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No. of Recommendations: 6
I listened to the Pacific Growth Equities presentation and am finally ready to buy AMSC. All I need to do now is pick an entry point.

I am convinced the Democrats will do what they say about alternative energy. The time is right because so many of these technologies are finally becoming cost effective. Wind is already there. Solar is still two generations away from prime time. Superconducting is starting to be cost effective in its first niche markets.

I am going into this with my eyes open. There are many deep pocket companies that are waiting for superconducting to hit stride. They will let AMSC build the first plants, try to get the chemistry right, make the hard first sells, and then they will enter.

I also heard a big no-no in the Pacific Equities presentation. AMSC is talking about being price competitive with copper at $2.00 a pound. Let me put that cost in perspective (and something that is time-stamped so you can believe what you are reading). Here is what I wrote on 1/8/2003 about the price of copper:

Copper is currently at $74.15 (January 2003 futures contract). Last quarter (Q3) FCX realized $.67 a pound for copper.

Four years ago copper was $.67 a pound. It could easily go there again because that was not the low price. It was on the rebound at that price. So, to be cost competitive, you need to look at the historic price for copper and then make your projections -- at least that is how I approach the subject.

My warmth toward AMSC is built on the fact that the wire needs today are so small (as the presentation is quite clear about). I wanted the company to have product. They do. I wanted the products to be through the first sell phase. They are and the ramp-up of sales to the wind vendor is just what happens when the technology is right. So, I see not only a technological advance but one that companies want to buy. Finally, the latest generation of wire is a major advance and will be the cutting edge for at least three years. So, the short-term technology risk (relatively speaking) is not very high.

AMSC is a Rule Breaker in my book. Insiders own 27% of the stock. The company dominates its niche. Realize that the quarterly revenue growth year-over-year was down 11.8% but that was during a switch-over to G2 wire:

The company is already telescoping that the revenue growth is ready to hit the hockey stick. The only place where this company really falls short of Rule Breaker status is earnings. This company is not going to turn EBITDA positive for a few quarters, but that is coming. Given a favorable regulatory environment (and, as I said, I do see the Democrats fulfilling their promises on energy) the door should finally be open in the USA for ramped-up R&D spending and government support for energy saving technology (where AMSC is sitting pretty).

I am not buying a flock of AE stocks. I do not see a lot of opportunities. I like Honda as the king of solar cells but that's a subject for another day.

If the Democrats want to reduce our reliance on foreign oil, one major option (since electricity is not oil-based) is to encourage plug-in hybrids. Let people draw cheaper electricity to cover their first few miles every day. It's an idea that is already cost effective. But, instead of the Cheney plan where you have to build a new power plant every week, you also improve the flow of electricity with superconducting wire (and efficient motors in the future) so the power can get to the people 1) more efficiently and 2) without having to dig up America or cover more of the landscape with ugly power lines.

As I said, AMSC finally makes sense -- and I hope it will build-up a lot of cents into my portfolio too. I thought 2006 was the make-or-break year and I think in hindsight that is what people will see. The hockey stick moment is here.

Just one person's opinion...

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