AMSC: Buying opportunity.
I've been building a large cash position lately, but today I went and used some of this to buy some shares of American Superconductor. By the start of Wednesday, AMSC's shares had fallen over 45% (from prices near $25/share to $13/share). AMSC makes electronic components for wind turbines, with their main customer being a Chinese corporation (Sinovel, recently IPO). Sinovel told AMSC that they would not take new orders (hich are 70% of AMSC's business), threatening the revenue and prospects of AMSC greatly. It appears to be bouncing now from this extreme low as people buy back into the company and think about the implications of the bad news.
My take on this:
* Sinovel stopping orders of AMSC is definitely bad and impacts revenue immediately. If this means that Sinovel is replacing AMSC with a Chinese supplier, this will have very negative effects for a long term. If Sinovel is only pausing on orders because of too high an inventory, this drop is greatly overstated.
* Wind power is set to have a good years from 2011-2012. Looking at one of the big name companies, Vestas, revenues continue to grow and sales grew going into 2011. The nuclear crisis in Japan now shows why wind power will continue to grow.
* Offshore wind development is now being actively pursued. This will open large tracts of the world to near constant energy production. The high price of this energy will fall as offshore transmission lines are built.
As such, I've bought into AMSC. If AMSC restores sales to Sinovel or finds other diversified clients in wind production (Vestas, GE... etc) than this may be a nice buy in time.