“The One Wind Stock to Buy … Before Thursday” Green Chip

Man, the Green Chip guys are busy. First they got going with the Alternative Energy Speculator service, which we’ve looked at a few times, and now there’s another service of theirs that I’ve never looked at, Green Chip International.

Seems to be the mantra of the newsletter business: keep launching new services or die. This one will set you back $249, and it’s run by Nick Hodges, Sam Hopkins, and Jeff Siegel.

Your favorite friendly Stock Gumshoe makes no such demands, and doesn’t have quite as many mouths to feed … so let’s just look and see if we can tease out this teaser, eh?

It’s all about wind power, as you might have guessed from my cryptic headline. And there’s a pretty good description of where wind power is going, and how much demand there is for this clean energy.

In their words:

“In its most recent report, the European Wind Energy Association (EWEA) said that wind became the leader in terms of new installed energy capacity.

“Through 2020, wind is expected to account for 34% of new generating capacity. It’ll account for 46% from 2020-2030.

“And the goal of attaining 12-14% of Europe’s power from wind by 2020 is well within reach.”

Can’t argue with that. Wind power has been growing in importance in Europe for many years, and now is really starting to get a foothold in some parts of the US. Especially in places where it doesn’t mess up the ocean view of any powerful US Senators. Lots of places in Texas, where the wind comes whipping down the plain before it gets to Oklahoma, are seeing good buildup of wind power that doesn’t much interfere with the cattle grazing underneath the giant turbines, and there are big offshore wind farms as well.

So we accept the premise that wind power is important, and perhaps growing more so as alternative energy mandates increase. Does that mean the Green Chip International folks have the best pick in mind for us?

Here’s the key part of the teaser, extracted from the letter:

“But the one I’m most excited about is going to release its first quarter earnings this Thursday.

“Company revenues are expected to rise nearly 20% and net profit is forecast to rise 135% over the same quarter numbers from 2007.

“When these numbers come out, I assure you investors will go crazy. Some analysts are predicting a target price some 23% higher than it is now.

“This is surely a company you want to be invested in before the first quarter numbers are released. As I write this, the price is already starting to tick northward.”

That, the trusty Thinkolator is heard to opine, must be Vestas Wind Systems (VWDRY for the ADR on the pink sheets, trades with pretty decent volume … or you can buy it on put’near all the European exchanges, too)

Vestas is a big producer of wind turbines — the biggest, they claim, with a 23% market share. These are the things that I’d call windmills, the big spooky metal creatures that dot many gusty landscapes these days.

Here’s an excerpt of what Dow Jones reports the earnings should be like:

“DJ Survey of 12 Analysts
Average Revenue: EUR930.1M, up 22% (from EUR760M in 1Q
2007)
Average EBIT: EUR53.8M (from EUR20M in 1Q 2007)
Average Net Profit: EUR39.3 (from EUR17M in 1Q 2007)”

And their little editorial note on same:

Note: Vestas 1Q net profit is expected to come in higher on robust growth and strong markets. Analysts will be watching for updates on guidance for full year. Comments on risks to the supply chain and rising raw materials prices will be eyed, as will discussion of the impact of further appreciation of euro against the dollar.”

That note probably goes about as far as I’d want to in venturing an opinion on this one — I haven’t dug deeply into Vestas’ numbers. Analysts seem to be relying significantly on the company’s assertion that they will get more efficient and expand margins steadily over the next couple years. They are shooting for something in the low-teens, margin-wise — while Vestas has had expanding margins as it became profitable in the last couple years (which makes sense), they certainly have never had profit margins anywhere near the 13-15% level that some expect. So we’ll have to hope that higher volume, lower technology costs, and, perhaps, other cost reductions come into play to grow into that hoped-for level of profitability. Management has apparently indicated that this is possible, guiding toward 10-12% margins “after 2008.”

The shares are trading at a PE of somewhere in the mid-20s, depending on whose estimates you use for 2008. The trailing PE is much higher, near 50. The shares have had a few big bumps up and down over the past six months, but since February they’ve more or less been trading in the current mid-$30s range, a range they’re near the top of at $36.50 as I type. They’re certainly growing quickly, and are showing some signs of building up enough capacity to meet the growing demand — they’re apparently shooting for a doubling of capacity by 2010, but to some degree this depends on the ability of their suppliers to keep up production. I assume that they rely on outside producers for the actual generators that are housed in the turbines/windmills, as well as probably for the carbon fiber or aluminum or whatever for the blades, etc., and at various points in the past couple years I know I’ve heard about shortages in those kinds of parts/supplies that have slowed down some wind projects. Don’t know to what extent that might impact Vestas, and as the leader in the industry they’re probably locked in with a lot of their suppliers so perhaps it’s not as big a concern … but it’s worth reading up on and understanding if you want to invest in the company.

Their valuation seems to be more or less in line with some of the other big European wind-related companies like Suzlon, Gamesa, and Nordex, but that’s just from a superficial glance.

It looks pretty interesting to me as a wind power play, though I wouldn’t venture a guess as to whether they’ll do well after their earnings on Thursday or not.

So what do you think? Will Vestas huff and puff and blow down your portfolio?


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33 Comments on "“The One Wind Stock to Buy … Before Thursday” Green Chip"

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themayor
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themayor
May 7, 2008 9:32 am

With Obama looking more like the Democratic candidate and our current “situation”…..It’s pretty safe to assume a Democrat will inhabit the White House next year and Congress will be overpoweringly Democratic…….I’m Buying Vestas because Things will be changing and “wind” will be BIG!

AJM
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AJM
May 7, 2008 9:50 am

God help us if the democrats win. Just look at their economic plans. Extend welfare and bailout homeowners that are living far beyond their means. Goes against every nobel prize winner of economics theories of efficient markets.

Brian B.
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Brian B.
May 7, 2008 10:11 am

The wind power co. seems to have done well since it’s listing start in Jan 2007. There also seems to be some “stale air” in the chart and information blogs. As the price approaches it’s 52 week high, am wondering where Green Chip was at, when this stock traded at 15 a year ago.

dumbfounded
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dumbfounded
May 7, 2008 10:11 am

Aye carumba! More politics…everywhere! As if either side of the political spectrum hasn’t screwed things up plenty over the past.
Just remember what life is really all about here in Amerika…………………………..
M…..O…..N…..E…..Y !!!!!!!!!!!
I hate it, but “we” keep electing liars. Like the president really runs the country. Gimme a break.

Advantedges
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May 7, 2008 10:32 am
Investorgirl…….I am surprised that you are using this forum to share your political beliefs, albiet your misinformed opinion. Americans look foolish to the rest of the world for many reasons: usually it is because we perpetuate lies such as the deceptive news that Obama is a Muslim, (“that background”). You have taken this misinformation to the extreme, suggesting that “we will be mandated to be muslim.” Where the hell did you get that idea? Please do some research before you make yourself look foolish on a public forum. Obama is no more a Muslim than Bush, McCain or the Clintons.… Read more »
Gravity Switch
Admin
11
May 7, 2008 10:35 am
I don’t know of many politicians on either side who are helping us make smarter financial or investment decisions or doing reasonable long-term thinking, but let’s try to keep on track here, please. I don’t mind everyone debating what the next president or party means to alternative energy or to Vestas or whatever, but have deleted a couple comments that were just political screeds … including the Obama muslim one, so sorry if Advantedges response no longer makes sense. No offense to the authors, I don’t much care what your political opinions are, but there are lots of better places… Read more »
Advantedges
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May 7, 2008 10:36 am

pps
Apparently the investorgirl posting was removed. We seem to have an excellent editor. My post is not necessary now, I suppose. Damn, it took a while to compose! lol,,,,,,,have a great day and buy low, sell high!

Leer
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Leer
May 7, 2008 10:46 am

I don’t have anything to contribute to this discussion since I’m new to investing in stocks, but thanks for bringing up a wind play. I’ve been looking around for a wind company to invest in. Keep it coming!

Woman with Portfolio
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May 7, 2008 11:01 am

Many thanks to the Gumsnoe for keeping his terrific site rant-free. Let’s help him keep it that way. I see that Investorgirl’s full-of-wind-and-fury rant has disappeared, a blessing to our most civil discourse on these pages. There are plenty of places elsewhere to vent paranoia and ignorance. Let’s just talk money and investing, OK, guys and gals?

Leer
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Leer
May 7, 2008 11:15 am

What’s the difference between VWSYF and VWDRY?

newbie
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newbie
May 7, 2008 11:30 am

Advantedges, please do not take the name of the Lord thy God in vain, for the Lord will not hold him guiltless who takes His name in vain. Your “rebuke” is almost as offensive.

Cocoon
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Cocoon
May 7, 2008 12:22 pm

There is a wind farm in S.E. CA., been there for 20 years plus. Wouldn’t it be nice if those operators shared their experiences with us all, AND extrapolate what new systems and technologies do to make wind power feasible and competitive.
Buy high, sell higher!

A. Nony Mouse
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A. Nony Mouse
May 7, 2008 12:40 pm

I kinda like (fpl) as a wind play myself.

clicclic
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clicclic
May 7, 2008 2:11 pm

Yea, I’m thinking SHORT this tiny windplay. It seems these tiny companies always collapse after the insta-spotlight starts to dim.

FPL is a great, safe windplay that has paid handsomely over the years. Just buy some of that on the dips.

Gravity Switch
Admin
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May 7, 2008 2:54 pm
Leer, VWDRY is the official ADR, it’s got a 3:1 ratio so 3 ADRs equals one share on the home exchange in Denmark. The other one is an informal pink sheet symbol for the actual Danish shares, which is why it’s 3X higher. The same company, just different ways of buying it (the official ADR usually has much higher volume, I’d always choose that one if given a chance) And I have nothing against FPL, it has certainly done well for many, but Vestas is far from tiny — market cap is about $19 billion if I did my math… Read more »
SageNot
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SageNot
May 7, 2008 3:00 pm

Paid who Clicclic? FPL is referred to as Florida “Flicker” & Light here in Melbourne, & their electric rates are terrible, so they sure aren’t passing the wind profits to us subscribers. They also want their customer base to pay an assessment to build green, WHAT A NERVE! It’ll take years to finish same, yet I have no doubt that their lobbyists are going to filibuster the State unmercifully. Owners, creditors & investors should
fund things like this, not customers, most are living on fixed incomes as it is.

Bad Idea!

billyboy
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May 7, 2008 3:52 pm

I got hooked on Greenchips once, with all their promises of rich reewards. The only winners were plays they recommende years ago. I got 2 new recos in the 3 month trial period, all losers. Maturally I asked for my money back. These guys are great at 20/20 hindsight.

jaidev
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jaidev
May 7, 2008 5:00 pm

Like Warren B. says,” Forget what people are saying, and concentrate on good investments”. I would look into OTC: AWNE

Red68
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Red68
May 7, 2008 7:13 pm

Gumshoe – Got any scoop on the 3 Brazilian Banks that Louis Navalier is teasing about today. Love this forum.

Sam
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Sam
May 7, 2008 8:44 pm
I bought some shares of Vestas Wind a few years ago. After they crossed three digit number I sold half and holding the rest. I also own Gamesa (GCTAF on Pink sheet) for last one year. Recently (check comparison for last three months) VWSYF is almost flat and Gamesa is doing a lot better. Last couple of weeks I had been thinking of selling VWSYF but after reading the teaser, I was wondering whether it is VWSYF. Now it is confirmed by Gumshoe and I checked that they are having the quarterly report on 08/05/2008 (which is european way for… Read more »
Aloha Art
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Aloha Art
May 7, 2008 10:30 pm

Politics and Religion, let’s get back to business.

Mahalo

Brian B.
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Brian B.
May 8, 2008 7:02 am

Looked into this wind co. GumShoe. Like the momentum of there earnings and recent sales contracts,,,It’s THURSDAY and the earnings release makes it a winner. Wind as alternative energy play…Thanks GumShoe. My donation e-mailed to you today. Good Investing!

Gravity Switch
Admin
11
May 8, 2008 8:47 am

Looks like they made a good guess on this one — earnings weren’t spectacular, but they were good and close to estimates, and the margin improvement has apparently begun, to at least some degree. Up 7% in Copenhagen this morning.

Hugodog
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Hugodog
May 9, 2008 8:34 pm
This is my first post to this website, and I’ll share a little of my investigation into wind energy. I’ve owned Gamesa (GCTAF) for 2 years with 155% gain..nice steady climber, few hiccups. They make some of the best turbines in the business and don’t manage a bunch of windfarms (which is often not a profitable venture). Vestas has been a similar play over that time, but I liked the clasrity and business model of Gamesa. Gamesa is now building in the US s of January 2008- smart move- and has several collaborations throughout EU and now Asia. I think… Read more »
destry
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destry
May 10, 2008 1:13 pm
Wind energy, is beginning to mature in a particular way. Until serious advancements in energy storage occur, wind and solar power, will be limited to consistancy of wind, and sunlight respectively…Vestas and Gamesa, are ist and 2nd , respectively, as to world marketing of turbines…I do believe that Gamesa does manage wind farms, in the US. They advertise so. I have Vesta, and it’s a keeper. ‘Came out of Gamesa, for no real reason, except maybe concern over Spain’s overall economy. T. Boone Pickens, is forming a consortium, to build wind farms up the central plains corridor, from the Texas… Read more »
Sam
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Sam
May 10, 2008 4:03 pm

Well! it actually happened. About 13% up. Is it still time to Buy? Or Sell?

Myron Martin
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Myron Martin
May 11, 2008 5:07 pm

takeprofits asks: Anybody know anything about Amrticas Wind Energy Corp.

Bruce Burbank
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Bruce Burbank
May 13, 2008 10:59 am

MMGW – MassMegaWatts is the way to go.
This is a different animal – same race.
Although in its infancy now and still
sort of Rube Goldbergish, its alternatives
are incredibly superior.

Gravity Switch
Admin
11
May 13, 2008 1:38 pm

Bruce, if nothing else it certainly looks really cool. Thanks.

Lamont
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Lamont
May 15, 2008 5:24 pm

Bruce,

I read up on MMGW and I must say I am pretty impressed. They look like they came in ready to conquer the world, got beaten down and now are on their way back up…with new technology and an Army contract to boot. I have bought them and will be interested to see how they do.

Bruce Burbank
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Bruce Burbank
May 20, 2008 1:25 pm

Lamont,
Glad that you got in. Feels good to be up 100%
in less than a week. In addition, the birds will be thanking us for the far fewer kills associated with
MMGW’s skeletal box like structures.

Hugodog
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Hugodog
May 20, 2008 4:09 pm

Bruce- thank you for MMGW. Keep your eyes on TRN. On a down day, it is up and plays to both wind and rails in unique products. As oil resets to this new high level, rail transport will show increase demand for cars which TRN builds and leases, and as wind is recognized in the US, tower construction will be tapped by the turbine builders.

Bob
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Bob
October 26, 2009 4:40 am

17 months later, Vestas ADRs (VWDRY) have gone from $36.50 to $22.70. Good deal eh?

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