Trading Alert: Purchased Beacon Power Corp (NASDAQ:BCON)

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I purchased some more Beacon Power Corp. (NASDAQ:BCON) on Friday after watching the stock slowly dwindle over the past 2 weeks back toward its 3-month low. I purchased it at $1.07 Beacon Power makes flywheel-based, environmentally-friendly energy storage devices that can help smooth out supply-demand swings in electricity grids, notably by storing base-load power and releasing it during peak-load periods. More on Beacon Power’s flywheel technology. Beacon is not a company that looks particularly attractive fundamentally at the moment. For Q3 2006, the company reported a net loss of $3,165,000, or -$0.06 per share, on sales of $277,000. Sales were down around 9% and net loss grew by nearly 48% when compared to Q3 ‘05. The main culprit for this wider loss was R&D expenses of $1,314,000, up from $358,000 in Q3 ’05. Overall, operating expenses for the three months ended September 30, 2006, were $3,333,000 compared to $2,228,000 for the same period in 2005, up about 50%. From a technical point of view, Beacon is nothing to write home about either. The stock decisively broke its 200-day moving average to the downside some time ago, and volumes have been drying up. We’re not seeing good signs of support either, so it could go lower yet. The problem with Beacon is that it got engulfed in the general euphoria that drove a lot of the alternative energy stocks to unjustifiable heights last fall/winter. Those who had positions in stocks like Energy Conversion Devices (NASDAQ: ENER) and Suntech Power (NYSE:STP) at the time will remember what I’m talking about. Anyone who took a long position in Beacon Power between August 2005 and May 2006 either: (a) was looking to ride the speculation wave or (b) didn’t know what he/she was doing. Beacon hit a 4-year high on August 26, 2005, at $4.13, while ‘06 EPS estimates called for -0.20 and ’07 EPS estimates for -0.12. What, then, do I like about Beacon? Beacon currently meets most of the requirements that I look for when I build a ‘buy-and-hold’ position in a development-stage clean tech company: (a) a technology for which I can see applications not only 20 years down the road but now (I’ve made this point here before); (b) research and development partnerships with one or a couple of reputable entities out of which a steady flow of good news streams out (in this case the US Department of Energy and the states of California and New York); (c) low trading volumes and no upside momentum, which provides plenty of attractive entry points. I like Beacon at around $1 although I am guilty of having bought it at $1.20 in the past on good news about its tests. On occasion, stocks like Beacon will get nice pops on good news – I don’t pay attention to that. Something like this could be a 5-year story, maybe even longer. Beacon has one of the best exposures to California in the utility-scale energy storage space, and California has one of the most ambitious renewables program in the world. Beacon’s technology could be key in helping the deployment of renewable energy, as it would help to mitigate worries around reliability. DISCLAIMER: I am not a registered investment advisor. The information and trades that I provide here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

4 COMMENTS

  1. Hi Andrew,
    Evergreen is another one of those companies that was trading a tad too high for my own liking during last fall/winter. I used to follow the stock as part of a basket of solar firms but never bought it.
    I’m not hugely familiar with their technology or how close they are generating positive earnings, but they certainly have been growing their revenues fast over the past 3 years.

  2. Hi Niels,
    You might partly find your answer here: http://biz.yahoo.com/ap/061229/volume_spikes_nasdaq.html?.v=1
    and here: http://biz.yahoo.com/e/061229/bcon8-k.html
    One analyst at Merriman Curhan Ford downgraded BCON from Buy to Hold the day after this announcement.
    In my view, it is a little premature to panic, although I wouldn’t buy any until we know more about this problem. I’m still long and haven’t dumped any of my stocks.
    The company expects to begin generating revenue from its fly-wheel technology this year so I will wait and see how that proceeds before doing anything more with this stock.

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