Wind Update ~ market folly

Tuesday, July 8, 2008

Wind Update

Today I'm seeing a lot of interesting bits about wind power. The main bit I'm seeing is Boone Pickens' alternative energy plan found on the new website: Longer term readers will know I keep tabs on Pickens simply because he's an energy maverick, has made a lot of money in the industry, and now runs BP Capital, an energy centric hedge fund. I've posted his thoughts numerous times. (I tracked his hedge fund portfolio holdings here, and I linked his thoughts on energy here). Now, although he's made the bulk of his money from oil, he's turning his focus to wind and natural gas; and rightly so. I've been bullish on alternative energy for some time now, saying that you need to play energy for the future. I've been assembling baskets of names in the wind, natural gas, solar, and nuclear spaces. But, that's not to say that Boone isn't still going to be invested in oil and other current energy plays. Besides playing energy for the future, you've got to play it for the intermediate term as I posted about here. Oil, coal, and natgas aren't going anywhere anytime soon, so you've got invest in those as well. And, if you think about it, natgas is the only type of energy overlapping in both the current energy picture and numerous people's plans for the future. So, I like to take a basket approach and pick a few names in each class and then have a dedicated percentage weighting to each type of energy.

But, back to wind. The main problem with investing in wind power is the lack of tangible options for the retail investor. There are a few companies who trade on the main exchanges, but wind is only a small sliver of their business. GE is the perfect example of this. They have wind exposure which is great, but a lot of people don't want the other stuff that comes with that company; they only want the wind exposure. The majority of wind-centric companies trade on the OTC and pink sheets (such as, BWEN.ob,, etc). And, the majority of investors either aren't comfortable investing over the counter, or simply don't know how to. So, its good to see wind getting more media exposure and 'hype' if you will. And, as investors, we've got to be playing it. I've said all along to spread your bets across all alternative energy classes, to cover your bases. Because in the end, there's no real way to know which ones will be prominent 20 to 30 years from now. If you're looking for a route 1 way to play wind, you could simply go through the new etf FAN. And, for your convenience, Jeffrey McLarty has sorted through the ETF holdings here. And, TraderMark highlights a new Wind IPO (Noble Environmental Power) here.

Lastly, I'm starting to see some wind names really breakout with heavy buying. Stewie highlighted Aerovironment (AVAV) over on his blog as a great technical setup. Some of you might remember me writing up a piece on AVAV here, after I learned they were the makers of architectural wind products (basically wind turbines on tall buildings). But, disappointingly, they are primarily a defense company and the wind segment of their business is tiny (although growing). If you want a trading vehicle, AVAV looks to be breaking out right now as Stewie pointed out. The overhead resistance in the high 26's has been taken out and should now act as support, and I'd be a buyer on the re-test of that support if you want to trade it. But, that's the main emphasis here, its a trading vehicle, not an investment (yet). I've got to monitor their wind segment growth over the next few quarters to really see if its a viable wind investment. Because, like many other 'wind' investments, the company is primarily NOT a wind company. They just have a wind segment of their business. At any rate, AVAV is breaking out and you can trade it if you like.

Whether it be through natgas, wind, nuclear, solar, you-name-it, you've got to be thinking ahead and playing energy for the future. Boone Pickens is a great person to follow in this regard as he is taking proactive steps to make Wind power a viable alternative through his wind farms in Texas. But, wind isn't the only option and he discusses that in the following video. Enjoy.


Stewie said...

excellent read. thanks for sharing. always curious to know what pickens is doing. by far the hedge fund manager of the 21st century so far. thanks again.

Drax Industries. said...

The smart thing would have been to load up on GE trading in the 26 dollar range. I did and it will pay off handsomely and with dividends as well. GE has a diversified portfolio that includes solar,water,wind,biogas,infrastructure,media NBC,capital financial which can be used to fund aquisitions or new projects,hybrid tugboats,hybrid locomotives,GENX engines for aircraft that use less fuel and provides less noise as well. Sounds like a good play if you want to expose yourself to a safe company that will grow with the new infrastructure needs. Cap and trade will make GE big bucks as well.