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goldminingXpert (29.47)

When does this whole wind bubble blow over? (AMSC)

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June 21, 2008 – Comments (11) | RELATED TICKERS: AMSC , ENERQ.DL

I'm calling a top now... or right about now anyway. Some of these stocks are up 500% or more in the past year or two. American Superconductor... a company that purchased a tiny wind firm for under $20 million in stock is now up 700% off its low due to one deal where the buyer appears to not have the financial strength to pay. How does a tiny little $20 million dollar firm turn into somebody filling a $450 million order? They don't. AMSC's core business... superconducting wires, are ridiculously expensive to operate. In summary, this company is a sick joke, yet is has doubled since January alone. The other examples of insane stupidty... I'm looking at you ENER, BWEN, and APWR, are beyond belief. I feel like I'm living in February of 2000 again.

Wind is not ready for the bigtime, it is nice, but it isn't going to make fossil fuels extinct tomorrow. At best, it provides a small change to the overall power grid. By comparison, the internet was far more important than wind will ever be. 

I am taking a stand... a mere 53 points down on my AMSC pick, it is time for action. Not only is this company burning money, it is also deceitful, outrageously overvalued, and quite possibly fraudulently lying about its biggest contract as stated by Citron. I've purchased 5 January 2009 puts with a $40 strike price on AMSC for $7.40 ($740 per contract)... when AMSC reaches $20 (or lower) before January of next year, these will be worth between $20 and $25 x 100 shares ($2,000 to $2,500 per contract) netting me roughly a 3 for 1 return on investment. If for some reason AMSC continues its mercurial rally, I will buy more puts at the $45 and then $50 strike price... I've got plenty of capital to build up a diversified put portfolio on these suckers.

11 Comments – Post Your Own

#1) On June 21, 2008 at 6:29 PM, AnomaLee (28.61) wrote:

Good post... I've been thinking about putting a spread on some of these companies.

I thumbed down Capstone Turbine this past week, and I immediately had 2 responses to why a company trading at 20x sales, 15x book, that is still down 90% since its IPO is a buy, and everyone is excited about a backlog not even one tenth of its market cap? WTF?!

I actually like ENER the company, but the run-up is ridiculous in all these alternative energy companies. 

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#2) On June 21, 2008 at 7:53 PM, DemonDoug (72.68) wrote:

amsc:wind as pets.com:web.

It's your classic pump and dump.  Any "hot" industry can have companies that take advantage of it and do this type of thing.  It has happened in the past, over and over, and will continue to happen, it's human nature.

Fortunately we can use human nature to our advantage - like you stated, by buying puts for an example.

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#3) On June 21, 2008 at 8:55 PM, abitare (36.28) wrote:

FYI - I own one put AMSC

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#4) On June 21, 2008 at 10:34 PM, FleaBagger (29.06) wrote:

I've been wanting to buy puts for some time now, but I never had the courage to buy some deeply out-of-the-money puts on HB's or airlines (which, in retrospect, would have been very profitable puts to have), and I've never had enough liquid capital to buy near-the-money puts on the companies that I follow that are bad and wildly overvalued. Maybe now I could cough up enough for a moderately out-of-the-money AMSC put, since that seems to be a consensus of top Fools.

By the way, I have a friend who recently bought APWR and made a huge short-term gain on it. Any bull case to be made for it from here, in the mien of an FSLR type? Or should I continue to urge him to sell?

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#5) On June 21, 2008 at 11:24 PM, goldminingXpert (29.47) wrote:

Fleabagger--no bullish case at APWR at this price level, sorry.

Anomalee--my CAPS pick on Capstone is my all-time worst loser at around -160 points now. I'm leaving it open, this run has to end sometime. I didn't have the guts to short anything at the time of the red thumbs on these companies, but with them up 50% or more since I redthumbed them, the overvaluation is just too compelling to pass up. Whatever, I can lose afford to lose $3,500 without it killing me if AMSC manages to actually turn a profit or something weird like that. If ENER breaks 90, I'm buying puts on them too--it is better than AMSC, but I can't see a fair value for ENER over 30 or so until management builds a track record based on more than hype.

Finally, anyone seen the insider selling at both these companies? Suspicious that 800,000 shares are sold at AMSC and ZERO are purchased in the past two quarters! 

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#6) On June 22, 2008 at 8:45 AM, JoHooch (< 20) wrote:

I'm holding APWR with a 28% gain.  Just bought it the morning of the 16th.  I might take a little profits, but I'm letting this thing run until it looks like a lot of money is bailing out.  Here, just look at the chart. All I see there is massive accumulation.  Big volume spikes on up days and max green BOP (indicator on the bottom) indicate big money buy-in.  Moneystream and TSV18 maxing out too.  Of course a chart can't predict the future and anything can happen, but just based on the amount of accumulation we've seen it looks to me like some "smart money" or at least big money is buying in really big time.  I'm fine following their lead for the time being.

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#7) On June 22, 2008 at 11:53 AM, JoHooch (< 20) wrote:

Oh and wind farms were a major topic this morning on CBS sunday morning (I think that was the show...).  The biggest concern in Texas it seems is that if tax subsidies end, there will be a ton of huge wind turbines or whatever they are called standing still and rusting away. 

Fun fact I learned...one of those wind turbines can power 500 homes.  DAMN.

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#8) On June 22, 2008 at 1:01 PM, goldminingXpert (29.47) wrote:

Feel free to run the wind names higher... I'll load up on leap-2010 puts on them if they get overpriced enough. I'm dollar-cost averaging into a diversified portfolio of putson these alt. energy stocks.

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#9) On June 22, 2008 at 9:49 PM, JoHooch (< 20) wrote:

Sure thing goldminingXpert.  I'll run em up and you can ride em down.  No problemo. :-)

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#10) On June 27, 2008 at 2:15 AM, TheParadox (91.78) wrote:

I agree with you on AMSC 100%... if you look at my pitch when i picked the red thumb on it, i really did a lot of digging afterwards and made a little journal with it.  I found it on citron, but it felt kinda awkward about following them so often.  I decided to dig up some dirt on them and finally I found myself getting "hyped" about the idea, and then it hit me: that was the whole idea... the reason for all the buyers... Hype.  I looked at the fundies and realized they just bleeding money.

 

Get Hyped:

http://www.lipower.org/newscenter/pr/2006/supercond.swf

what i also found was AMSC had support from the DOE to cover some of the cost with LIPA on the project as well... so this really translates to me that the "cost effectivenss" of the system is wack.

 

Its a shame you've burned some points on something thats junk, but that happends sometimes, sit and wait and you'll recieve you points back.

 

I have some 2009, and a 2010 put on FSLR to drop below 275 when it was sitting up in that range, it feels great, i got it like when the stock nearly hit its peak, and my break even is at like 265ish, but man, they were expensive!!...

 

It seems to me that these alt energy stocks are way overpriced because the market thinks that because "oil is high, wind and solar are sooo attractive".  It even crossed my mind, but after i saw the valuation, it struck me as something i read about with the tech bubble in 2000...  More then likely what i think will happen is we stop devauling our dollar (hopefully soon too), would cause oil to drop... most oil is imported, a weak dollar makes prices high.

 Puts on AMSC sound good... Jan 2010 @ $35 puts are trading at 10.90 with the stock at 37 ish.  Break even is at 24.10... will AMSC lose over 36% of its share price before 2010?  Seems reasonable to me. for the 09 puts at 40, it would have to drop 19% to break even.

Good post, i've been thinking about this (puts/short on alt energy) for sometime, but honestly i didn't have the balls to do it because it feels like no one sees it but me... and the people that have done it got in too soon and got burned.  FSLR was my only exception with the huge PE and nanosolar going public, i got that idea from Statsgeek... i've been kinda scared.

 

Man, i really think i'll get some puts on AMSC...

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#11) On June 28, 2008 at 2:09 AM, TheParadox (91.78) wrote:

YO, YOUR A FREAKING DIRTY SOB ! ! !

 I SAW FRIDAYS CLOSE, A NICE FREAKIN 7% DROP...

MAN, TALK ABOUT CALLING THE SHOTS.

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