank network with the execution by Volksbank Meissen of an agreement to open 12 "shop-in-bank" locations in Meissen -- two in August and the remaining ten in the fall.
• In May 2008, CoaLogix signed an agreement to pay an upfront $2 million license fee and subsequent royalties on net sales to obtain the exclusive worldwide commercialization and marketing rights to Solucorp Industries' technology for the fixation of heavy metals, such as mercury, for the electric power generation industry. The agreement grants CoaLogix exclusive worldwide marketing rights for the technology for a period of ten years with an option to extend for an additional five years.
• Acorn Energy completed its acquisition of a significant minority interest in GridSense in January 2008, providing the Company a strong foothold in Asia and the emerging field of remote monitoring and control systems for electrical utilities.
• In February 2008, ACFN's DSIT subsidiary, a leader in the field of threat detection for underwater energy infrastructure, announced $1.4 million in new contracts involving the integration of subsystems developed by DSIT into systems built by customers and opportunities to expand the projects in the future.
• Recently announced that its DSIT subsidiary has been awarded new development and production projects at a total value of approximately US $900,000.
• Acorn Energy now owns significant interests in three listed companies: 552,500 shares of Comverge (listed on the Nasdaq Global Market), 407,000 shares (31.4%) of Paketeria AG (listed on the Frankfurt Stock Exchange); and 15,714,285 shares (23.8%) of Gridsense (listed on the TSX Venture Exchange). Acorn also has controlling or significant interests in four private companies: CoaLogix, (85%); Coreworx (100%); DSIT (72%); and Local Power (10%).

 Disclosure: Author holds a long position in ACFN

 

 

 

Comments

[NOWHEREMAN:]

Sounds a lot like CMGI during the Tech pre Bubble years. Where are they incorporated and what percent of the company is owned by insiders? Have those insiders taken the current weakness as an incentive to buy shares?

2008 Aug 17 10:52 AM

[David Lentz:]

Yahoo Finance has insiders buying the shares (apparently on the open market, not via option exercises) back in April-May.

Tom -- any idea what happened to the stock in 2003 and 2005, when it had dropped to around a buck a share? Looking at the long-term history of the stock, it has ranged from $14.75 (when it split 2:1) to $0.85.

The insider buying looks promising, and the balance sheet does not send me running away -- although the fact that 2007 was only year in the 2005-2007 period that they had net profits. The cash build-up leads me to speculate that they are gathering funds to make another acquisition, or at a minimum preparing for calamities in the equity markets. I like cash.

OTOH, the small-cap universe is a treacherous place to live. Caveat Emptor.

2008 Aug 17 12:59 PM

[NOWHEREMAN:]

They bought much higher but are not buying at reduced levels. I like it, but am unwilling to get involved until the energy markets stabilize or insiders come in other than those which have already been participating.

That's their current problem, energy related stock are in disfavor.

2008 Aug 18 04:22 AM

[Njord Wind:]

I wouldn't be too concerned about insider holdings. The only real insider here is John Moore, the CEO, who owns about 4% of the company.

I also wouldn't think about this company in terms of "earnings". For example, that $2.45 in earnings you mention includes nearly $29M in gain on sales of COMV shares - not exactly sustainable earnings.

I definitely wouldn't think of them as an "energy" stock in the usual definition; that term usually means oil and gas related stocks. The stock has been under pressure recently because COMV, of which they still own a significant amount, is down from $14 to $6 in the last month. However, I'm relatively bullish on COMV as well, so I wouldn't worry about this.

I like to think of this company as a nice portfolio of mid to late stage venture companies, without the fees of a real venture investment. I think any of their portfolio companies could one day double the value of the company, if you can just wait 2-3 years to realize the value.

2008 Aug 18 09:56 AM

[hinhier:]

I believe this was a much different company in '03-'05. Different management, different holdings. Mr. Moore took over in 3/06 with the stock trading in the low $2 range.

I believe at the time the only companies Acorn had interests in from the current portfolio were Comverge and DSIT.

2008 Aug 18 10:53 AM

[NOWHEREMAN:]

Like I said, energy related. CMGI bought private firms and IPOed them, tech for the most part. There is a Public Venture company which is trying to do the same thing, TINY.

Don't own any of them but do like ACFN's chart, if it holds here. Could move above $7 if it follows the Sine wave in progress.

2008 Aug 18 01:41 PM