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AMSC, ABB and Vuzix OMIBs ?3

08:41 07-Jun-19


AMSC has reported its fourth quarter results:

The results are not all that bad, but I certainly don't think they justify management taking raises and a $1M spot bonus for the CEO.  AMSC fell 17% on the news and is now just above the $8 fair value I'd estimated.  The conference call did promise growing business in electrical grids, which is my primary focus, and Navy contracts.  I see paralysis or swings in American government, as a risk there, but not a barrier to investment if the stock continues to fall. 

In the meantime, ABB is probably a safer, more market-appropriate choice for many investors in this area as it scores big power deals abroad.  The stock certainly doesn't have as much potential upside as AMSC, but it is cheap and profitable, though the next dividend is almost a year off now.  Looking deeper, another reason to own either stock is the problems with the hydrocarbon market that I've mentioned many times before.  Demand for natural gas and/or renewables has already shown a steady growth trend but that still needs to multiply over the next decade.  For the long term, renewable gas, wind, and solar are clearly the path forward for sustainable climate control and transportation.  Grid upgrades are a prerequisite to that future.

For those who want GRoDT, I'm adding a VUZI section to the website, as foreshadowed.  I think HMDs (head mounted displays) are starting to find traction in security and commercial applications as evidenced by several supplier agreements, follow-on orders, and Google having another go at its Glass offering.  That may eventually transition to smart glasses developing a consumer market, where I see the wave guide approach used in Vuzix's Blade product as best in class.  Deliveries should begin to ramp this quarter and along with reselling via Verizon.  Quantification on production yields is still the missing piece of the equation for me, but under $2 I suspect that VUZI is worth a shot, though the usual warnings about GRoDT risk and position sizes apply, of course.  That said, a pair of recent OMIBs from the CEO followed by another from the CFO backs up the positive opinion on this price point.  Although these transactions only changed the individual stakes by about half and full percentage point, respectively, that's because together, these individuals own about 13% of the company, thereby aligning there interest with those of shareholders. 

It's a tricky investing time, with regulators and the big corporate names that have risen the most in the market increasingly at odds.  Prevailing in such matters is probably what's behind Vodafone appointing a former Telstra CEO to its board.  A hearing is set for September 10th.  The job reports released this week do nothing to change my rather gloomy market outlook while we wait for resolutions in trade and Brexit.  Invest carefully!