American Superconductor (AMSC): Dominant foothold in the Chinese wind industry

By Brendan Coffey, Editor of Cabot Green Investor
From Cabot Wealth Advisory 9/16/10 Sign up for free Cabot Wealth Advisory e-newsletter

American Superconductor (AMSC) is an American company with a dominant foothold in the Chinese wind industry. It’s a Massachusetts-based maker of highly conductive utility-grade cable being used everywhere from the Tres Amigas project in New Mexico to better interlink the U.S. electrical grid to Seoul, Korea’s grid as part of that country’s $80 billion five-year plan to invest in Green energy.

Those are excellent deals, but the real value in American Superconductor is its burgeoning business designing wind turbines, which grows out of a small Austrian design firm it purchased a few years ago. Among its 12 major turbine customers are five Chinese companies, including Sinovel, the dominant leader in turbines in China. As part of all of American Superconductor’s licensing deals in China and elsewhere, it has the right to sell the electrical systems for every turbine built, a business model like the razor/razor blade model that built Gillette so successfully.

Since the start of 2008, the company has had 13 straight quarters of increasing sales. It also boasts six straight quarters of net income and for its fiscal 2010, which started April 1 of this year, management projects sales growth over 30% to $430 million with net income surging 75% to $1.25 a share. The Cabot Green Investor model portfolio bought AMSC in May 2009 and sold in February 2010 during the market correction, making a profit of 40% on the position. We bought the stock again this April at 31. It’s down a little, at 29, which makes for an attractive entry point.

The market has held both stocks down out of concern that a double-dip recession is coming. Whether or not it is (and I’m with Warren Buffet in believing it’s not coming), the Green rally is only just starting.

Click here to learn more about American Superconductor and other leading stocks featured in Cabot Green Investor.


 




Brendan Coffey

Analyst and Editor of Cabot Green Investor

Brendan Coffey is a member of the Cabot investment team and editor of Cabot Green Investor. A veteran financial journalist, Brendan has spent more than a decade writing about investing for publications including Barron’s, Forbes, The Wall Street Journal and a number of private-client brokerage newsletters.


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American Superconductor (AMSC): Leader in the wind power market

By Michael Cintolo, Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Report
From Cabot Wealth Advisory, 12/10/09. Sign up for free Cabot Wealth Advisory e-newsletter

My stock idea for today is one of my favorite growth stories … but the stock itself hasn’t done much in months. So why write about it here? Because it’s showing signs of wanting to get going … and once it does, I believe it’s going to embark on a major run.

The company is American Superconductor (AMSC), a firm that tried for years to make a name for itself in high-performance superconducting wires. And, in fact, that business should do well over time, as the U.S. and other countries build out so-called smart grids.

However, the big money is not coming from superconducting wires anytime soon.  American Superconductor has really transformed itself into a leader in the wind power market … although, interestingly, it doesn’t produce any turbines of its own.

What American Superconductor does is design all sorts of wind turbines, and then license the designs to firms that want to get into the production business. These licensees use American Superconductor to set up shop, and then via contract, they are obligated to purchase wind electrical systems (basically the brains of the wind mill).  So as its customers grow, so does American Superconductor!

By far its biggest client thus far has been Sinovel of China, which wasn’t in the wind business just a few years ago but is now one of the five largest in the world! Almost single-handedly, Sinovel has pushed American Superconductor’s growth into high gear. But this isn’t a one-trick pony–the company has inked more than a dozen licensees, including a few that should ramp into volume production of wind turbines in 2010.

Because of all that, American Superconductor is firing on all cylinders. Revenues have exploded 60%, 83% and 85% the past three quarters, while earnings have surged from losses to three cents, 12 cents and 19 cents per share during the same time. Better yet, management recently stated that they expect earnings of 60 cents a share for the current fiscal year (ending next March), and for fiscal 2010, earnings of “at least” $1.15 per share. We think even those figures could be very conservative as new licensees ramp up.

The stock, as mentioned above, has been building a launching pad for a while, since late July.  But since Thanksgiving, AMSC has tightened up and come under some serious accumulation.  This week the stock tested its old peak.

While this stock has teased me before (it’s tried to break out a couple of times in recent months before failing), I believe it’s worth buying a small position–maybe half of what you normally buy–around here with the idea of averaging up in price should AMSC continue higher.

 


Mike Cintolo Michael Cintolo
Vice President of Investments and Editor of Cabot Market Letter and Cabot Top Ten Weekly

A growth stock and market timing expert, Michael Cintolo is editor of Cabot Market Letter and Cabot Top Ten Weekly. Since joining Cabot in 1999, Mike has uncovered exceptional growth stocks and helped to create new tools and rules for buying and selling stocks. Perhaps most notable was his development of the proprietary trend-following market timing system, Cabot Tides that has helped Cabot place among the top handful of market-timing newsletters numerous times.


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Company Details

American Superconductor (AMSC)
64 Jackson Road
Devens, MA 01434-4020
United States
978-842-3000
http://www.amsc.com
Index Membership: N/A
Sector: Technology
Industry: Diversified Electronics
Full Time Employees: 714