By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory, 5/29/09 Sign up for free Cabot Wealth Advisory e-newsletter
Solar stocks had a great run in 2007, and some of them are looking strong again. I like First Solar (FSLR) a lot; it remains the low-cost solar cell producer and the production volume leader…and its revenues in the first quarter of 2009 were up 112% over the previous year.
But today, I want to focus on wind and biofuels, partly because these stocks have not had a big run yet, and thus have better potential.
The most attractive company in these areas is A-Power Energy Generation Systems (APWR), a Chinese company that brought in $265 million in 2008, up from $153 million in 2007. (That’s 74% revenue growth during the worst global economy in 70 years.) The bulk of the company’s revenues to date have come from designing and installing distributed generation power systems; it’s built 14 so far. In essence, these are standalone power plants that are off the government grid. They might burn coal or oil or natural gas, and they are more efficient than grid-connected systems because they’re designed to serve specific local needs…and transmission losses are minimal.
In a way, I see the growth of the distributed generation movement as a parallel to the growth of the cellular phone business in the developing world. While economies that matured in the 20th century built communications networks dependent on wires, economies blooming now can bypass the communications wires. As the distributed power generation grows, more and more of these communities will be able to bypass the wires of the power grid, as well.
And now A-Power is moving fast into the wind and biofuels business, in effect using its expertise in distributed power to design and build the world’s most advanced, large-scale independent power systems.
In 2008, A-Power began building a turbine manufacturing plant in Shenyang and it’s already looking at building a second plant in inner Mongolia to support government plans for wind farms there. The company has 30 firm orders for 2.7 MW turbines and expects to ship its first wind turbine this month.
On April 21, the company announced it had signed contracts to build two 30MW micro-grid electricity-generation systems in Anhui Province using biomass as the primary fuel. The total value of the two contracts is $75.3 million
And then this Wednesday, the company announced it had signed a contract to design, construct, install and test two 18MW electricity-generation systems using biomass as fuel in the City of Huaian, Jiangsu Province. The total value of the contract is estimated to be $52.8 million.
As the momentum from these new ventures grows, I anticipate that A-Power will receive work from all over China, from companies and municipalities eager to build their own independent, efficient power generation systems. Looking forward, the sky’s the limit.
Happily, the stock (APWR) is still unknown to most investors, so it’s still under-owned. But as the company grows, and as its stock advances, more investors are going to discover the stock, and buy it, and push it higher, making early investors rich!
So, you could simply buy the stock now, and hang on. But I strongly suggest that you subscribe to Cabot Green Investor first, so that you can buy when editor Brendan Coffey tells you to, so that you can diversify into other Green stocks, and so you can sell and get out with a profit when the time comes.
More on Cabot Green Investor: 5 Stocks Wall Street Visionaries are Buying Now
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President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
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A-Power Energy Generation Systems (APWR)
No. 64 Huanghai Road, Yuhong District
Shenyang, Liaoning, China