The Iconoclast Investor

Nahant, the town where I live just north of Boston, is breezy in the summertime, which keeps the weather from getting as hot as on the mainland (Nahant is made up of two islands). The downside is in autumn and winter when that idyllic summer breeze turns into an often-relentless wind.

But it turns out that the wind may become a new advantage. The Nahant alternative energy committee has approved a plan by an area startup called Deerfield Energy to replace the street lamps along the causeway to the mainland with lampposts topped with wind turbines. Since the causeway runs along a state beach, it’s not the town’s say, but Nahant rightfully holds some sway in the decision. If approved, Deerfield will install new lamps topped with a 12-foot diameter turbine. The wind should produce enough power to pay for the electricity of the lamps with some leftover for Deerfield to sell into the grid, paying off its investment in the posts in a few years.

But the big news in wind isn’t the doings of a town so small most Bay Staters have never heard of it. It’s that plenty of big projects are being bandied about now that energy prices look to stay high for good. One project proposed by another private start-up, Bluewater Wind, calls for up to 200 turbines spaced half a mile apart off of the Delaware coast. Just the blade of each would be 140-feet long, according to CNN. The project was approved by the state legislature this summer and The New York Times did a story about it in this Sunday’s magazine. Off of New Jersey, fishermen who once opposed turbines have banded together to push for a new offshore wind project of similar scope.

In many cases, once approved, these projects could come together rather quickly: a few years back, General Electric (GE) built a 25-megawatt project in the Irish Sea off County Wicklow in just nine weeks.

GE isn’t the only big player in the potential for wind. As editor of the Cabot Green Investor, I’m keeping an eye out for the most promising wind stocks to be had. One of these isn’t located very far from where I am–American Superconductor (AMSC), which is based in Devens, Massachusetts.

American Superconductor is a company that actually had a long promising business in superconductive transmission wires for utilities, which was a great idea, but a little ahead of its time and not profitable. But last year the company bought an Austrian wind turbine designer.

The move was shrewd, since wind is a complementary product to the wire and electrical system American Superconductor already had been producing. The combination of the two businesses has been classic razor and razorblade marketing–American Superconductor sells its designs to other companies that manufacture and market turbines. With the sale comes the right to sell the electrical components for each turbine built, something other turbines designers don’t require.

The result is booming revenues–sales for its latest fiscal year, ended March, were up 115% to $112 million and are expected to grow to $180 million this year thanks to a major client in China and the uptick in the need for its superconducting wire that will help transmit all that new power.

It’s stocks like those that we love to find. We recommended AMSC to readers in May. Following Cabot’s time-tested method of discerning technical signals and market momentum, we recommended that readers sell their positions over the summer for a total profit of 38% in just three months. Of course, in the current market, it’s been impossible to avoid some busts too, but we’re glad to say we are well ahead of the performance of alternative energy ETFs and mutual funds for 2008.