Assessing Ascent's ascending shares
I begin this column with an emphatic warning: Ascent Solar Technologies (Nasdaq: ASTI) is a very high-risk speculation. Ascent has been a public company only since August 2006, it has a tiny market cap of $50 million, its stock has more than doubled in the past month and intraday swings of 10% or more are not uncommon.
Despite these caveats, Ascent -- a maker of thin-film photovoltaic materials -- is an intriguing situation that has caught the attention of two very savvy market advisors.
In his Coolcat Report, Kevin Kennedy focuses on small cap, high growth situations that have shown strong technical momentum.
Says Kennedy: "Ascent Solar was formed in October 2005 to commercialize thin film photovoltaic technology. Armed with increased funding from the government to develop photovoltaic cells for use in solar energy projects and a recent investment from Norwegian giant Norsk Hydro (NYSE: NHY), the tiny company saw its shares rise 89% on March 14."
Norsk Hydro, Kennedy explains, acquired 1.6 million shares of Ascent Solar at $5.77 a share in a private placement as the "precursor to a strategic relationship between the parties." The shares purchased, he notes, represent about 23% of the total shares issued and outstanding after the sale.
"The solar market is growing rapidly," says Kennedy. Since 1998, he points out, there has been an annual growth of about 40% in the market for conventional solar energy, while the market for thin film technologies is reportedly growing at roughly 70% annually.
Given the high volatility, Kennedy suggests that traders exercise restraint. He added the stock to his buy list, with the recommendation to buy below $9 with a sell stop at $7.79.
While Kennedy focuses on the short-term momentum behind the stock, Kenneth Reid, editor of Spear's Security Industry Analyst, assesses the stock from a long-term, fundamental perspective.
Importantly, Reid's initial recommendation for the stock came prior to the Norsk Hydro news. However, he remains bullish and currently holds the stock on his "A-list," which represents his core portfolio positions.
Reid notes, "Ascent's specialized thin film CIGS (copper-indium-gallium-diselenide) photovoltaic technology is used to create devices that convert sunlight into the electricity needed to power satellite and high altitude instruments and communications systems."
He points out that these film technologies make it possible to manufacture "very lightweight, flexible solar cells the thickness of a human hair."
As background, the advisor explains, "Ascent was a spin-off from a technology incubator in Colorado, ITN Energy Systems, founded in 1994 by a team of scientists and engineers from major aerospace corporations."
"This sounds like a good story, but what are the chances of success?" asks Reid. One significant factor in assessing its potential, Reid believes, is the quality of management.
First, he looks to Prem Nath, Ph.D., senior vice president of manufacturing. According to Reid, prior to joining Ascent Solar, Dr. Nath was with United Solar Ovonic, a subsidiary of Energy Conversion Devices (Nasdaq: ENER). He adds that Dr. Nath has co-authored more than 50 technical papers and is named on more than 50 issued U.S. patents on PV processes, products and materials.
Next up is Joseph Armstrong, Ph.D., vice president and chief technology officer, who Reid notes spent 10 years at Lockheed Martin (NYSE: LMT), where he managed photovoltaic research projects. Reid adds, "He is a named inventor on four U.S. patents in areas including shape memory alloys, thin-film PV technology and electronic circuit assembly."
Third on the list is Joseph McCabe, vice president of business development. Reid says, "From 2000 until 2004 (McCabe) managed solar energy research for the State of California." He adds that McCabe owns a U.S. patent integrating LED lighting directly into PV surfaces.
Overall, Reid says, "The credentials of these men impress us." He concludes, "ASTI is a development stage company. We think the company will be a serious and successful player in the new solar boom. We recommend the stock as a long-term buy and hold play."
Finally, I would leave readers with another reminder as to the speculative nature of this idea. Reid warns, "Due to the small float of 5 million shares the stock is likely to be exceptionally volatile. Investors should consider that when making any investments in companies of this size."
Steven Halpern is the founder of “TheStockAdvisors.com - Steven Halpern's Guide to Financial Newsletters,” the first website to feature a daily overview of the investment newsletter world.
