Newsletter Watch: Solar plays
Neil George is well known as the senior editor of Personal Finance, one of the longest-running and most reputable newsletters in the advisor industry. In addition, he publishes a specialized service — Inner Circle — for sophisticated traders willing to buy lesser-known stocks that offer a combination of higher risk, but also higher potential rewards.
One sector he currently favors in Inner Circle is solar power, and here he looks at a pair of small-cap solar stocks that are currently on his “buy” list.
George says that AeroVironment, Inc. (Nasdaq: AVAV), with a market cap of $511 million, has been on the vanguard of wind, solar and electric conversion equipment for over three decades.
"Thirty years ago this year the company's Gossamer Condor became the first vehicle to achieve successful human-powered flight,” he says. “The company built the GM-backed winner of the first solar land race, the Sunnyracer. It set the world record for manned solar-powered flight in 1981.”
George says the company has been expanding our understanding of alternative technologies for a long time.
“After all these years it looks like it's now focusing on making some money — as opposed to headlines — as a visionary company,” he says. “Its product lines now have to do with micro unmanned aerial vehicles for combat forces in remote locations, its PosiCharge power system and its power management division."
Although he says that AeroVironment doesn't build solar cells, George points out that the company is a leading force in managing the electricity derived from wind and solar sources.
"This is a crucial yet underappreciated niche; managing and distributing the energy well is the difference between success and failure for renewable energy generation," George says. "Much of AeroVironment's recent news has been about its micro unmanned aerial vehicles (mUAVs). It just landed another contract with the Marines and set another world endurance record. A military contractor that's also a key green tech player is a very good combination."
In addition, the advisor also looks to Calif.-based WorldWater & Solar Technologies Corporation (OTC: WWAT), which specializes in solar powered water pumps and filtration systems for the agribusiness sector. The low-priced stock has a market cap of $347 million.
"The company has a half dozen sites in its home state and projects as far reaching as disaster relief portable pumps in the Katrina-ravaged Gulf of Mexico to a 40 kilowatt solar panel array Dupont requested in Delaware," he says.
According to George, the firm's core technology is its solar electric pumps that are customizable for on-grid, off-grid and even emergency operations. Just recently, he says, it finalized a merger with Texas-based solar array builder Entech, Inc., which will now be a subsidiary of WorldWater & Solar.
Entech, he says, provides advanced solar energy technology for a variety of applications, ranging from day-lighting systems for commercial buildings to solar power arrays for spacecraft.
"This merger will help WorldWater & Solar lower its solar production costs while also adding revenue from NASA and satellite businesses,” George says. “What's more, California Gov. Arnold Schwarzenegger is supporting and promoting California green businesses from Canada to Mexico and that's not a bad spokesperson for a small solar pump company."
Meanwhile, he says, WorldWater & Solar recently initiated a new program, offering solar systems to Association of California Water Agencies (ACWA) members at no investment cost and at energy prices equal to or below grid rates for 20 years or more.
ACWA, George says, is a statewide association of public water agencies whose 440 members are responsible for about 90% of the water delivered in California.
"WorldWater is a preferred solar provider to ACWA and has extensive experience working with California water agencies,” he says. “In 2006, WorldWater's patented AquaMax technology was installed at California's Idyllwild Water District, becoming the first and only water utility in the world to be fully self-sustaining through solar power."
In August, he says, Valley Center Municipal Water District in San Diego County signed a 20-year power purchase agreement for WorldWater to build a 1.2 megawatt solar system capable of powering multiple 350 horsepower (hp) pumps independent of the grid.
"This is the kind of innovative strategy that could pay off big very quickly," George says.
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