The potential opportunities and risks in wind energy investing

Thinking about investing in renewable energy companies? Apparently so are a lot of Wall Street investors. I don't pretend to know much about this, but it seems clear that, among other things, investors have paid attention to T. Boone Pickens. Pickens, who spent a lifetime in the oil business where he amassed a forutne, has determined that the future of energy is blowing in the wind. Now he's investing part of the fortune to build the largest wind project in America.

But Pickens is not alone in touting the virtues of wind energy these days. Not by a long shot.

"Mad Money" manager Jim Cramer points out, paying attention to the entire wind energy 'value chain' can really expand your investment options. (GW)

All You Need To Know About Wind Energy

The Street.com
August 22, 2008

According to the U.S. Department of Energy, up to 20% of the country's energy supply could be generated by wind power by 2030.

In May, T. Boone Pickens' Mesa Power ordered 667 wind turbines from GE (GE - Cramer's Take - Stockpickr) as part of its plans for a giant wind farm in Texas.

That same month, Jim Cramer wrote on TheStreet.com: "Sanford Bernstein put out a fabulous report today [May 15] about alternative energy that waxed wonderfully about wind and a little less wonderfully about solar. The latter isn't as loved, because the average selling price of solar is too high vs. the dirty competition."

On July 17, The Dallas Morning News reported that the Texas Public Utility Commission authorized $4.93 billion of new wind power transmission lines, solidifying the state's position as the country's largest generator of wind power.

Five days later, at a hearing of the U.S. Senate Homeland Security and Governmental Affairs Committee, Pickens testified that the county needs to reduce its demand for foreign oil and ramp-up its own clean and renewable energy infrastructure, particularly wind.

Tuesday, at the National Clean Energy Summit in Las Vegas, New York Mayor Michael Bloomberg proposed his plan to make New York City a leader in clean power production -- again, the focus was on wind.

So how much do you really know about wind energy?

The following are key insights from TheStreet.com on the potential opportunities and risks in wind energy investing.

China Watch: A-Power's a Sparkler (Video, Aug. 11)

Larsen Kusick of the Breakout Stocks portfolio sheds light on A-Power (APWR - Cramer's Take - Stockpickr), a company entering the wind-power industry in China, and explains how to play it.

To watch the video, click the player below:

From Cramer: Wind Power in the M&A Spotlight (Jul. 28):

Xantrex [Toronto Stock Exchange ticker: XTX] gets a bid! Here's a Canadian wind play that just got bought by France's Schneider Electric... it is significant because the wind plays that matter are being snapped up left and right.

This wind story is a 2009 story in terms of earnings, but it is a takeover and consolidation story right now.

From Cramer: Xantrex Will Blow You Away (Video):

Jim Cramer: "I think that what's most interesting, is they're [Schneider Electric] buying [Xantrex] for the wind exchangers... One of the things that's really difficult about wind... there's absolutely no interface for most states between wind turbines and the power grid... because the states have been reluctant to make a bet on wind. I think Boone Pickens is going to change that, and these inverters could be in a lot of different windmills. So this was a very smart acquisition... [Broadwind Energy (BWEN - Cramer's Take - Stockpickr)]has now become more seasonal... no near term catalyst, but I believe if Schneider bought this XTX, they're going to buy Broadwind."

To watch the video, click the player below:

From Cramer's 'Mad Money' Recap for July 31:

"Wind and solar stocks are transcending the weakness in oil," said Cramer, indicating that the strength in these sectors is genuine, and will continue even if oil hits his ultimate target of below $120 a barrel.

Cramer: Give Your Portfolio Wind Power (Video, Jul. 17):

Jim Cramer reviews his "wind-ex" stocks.

To watch the video, click the player below:

From Cramer's 'Mad Money' Recap: Inherit the Wind Stock:

To help illustrate the many great companies involved in the wind power business, Cramer built a windmill from scratch, piece by piece, to show which companies make each component.

First, Cramer featured the wind tower business that makes the support structures for windmills. Here, he reiterated... Otter Tail (OTTR - Cramer's Take - Stockpickr) as [one of] the best stocks to own.

Finally, Cramer said... MasTec (MTZ - Cramer's Take - Stockpickr) [is one of] the best companies for the wind power infrastructure needed to bring power from the mill to the grid.

New Wind-Energy ETF Blows Into Town (Video, Jun. 29)

High oil prices have investors turning to wind-energy stocks. Robert Carey, chief investment officer at First Trust, says the new exchange-traded fund -- ticker FAN (FAN - Cramer's Take - Stockpickr) -- is the safest way to play the emerging sector.

To watch the video, click the player below:

From Cramer's 'Mad Money' Recap: Wade In with Kaydon:

Cramer explained that while Kaydon (KDN - Cramer's Take - Stockpickr) is best known for its industrial bearing business that mainly serves heavy industry as well as the aerospace and defense markets, the company is also the market leader in low-friction wind turbine bearings.

Wind power currently only accounts for 8% of Kaydon's sales, but is 50% of the company's current backlog. According to Cramer, wind power should account for 20% of the company's sales by 2009 and is expected to triple by 2010.

From Cramer's 'Mad Money Recap': Stocks That Can Take a Hit:

Cramer called [Thomas & Betts (TNB - Cramer's Take - Stockpickr)] another "stealth" wind power stock that investors need to consider.

"Everything that wind touches is getting bigger," said Cramer who noted the management of Thomas & Betts is doing little to promote this small, but growing, portion of their business. Cramer said the company has also been selling unprofitable product lines and concentrating their efforts on its core competencies.

While Thomas & Betts reported lackluster earnings on April 30, Cramer noted the company said most of its sales will be during the latter half of the year. He also said the company's international exposure, which now stands at 40% of sales, is up from just 30% a year ago.

Cramer: Wind Stocks Are Towers of Power (Video, May 7)

A lack of supply for towers has the wind sector on fire, says Cramer. A pure (but speculative) play: Broadwind Energy (BWEN - Cramer's Take - Stockpickr). Cramer thinks "this can be a gigantic, gigantic company."

To watch the video, click the player below:

Plus, don't miss Cramer: Broadwind's the Weather Vane of Wind Sector and Cramer: Buy Nat Gas Now, Wind in '09 on TheStreet.com TV.

From Cramer's 'Mad Money Recap': Woodward Governor's Big Wind Power Play:

[Cramer] called [Woodward Governor(WGOV - Cramer's Take - Stockpickr)] a forward thinker that now estimates its wind power business to be worth $100 million by the end of fiscal 2008, compared to the consensus estimates of only $60 million.

To bolster its wind power business, Woodward recently added its first Chinese turbine manufacturer and is building a new factory in Colorado. He said the company's wind power business is growing at a staggering 150% a year, far more than any "high-tech" company can deliver.

From Woodward Builds Power Behind the Scenes:

Woodward Governor posted another stellar quarter last night [Jul. 21].

Woodward Governor earned 47 cents a share in its fiscal third quarter and beat consensus estimates of 43 cents (a 9.3% upside beat). Sales grew rose 23% year over year to $329 million, vs. the $308 million consensus (a 6.8% upside beat).

Even better, management issued upside guidance for fiscal 2008. It now sees revenue growth of roughly 20%, up from 14% to 16%, and $1.75 in earnings, up from the previous guidance of $1.61 to $1.66.

The company's business is divided into three segments: turbine systems, engine systems and electrical power systems. It is a front-and-center supplier to the drive for more efficient and cleaner energy systems.

On yesterday's conference call, Tom Gendron, president and CEO, discussed industrial turbine demand, saying, "Emission regulations, growing global energy demands and newer projects such as coal gasification all should provide opportunities for Woodward."

Favorable Winds

Also, Woodward Governor is a stealth play on wind power. In October 2006, it acquired SEG, a German designer and manufacturer of wind power generation products. Although the wind business is still a small fraction of overall revenue, it is growing rapidly. The company has guided to slightly higher than $100 million in revenue for the year (about 9% of total revenue).

Gendron says, "Demand for wind turbines continues to grow at a remarkable rate." The CFO adds, "Again this quarter, wind power sales were very strong."

From Cramer's 'Mad Money Recap': Emerson's New Tech Look:

Cramer proclaimed that 2009 will be the year of wind power and recommended Owens Corning (OC - Cramer's Take - Stockpickr) as his favorite wind power stock.

Cramer said that Owens Corning, often thought of as just a supplier of insulation, is transforming itself into a great global manufacturer of alternative energy components. The company now has a glass-fiber composites business that accounts for 33% of its sales.

Cramer said the glass composites business combines glass fibers with other materials to make incredibly strong and flexible substances for wind turbines, among other applications.

From Jim Cramer's 'Stop Trading!': Win With Wind:

Cramer said that the U.S. is facing a shortage of supply of windmills. "Everybody who's involved in making them, it's a win still," Cramer said. He recommended Quanta Services (PWR - Cramer's Take - Stockpickr) and Trinity Industries (TRN - Cramer's Take - Stockpickr) as plays on his thesis.

Cramer: Quanta Is a Wind-Win (Video, Jul. 23)

Cramer dives into his favorite wind plays in light of the recent drop in energy prices.

To watch the video, click the player below:

Plus, don't miss Cramer: Trinity Is the Wind Play on TheStreet.com TV.

From Cramer's 'Mad Money Recap': America's New Tech Stars:

Cramer welcomed Dan Batrack, chairman and CEO of alternative energy supplier Tetra Tech (TTEK - Cramer's Take - Stockpickr), to the show to discuss what he called the company's "breakout quarter."

Batrack said that his company had a very strong quarter, with net income up 30%, revenue up 35% and the company's backlog up 40%. He credited the company's growth to strong demand for wind power.

Batrack believes the U.S. wind power market is growing faster than the consensus forecast of 25% growth. He said his company has booked over $170 million worth of orders for wind products in the past 90 days.