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I've Been Buying BWEN Between .27 And .30/Share

|Includes:Broadwind Energy, Inc. (BWEN)

The company is executing a non-wind-dependent turnaround plan that-if successful-- should make it healthily cash flow positive by next year. (Management appears to think the company is on the right path, as in June the CEO bought 80,000 shares and the CFO bought 100,000 shares at prices near where the stock is now.) What particularly grabbed my interest here is that last week the Federal government slapped very large tariffs on Chinese and Vietnamese tower manufacturers whose pricing has been crushing the profitability of the company's wind tower division. Unfortunately, with current natural gas prices as low as they are, most of the wind business is dependent on a Federal tax credit that's scheduled to expire at the end of this year, however it now appears that the tax credit will be extended: thecaucus.blogs.nytimes.com/2012/08/02/s.../

Even if the tax credit isn't renewed and the company's non-wind businesses continue to grow as they recently have (admittedly, a big "if"), I think the company could do around $7 million in 2013 EBITDA less capex; if the credit is renewed we could see around $10 million in 2013 EBITDA less capex and quite a bit more than that in 2014 if the wind business fully recovers (requiring a tax credit extension once again at the end of next year) and the new tariffs enable some pricing power. A 7x multiple on the "no tax credit renewal scenario" would make the company worth $49 million in 2013 and when we add in NOLs with a cash value of around $20 million the resulting $69 million valuation would give us around 67% upside from the current price of .30/share; if the tax credit does get renewed on a multi-year basis the upside could be closer to 120%. (At some point this summer the company will execute a reverse stock-split in order to maintain its Nasdaq eligibility and the stock price will adjust accordingly.)

Disclosure: I am long BWEN.

Stocks: BWEN