Topic: Growth Stocks

This renewable energy stock is staking its future on wave power

Growth Stocks

Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.

An interesting question came up this week about Ocean Power Technologies, a company that is generating electricity from ocean waves. This raised the issue of the risks and rewards associated with a renewable energy stock. In particular, Pat drew the comparison between the long-term prospects of wave power and wind power.

Q: What do you think of Ocean Power Technologies? What is the buy/hold/sell status of the stock, please?

A: Ocean Power Technologies (symbol OPTT on Nasdaq; is trying to develop and commercialize a system that generates electricity from the mechanical energy created by the rising and falling of ocean waves. The company began trading on Nasdaq in May 2006 at $1.80 a share (split adjusted).

Founded in 1994, Ocean Power focuses on commercializing its PowerBuoy system, which is able to respond to changing wave conditions. Most of the PowerBuoy is underwater, so it has less visible impact on the surrounding environment than wind turbines. Wave power is also steadier and more consistent than wind power.

In 2004, Ocean Power formed a joint venture with Iberdrola (a major Spanish utility) to build a wave farm on the north coast of Spain. Ocean Power deployed and tested its first PowerBuoy off the coast of Spain in September 2008.

In October 2008, the company deployed one of its PowerBuoy systems near Kaneohe Bay, on the island of Oahu, under its ongoing program with the U.S. Navy. This PowerBuoy will be connected to the Oahu power grid.

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Renewable energy stock: Ocean Power adds contract from U.S. Department of Energy

In addition, Ocean Power continues to work under a contract with the Scottish government. As well, Ocean Power recently signed agreements to develop wave power projects off Australia’s eastern and southern coasts.

The company recently won a $2.4-million contract awarded from the U.S. Department of Energy to promote the development of renewable marine energy. To that end, Ocean Power has teamed up with Lockheed Martin to develop wave power projects in North America.

You can see Pat’s recommendation on Ocean Power Technologies in this week’s Inner Circle Q&A. In his analysis, he looks at how soon the company is likely to be commercially viable and generate a profit for shareholders. He also considers whether it can continue to attract government and commercial development contracts.

Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle section, and many other membership privileges. Click here to get started right away.

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