Newsletter Watch: Orion Energy Systems
This week in Newsletter Watch, we focus on ChangeWave Investing editor Toby Smith, who is one of the most widely followed financial newsletter advisors. According to his investment strategy, a “changewave” is any emerging technology or trend that, like a wave, is unstoppable. His focus, therefore, is isolating these future trends and the isolating individual stocks that are poised to ride these waves.
One method that Smith uses to determine these changewaves is by analyzing ongoing surveys of the members of his "ChangeWave Alliance." The participants in this group include investors and professional analysts, industry experts and tech industry employees, ranging from salespeople to researchers to CEOs.
Through ongoing and detailed surveys, these participants provide a unique look into patterns and trends, offering valuable information on developing research, sales trends, expectations and future plans.
"Recently, the ChangeWave Alliance took its first comprehensive look at corporate energy usage and the findings were eye-opening. We found that a sea change is occurring in the way corporations view energy consumption," Smith said.
According to the Alliance survey, 62% of those "in the know" expect either a "moderate" or "significant" rise in electricity prices in the next 12 months. Only 2% said they think prices will remain at current levels.
Twenty-two percent of respondents reported that their company is "very concerned" about reducing its energy usage, and another 35% said their company is "somewhat concerned."
Most important, he adds, 23% reported their company's spending on energy efficiency products and technologies will increase during the next six months — three times the percentage of those who said they see a decrease.
Overall, the United States spends about $1 trillion per year on energy. And, he says, it is estimated that advanced efficiency systems could reduce that energy bill by as much as 25% to 50%.
"The perfect storm of rising energy prices and concern over global climate disruption is forcing corporations to rethink the most basic ways they use energy. This will create investment opportunities in the process," he says.
In light of these Alliance survey findings, Smith says, "We think there is one stock that is particularly deserving right now — Orion Energy Systems (Nasdaq:OESX), a pure play energy management system, (that) is a recently public company that is still flying well under Wall Street's radar."
Most of Orion's revenue, he says, is generated from the sale of high-intensity fluorescent (HIF) lighting systems to commercial and industrial customers.
So far, he says, Orion has sold and installed about 1 million of its HIF lighting systems in more than 2,100 facilities. Larger players compete with Orion in the energy-efficiency lighting market, however he says that none of these larger players is equipped with the comparable breadth of innovative products and technologies.
"Lighting tops all areas as the easiest way to reduce energy use. It's no wonder that 90 of the Fortune 500 companies are already Orion customers, since its systems generally reduce lighting-related electricity costs by about 50% while improving the lighting quality and increasing the quantity of light by approximately 50%,” Smith says.
The company's customers, he says, will typically realize a two- to three-year payback period on HIF lighting systems without considering utility incentives or government subsidies.
As a result, he says, it is not surprising that Orion Energy sales are growing at an impressive clip. For the nine months ended Dec. 31, revenues increased 73%, while net income surged 423%. The company ended the year with $83 million in cash and minimal debt.
The shares, he says, were offered at $13 in its IPO last December. As a caveat, he says, "There is an attempt at a lawyer-instigated class-action suit against OESX, but it doesn't appear to have any teeth."
Bottom line, the advisor concludes, "Let's and enjoy the luxury of accumulating OESX while the stock is wallowing at an attractive price level."
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