For the past 3 weeks, I have spent most of my time researching American Superconductor to determine whether it would meet the criteria to become a Rule Breaker. What I have learned from all those hours and hours of research has made me more sure than ever that when my husband bought stock in AMSC a little less than a year ago, he invested our savings wisely. I compiled some of my findings into a report for my seminar team. I have edited it below to remove references to earlier posts, since I have been told that only seminar participants have access to those. I am posting this on the AMSC board in the hopes my research will be of benefit to some investors and even some would-be investors who are just checking out American Superconductor.------------------------------------------------AMSC: A Longterm InvestmentThere is no question about the volatility of the market today. And, as anyone who has been following American Superconductor (ASC with ticker AMSC) can tell you, there has been no news from the company itself, other than the Secondary Offering, since December. AMSC is presently at the mercy of the rumors, conjectures, competitors' announcements, analysts' ratings and market trends until the 10-Q is released. Any short term or day trader who bought AMSC at its recent high has already lost his shirt. (Although not quite so badly as on a lot of the other tech stocks----) Overvalued Stock?A prominent Morgan Stanley Dean Witter (MSDW) analyst considered AMSC overvalued: (NEW YORK, March 10 (Reuters) - Morgan Stanley Dean Witter said it cut its rating on American Superconductor Corp.<AMSC.O> shares to hold from strong buy, a market source said on Friday. -- Further details not immediately available.) The market appeared to react accordingly to the word of the Wise. A few days later the NASDAQ itself (of which AMSC is a part) began to slide and had a pretty fast descent because tech stocks were considered overvalued. Does that mean that all the stocks on the NASDAQ are poor investments? Of course not. In fact, savvy long-term investors think this is probably a great time to pick up tech stocks they value. When the company is a Top Dog and First Mover in an Emerging Industry, most of its revenue is from contracts for Research and Development (R&D). Using Rule Breaker criteria, we can only be convinced AMSC will do well in the future by making sure we believe the company and the management are solid and able to outpace their competitors. Long term buy and hold (LTBH) investors in AMSC are holding firm. The MSDW downgrade, for whatever reason, and the recent emergence of competitors will have little or no effect on the R&D, performance or future of AMSC and ASC in the world market. The proceeds from the Secondary Offering gave them the needed cushion to break any short-term fall resulting from extending a sales target date, which is now rumored to be one of the reasons for the downgrade.Outstanding, Knowledgeable, Seasoned LeadershipThe work of Gregory Yurek, the founder and CEO of AMSC, on the development of corrosion-resistant alloys led to the invention of technology now used in manufacturing HTS (high temperature superconducting) wires. Dr. Yurek served as a consultant to the firm responsible for overseeing the transfer of technology from MIT, for establishing the company's research and development programs, and for creating strategic alliances. From the ASC web site, "American Superconductor's management team brings together a group of seasoned professionals with extensive management, financial, engineering and marketing experience. Twenty-five (25) of the firm's 242 employees hold Ph.D.s in materials science, physics, metallurgy or engineering. Senior management has well over 100 years of industry-related and marketing experience." Important, Emerging IndustryIn the future we may see AMSC live up to its slogan of "Revolutionizing the Way the World Uses Electricity." The technology used in superconductors is important enough to have won the Nobel Prize 4 times. In 1986, a breakthrough in superconductivity occurred when two scientists, Dr. K. Alex Muller, who is currently under contract as a consultant to ASC, and Dr. J. Georg Bednorz, at an IBM laboratory in Zurich, Switzerland, identified a ceramic oxide compound which was shown to be superconductive at36 degrees Kelvin (-395 degrees Farenheit). This discovery earned them a Nobel Prize for Physics in 1987, which is one of four Nobel Prizes [1956, 1972, 1973, 1987] that have been awarded for work on superconductivity. A series of related ceramic oxide compounds which have higher critical temperatures were subsequently discovered including those being used by American Superconductor. http://www.amsuper.com/superconductivity/facts.html Followers and "Wannabees"Any important emerging industry will have more than one player. And each player will try to look better than the other, in hopes of grabbing a bigger market share. A case in point is the big announcement from IMG (Intermagnetics General Corporation): (PR Newswire) Intermagnetics General Corporation today announced that it has signed an agreement with two government laboratories to develop manufacturing facilities for the world's most advanced high-temperature superconductors[HTS].- Mar 13 7:31 AM EST http://search.news.yahoo.com/search/news?p=IMG&n=10&c= Great headlines from the company, right? But read on. Further down they say they are a global leader in HTS research and development, having 30 years of experience in the field. Then toward the end of the release, "Epstein [CEO of IMG] estimated it would take at least two years to develop a manufacturing process that can turn out HTS coated-conductor tape at a cost-performance threshold that is competitive."Perusing superconductor message boards, I found several opinions that the process referred to by IMG offers results that could be considered as good as or better than the HTS of AMSC, but it is difficult to manufacture in sufficient lengths and may not be viable for commercialization. Finally, someone who understands the HTS technology explained that the AMSC/MIT process is even better and costs less. AMSC and Pirelli (strategic partner) knew about this research (just announced by IMG) long ago and decided that they made a better choice. From the 1999 Zacks Report on AMSC, "There are a number of companies in the United States, Europe and Japan engaged in attempts to bring to market high performance, technologically advanced, cost effective HTS products. However, to the Company's knowledge, no significant commercial amounts of HTS wire or other HTS products have been produced or sold to date."Contracts and Strategic AlliancesAMSC already has a real presence in the United States and Europe, with headquarters both in America and in Germany. By November of 1999 (Standard & Poor's Stock Report), AMSC had strategic alliances with Pirelli (the world's largest power and cable producer), EDF (Electricite de France) and ABB (the world's leading manufacturer of power transformers). The collaboration between AMSC under the U.S. Department of Energy's SPI (Superconductivity Partnership Initiative) and ABB is producing a powerful HTS transformer with a power rating of 10 megavolt-amperes (MVA) due to be manufactured and installed in a U.S. utility in 2002 and developed and supplied by ASC (American Superconductor Corporation in Europe) through EDF in a site near Paris by mid 2001.AMSC has several American contracts (Detroit Edison, Wisconsin Public Service, the U.S. Navy and Air Force, among others) and overseas contracts with Utilities Edison (the largest private utility company in Italy) and companies in France and New Zealand. The global influence of the role of Pirelli as AMSC's distributor has given AMSC a real competitive edge in the world market. From the 1999 AMSC 10-K, "In the past, we had to go out to the marketplace to show the product. Today the marketplace is coming to Pirelli to demand the product." Global MarketQuoting from the Company, "As energy demands increase and environmental concerns heighten, underground HTS cable will provide the necessary alternative to meet power supply needs. The development of commercially viable HTS transmission cable will allow US industry to capture a large portion of the growing US market. In addition, international markets are estimated to be 10 times that of the US and growing more rapidly" http://www.amsuper.com/In addition to making HTS wires for power transmission cables and manufacturing SMES and D-SMES (Superconducting Magnetic Energy Storage) systems utilizing HTS wire, AMSC is now designing smaller, more cost effective and energy efficient HTS coils for large electric motors, generators, transformers and fault current limiters (FCL). Concerning joint ventures to make motors, Yurek commented, "That's a fast channel into the marketplace." The world wide market for HTS motors over 1000 hp is estimated at $300 million per year. The same market for generators is estimated at $23-30 billion in a 10-year period. In 1998, the global transformer market for devices rated 30 MVA and higher was estimated at $3 billion. Estimates are that the cost savings and operational benefits of current limiters will create a potential domestic market of $3-$7 billion in the next 15 years.From the 1999 AMSC 10-K, "The first 10 Power Quality (PQ) SMES units are up and running with excellent results in manufacturing operations in the U. S., South Africa, and, most recently, Europe. American Superconductor's D-MES product offers a cost-effective solution [to power outages] that addresses an immediate global market opportunity that we estimate at more than $500 million annually."Solid FoundationFrom everything my research has taught me, I still believe American Superconductor meets all the criteria for a Rule Breaker. The primary difference between this company and most of the others I have investigated is that AMSC, while still involved heavily in R&D for new products, already has products on the market. I think Dr. Yurek says it best:"We have created a strong foundation based on: strategic alliances with world-leading corporations; developments in HTS and SMES technology second to none; and a broad and deep portfolio of intellectual property, including patents, licenses and trade secrets. American Superconductor has also continued to invest in talented and dedicated people and in the management systems and processes that foster business success…. We believe the foundation put in place during the '90's will lead to success for our company, for the new industry we are helping to create and for our shareholders. We are dedicated to achieving this success…."Judy
Judy,Very informative post. I appreciate the research you're doing.-Mike
Judy,Excellent work. Your time and energy invested in AMSC will not be in vain. This company will be one of the most successful companies of the next decade.Charlie R.
Judy,My compliments on a very thorough, well researched post. You didn't mention Gilder's Huber-Mills Power report and the upcoming San diego seminar he's putting on on the "Powercosm" where AMSC will be a presenter. AMSC was first mentioned in the Heber Mills report and that's where I began my research and initiated my investment in AMSC. Keep your eye on Gilder's seminar. Hopefully, I will be able to attend the seminar,(if I can get it scheduled) and will keep the board posted on the results. Keep up the good work and thanks again.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |