Top Wind Energy Companies

2008 has come and gone. And while the year has changed, stock prices have remained nearly unchanged.

This is good news for those of us looking to pick up shares of clean energy stocks on the cheap. One overlooked sector lately has been wind. And it’s a shame, because gaining access to some of the top wind energy companies now, will be a boon to your portfolio all year.

Here’s what I mean.

Wind Energy Companies: Blown Away?

Beginning last September, major wind stocks went on a quarter-long plunge, losing well over 60% of their value in some cases.

Here’s the chart:

However, just after the election, which probably isn’t a coincidence, wind energy stocks, even foreign ones, began to rise again, as evidenced by the last few months on that chart.

Thing is, even after the slight price increases of the past month or so, wind companies are still far off–over 40% in most cases–they’re 52-week highs, which means there is a lot of upside ahead.

There is plenty of ‘good’ to come but first, we have to deal with the ‘bad.’

Just a year ago, wind turbines were selling like hotcakes. In some cases, turbine manufacturers had order backlogs of up to two years. Now, a glut has erupted, and European wind companies think they’ll need until 2012 to work through inventory once scheduled for installation in 2010.

The cause of the delay? Rising financing costs in a very capital-intensive industry. At an average cost per kilowatt in 2008 of $1,700, a standard 1 MW turbine comes with a price tag of $1.7 million. Just one of ‘em!

Tack on land purchase, right of ways, transmission, installation, insurance, and more… and you’re looking at a very pricey industry. Now, with the cost of capital and credit rising, some planned projects are now longer viable, lengthening project lead times or canceling them altogether, and softening demand in the process.

I imagine we’ll have some small players that rely on external project finances to drop out of the game completely. Cash-rich wind developers, like Florida Power & Light (NYSE: FPL) in the States and Iberdrola Renovables across the pond should continue to purchase and install turbines, albeit at a slower rate.

Some analysts have even said that capital expenditures for wind projects could be down as much as 30% over the next two years. And new installed global capacity will rise 14% this year, only half the typical annual growth rate witnessed the past few years.

To ride out the slowdown, major producers like Vestas (COP: VWS) and Gamesa (MCE: GAM) announced temporary plant closures last quarter.

But it’s not all bad.

Top Wind Energy Companies: Bottom Fishing

As I said, major wind companies are still down about 40% over the past few months, up just bit from their 60% dips in September and October. I think most further financial risk has already been priced in, and we’ll likely see these stocks trade sideways for some time.

That doesn’t mean now isn’t a good time to pick up some shares. The aforementioned Vestas and Gamesa are ripe for the pickin’. Nordex (XETRA: NDX1) is sorely undervalued, trading below 9 euro near its 52-week low. Suzlon (NSE: SUZLON) also looks good.

You see, with nearly all further risk priced in, any good news or signs of market recovery will give these stocks a boost. And there’s plenty of it looming.

For starters, Obama is about to take office and ram a green agenda through Congress disguised as a near-$1 trillion infrastructure stimulus. Just last week he called for doubling our use of renewables in the next three years. Wind will have to supply the brunt of that capacity.

If the build-out happens, construction companies that build wind farms will also be on the menu. I like Foster Wheeler (NASDAQ: FWLT), TransAlta (NYSE: TAC), ABB (NYSE: ABB), and Tetra Tech (NASDAQ: TTEK).

Even though they’re not pure plays, I’d have to lump those companies into the list of top wind energy companies as well. I’d be buying them all at these levels.

For the foreign juggernauts that actually run the show, you might want to consider a domestically traded wind energy ETF, as buying those stocks on their home exchanges can get confusing and pricey.

The only two out there are the First Trust Global Wind Energy ETF (NYSE: FAN) and the PowerShares Global Wind Energy ETF (NASDAQ: PWND).

The First Trust ETF holds Vestas, Gamesa, and Nordex, but also REpower Systems and Babcock & Brown Wind partners. Click here for a list of accompanies associated with the PowerShares ETF.

I’d buy the ETFs to gain exposure to the European big boys, and I’d be buying the construction companies here on NYSE and NASDAQ.

As credit eases and normal finance activities return, buying these wind energy stocks now will turn nice profits for you down the road.

To green energy and green profits,

Chris
Clean Energy Sector