Change of Heart: From Oil Baron to Wind Power Backer

Get ready for the media blitz.

“It’s time to stop America’s addiction to foreign oil.” So said millions of dollars worth of print ads taken out in newspapers across the country last Tuesday. In a full-page photo of a bright blue sky and a series of wind turbines the ad stated its case. “In 1970, we imported 25% of our oil. Today, it’s 70% and climbing. We will send $700 billion to foreign countries this year. Money that is building their countries. Not ours.” That’s a powerful point. The man making it? Oil billionaire T. Boone Pickens.

Last week he launched his “Pickens Plan,” a media campaign to get renewable energy policy entrenched in the next administration’s thinking. Through a combination of newspaper and television ads, Facebook and LinkedIn efforts for the young networking savvy and media coverage (like this) for everyone else, the Texas oil king wants to end “our growing and dangerous dependence on foreign oil.” This is the opportunity, his July 8 press release blares in boldface, “to do something we should have done 30-40 years ago.” When the oil barons start going Green, you’d better take notice.

The Pickens Push

One thing is for certain–Pickens is nothing if not practical. During the last 40 years, he wasn’t tilting for windmills; he was busy building his $3 billion fortune in oil and natural gas-not renewables. And four years ago, he bankrolled the Swift Boat Veterans For Truth campaign against Senator John Kerry, of Massachusetts, who had proposed a wide-reaching renewable energy plan similar to what Pickens is now proposing. (One odd aside to that saga–Federal Election Commission records show Pickens previously had been a repeat contributor to Kerry’s senate campaigns–one of the few Democrats he’s ever supported.)

The difference, of course, is that Pickens now has a significant interest in shifting policy toward renewables such as wind power and natural gas. He is in the process of building what would be the world’s largest wind farm, a $10 billion project spread over 200,000 acres of Texas panhandle and he has accumulated big financial interests in many natural gas-related companies.

However you feel about Pickens’ political actions, in investing the smart move is to step back from emotional reactions and take hints from what the smart money is doing.

As editor of the Cabot Green Investor, I evaluate a universe of stocks that have significant operations in clean energy, energy efficiency, organic consumer products and a host of other fields that fall under the Green umbrella. Where Pickens sees opportunity, so too there may be opportunity for our readers.

Knowing that most of you aren’t subscribers to Cabot Green Investor yet, I thought taking a look at some of the potential winners from Pickens’ newfound love of Green would be useful. I hope my brief glance at some of the stocks that stand to benefit can give a sense to non-subscribers of how we weed out winners from losers in Cabot Green Investor.

Stocks That Might Benefit From Plan

General Electric (GE) Before Pickens rolled out his plan, he had announced a massive order of 667 wind turbines from GE as part of the initial $2 billion build up of his Texas wind farm. That’s an order worth billions to GE, with more likely to come.

Is it Green? GE is one of the world’s largest makers of wind turbines. Did you see the episode of “30 Rock” with David Schwimmer as “Greenzo,” the superhero for NBC’s Green Week who quickly develops a massive ego? Very funny. But GE also makes jet engines, light bulbs, locomotives, oil refineries, telephones, loans, episodes of “Hardball with Chris Matthews” and runs of the Incredible Hulk rollercoaster at Universal Studios theme park in Orlando, Florida.

Is it Cabot Green Investor worthy? In short, there are a whole lot of other businesses you’re buying into with GE besides its wind turbines, water filtration systems and solar products. And GE is so big you’re not likely to see much growth from Green on the bottom line. That’s partly why the behemoth’s stock has traded in a range for the past six years. We’re looking for growth stocks, shares that have the potential to post dramatic gains in a short time. For instance, after we recommended a solar panel maker in our June issue, shares were up nearly 25% in less than two weeks.

ABB Ltd. (ABB) ABB makes automation and power control systems for a wide variety of industries. It’s one of the biggest holdings in Pickens’ BP Capital hedge fund, with more than 2.8 million shares owned as of March 31.

Is it Green? Arguably. Making systems that reduce the amount of electricity need in any number of industrial applications is justifiably green. ABB’s products also make power plants operate more efficiently, power transmission more effective and large scale heating and cooling systems need less electricity. One client, a London bank, cut its energy bill 90% after installing ABB’s drives and motors. That’s Green enough if our other criteria say go.

Is it Cabot Green Investor Worthy? ABB’s size (its market cap is $60 billion) is a strike against it, but its long-term chart has shown a nice strong uptrend, moving from 10 at the start of 2006 to 33 in May. But growth stocks worth buying have impressive sales increases year-over-year, double- or preferably triple-digit growth with the promise of more to come. ABB’s five-year sales increases amount to just more than 8% annually. ABB may be good for a portfolio looking to trade higher risk for less growth, but that’s not our aim.

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More Stocks That Might Benefit

Clean Energy Fuels Corp (CLNE) This is a company whose operations are right up our alley-producing cleaner energy for automobiles. Pickens founded the company in the early 1990s in the belief that natural gas could be a cheaper alternative to diesel for vehicles, because natural gas as a commodity is widely available in the United States. Sales were about $118 million last year compared with $92 in 2006 and $78 million in 2005. Pickens took the company public in May of last year and controls 60% of the stock.

Is it Green? Sure, natural gas burns cleaner than diesel, which is why many utilities and urban buses are powered by it. It’s not as Green as solar or wind, but incremental gains count, too. Part of Clean Energy’s strategy is to benefit from state and local mandates for cleaner burning fuels for municipal vehicles, a prospect that seems to be improving.

Is it Cabot Green Investor worthy? There is a lot to like. Sales growth is fine, at 26% annually, and has the promise of being able to post greater rates of increase, as natural gas becomes a more viable fuel option, something we like even more. As a businessman, Pickens didn’t make billions because he’s lucky, so we’re glad he still has a hand on the wheel here, meeting our criteria that a company should have good management. Its market cap ($500 million) also is a size we like, since it signifies a company that is past the volatile and speculative start-up stage but still is growing into its market. Looks good?

Well, after we examine the sales growth trends and market potential, evaluate the management and become comfortable with the financials, we check the technicals. The time-tested Cabot growth model has shown that buying stocks with strong charts–showing an upward momentum in price on increasing volume–is a key differentiating factor in whether a stock is a winner or a loser for the buyer. There are many very good companies out there, but not every one is a stock worth buying.

Looking at Clean Energy, the company went public at 12 in May 2007, worked up to 19 pretty quickly, before plunging to 12 again by August 2007. Since IPOs usually have little institutional support this isn’t surprising, though still not welcome. Shares recovered and worked up to 20 near the end of 2007. Then they steadily began declining, testing and holding support around 13 twice, but they failed to rally and broke through that support this May to a low of 11.

A Pickens-prodded bounce sent shares up double digits on consecutive trading days last week, but a brief rally does not a trend make. Shares still sit below the 50-day moving average, and look all the more bearish because that average is on a downtrend, too. Now it faces lots of resistance up through 14. It’s not a buy yet, if it ever will be.

By contrast, one potential winner from Pickens’ push on domestic wind energy could be American Superconductor (AMSC). The Massachusetts-based designer of wind turbines and highly conducive transmission wires showed a good upward trend (unlike CLNE) as well as a good story (big exposure to China and GE uses some of its components in some turbine lines), solid management and improving financials, so we recommended it to readers in our May issue when it was at 26. Shares vaulted above 41 in mid-June. And it’s still strong today.

As T. Boone has realized, there’s good money to be found in Green.


Brendan Coffey
For Cabot Wealth Advisory

Editor’s Note: Brendan Coffey is the editor of Cabots’s newest publication, Cabot Green Investor. So, if you’re ready to focus on the next great wave of growth, Cabot Green Investor might be right for you. It applies Cabot’s time-tested growth stock picking and market timing systems to the Green sector. Click the link below to get started investing in earth-friendly stocks.


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