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The seeming attraction of wind power stocks is obvious — these companies operate (or make parts for) wind turbines, which offer a source of clean, endlessly renewable energy that can replace fossil fuels like oil, coal and natural gas. However, like other alternative-energy firms, wind power stocks face significant costs and risks.
One of the main problems with wind power is that varying wind speeds cause its electricity output to fluctuate. In many areas, the wind is stronger in the daytime, when demand is lower, and dies down in the evening, when consumers use more appliances. As well, electrical power can’t be stored efficiently, so to make economic sense it must be used when it is produced. As a result, utilities must maintain back-up power capacity that is equal to their reliance on wind power.
Wind power stocks also face high construction costs. These include the cost of the turbines themselves, plus buying or leasing the necessary land. Installation can also be expensive, depending on the terrain and distance from the power grid. Not surprisingly, many of these companies are heavily reliant on uncertain government subsidies and political support.“What works in Canada is working in the U.S.” That’s what Mr. Peter Brimelow of Dow Jones MarketWatch recently wrote about Wall Street Stock Forecaster, one of a group of “remarkable Canadian newsletters” that have “assembled a long and very strong record.” The record, as compiled by the authoritative Hulbert Financial Digest, shows that the compound annual return of Wall Street Stock Forecaster has beaten the Wilshire 5000 Total Market Index by almost 30% over the past decade. You are not getting the full potential out of your investments if you do not include a selection of the best U.S. stocks in your portfolio. And the results show that Wall Street Stock Forecaster uncovers the American stocks with the greatest growth potential. As a new investor, you can get the first month FREE plus you will start profiting from our weekly hotline updates and recommendations immediately. Reply now. Click here.
A good way to profit from rising demand for renewable energy (including wind power) at lower risk is to focus on companies that build components for electrical-power grids.
In spite of the weak economy, governments around the world continue to invest heavily in upgrading their electrical grids. That’s partly because power-grid upgrades are important to the continued development of renewable energy projects, including wind farms.
While most power plants are located near big cities to keep costs down, wind farms tend to be in more remote areas with steady winds. As well, a lack of transmission capacity has been a major problem for wind projects.
One electrical infrastructure supplier that stands to benefit from continued government investment in transmission-grid upgrades is Switzerland-based ABB Ltd. (symbol ABB on New York). We updated our buy/sell/hold advice on ABB in a recent issue of our Wall Street Stock Forecaster newsletter.
ABB makes transformers, transmission switches and other equipment for distributing electricity.
In late 2009, ABB received a $30-million order for specialized power equipment from Ontario’s main electricity utility. The company will deliver this equipment in 2011. This order is small next to ABB’s annual revenue of $35 billion U.S. But it could lead to more orders as Ontario closes its coal-fired power plants and invests in green-power projects. ABB is also seeing higher demand for its power equipment from developing countries.
ABB’s revenue and earnings fell slightly in 2009. However, the company is doing a good job of controlling its costs; it has been cutting jobs, closing plants and buying more raw materials from low-cost countries. These factors, along with rising demand for electrical infrastructure, could mean strong gains for ABB in the coming months.
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