The wind’s kickin’ up
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From Times Staff Writer Edward Silver:
Last year, you didn’t need to sweat to find a winning solar stock. Everything went up, but that’s over now. The sector was taken down mercilessly in the first quarter, then lifted in recent weeks by bargain hunters.
‘It’s become so volatile that you can hardly leave your screen for a minute,” said a hedge fund manager who prospects in alternative energy. Tired of the ups and downs, he’s putting more cash into wind shares.
This investor, whose firm looks after about $25 billion -- and who, like many hedgies, is not keen on seeing his name in the media –- laments that the wind industry has built five times the capacity of solar around the globe but sports a punier market cap. Soon the wind will blow the other way, he figures. He’s especially high on the largest players, the turbine makers and utilities, whose growth tends to be strong and steady, and the stocks less like thrill rides.
It doesn’t require vast sums or sprawling production lines to market solar cells. But it can take years, a mint’s worth of cash and a colossal manufacturing operation to set a wind farm in motion, ensuring that the business remains more an oligopoly than a free-for-all.
Owning entrenched turbine makers such as Denmark’s Vestas and Spain’s Gamesa helps this hedgie rest easy. Order books at these two companies are filled well into the future. Likewise, U.S. stalwart General Electric. Turbine sales were a standout in the conglomerate’s generally dismal first-quarter results, bolstering this investor’s view of the trend.
Forecasts for the windmill makers are still too low, he said. This year, “their margins will be better than expected because they’re running at full capacity.”
He also likes Spain-based utility Iberdrola Renewables, the world’s top wind power provider, with 7,800 megawatts installed. A recent choice, Theolia of France, matches up its wind holdings with biogas energy derived from household waste.
These European companies do have U.S.-traded shares -- see the links above -- but volume is thin. Those interested might look into getting those shares on their home exchanges, as this hedge fund investor does. But watch out for currency moves.
Though the fund manager was willing to pay for calm, Britain’s wind sector served up a jolting surprise last week. Royal Dutch Shell decided to opt out of the $4-billion London Array project. Instead, the fossil fuel titan may put a few more shillings into wind deals in the U.S., where the market is playing catch-up and growing swiftly.
Shell offered no excuse for its abrupt exit. The Financial Times, though, observed that the “global rush” has driven up the cost of wind energy as if it were oil.
Money & Co. blogger Tom Petruno is on vacation this week. He returns May 12.