Echelon (ELON)
By Timothy Lutts, Chief Investment Strategist
and Editor of
Cabot Stock of the Month ReportFrom Cabot Wealth Advisory, 10/8/09
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Echelon (ELON) - Power Grid Opportunities
Today, I want to focus on the possibilities for change in our enormous electric power grid, an animal that is so complex--and so rooted in ancient technologies--that it is rife with inefficiencies. Which to me spells opportunity.
We all know how it works in general. All across the country, power plants burn coal or oil or natural gas or combinations of the three. Others burn wood, or generate nuclear power, or use hydropower, or take in trickles of power from little wind power farms and solar panels. And all across the country, people like you and me go around flicking switches off and on whenever we want something ... light, heat, dinner, communications, clean clothes, entertainment, etc., pretty much without regard to the effect our actions will have on the grid as a whole. And because electricity can't be easily stored, the power companies have to continually adjust their inputs to meet our demands.
That it works is pretty wonderful, almost a miracle. Yet it's crying for modernization. Above all, it's crying for transparency and intelligence about operating costs. In short, when power demand is high, we should know it, and we should have the choice of deferring using that power until it is cheaper.
Some of that behavior, in fact, is going on right now, thanks to a company named Echelon (ELON). It was recommended in Cabot Top Ten Report recently, and here's what editor Michael Cintolo wrote.
"In the future as designed by Echelon, the electric grid (smart grid) has the intelligence to understand changing demands, and to vary electricity pricing to make it more expensive to the user when production costs are high and less expensive when production costs are low. At the same time, increasing numbers of electricity-consuming appliances and devices are endowed with intelligence and communications capabilities that enable them to operate at the intersection of when electricity is cheapest and operation is most convenient for the user. The company has two main product lines now: Networked Energy Services (NES) for advanced metering infrastructure and LonWorks (Local Operating Network) for infrastructure products for control networking. Today, Echelon's largest customers are electric utilities; its products are used in commercial buildings, smart homes, industrial plants, mining operations, schools, streetlights, warehouses, electric vehicle chargers, solar farms and more. The company has not been profitable since the last quarter of 2007--the slump in the construction industry was painful--but the stock is telling us better times lie ahead."
When that was written, on September 21, ELON was trading at 14. Since then it's been up to 15, down to 13, and now it's at 14 again, building a tidy base in preparation for its next advance. I wouldn't buy it today, but if it dipped to 13 I'd nibble, and if it was still building this base a month from now, I'd snap it up.
Echelon Corporation
550 Meridian Avenue
San Jose, CA 95126
United States
Phone: 408-938-5200
Fax: 408-790-3800
Web Site: http://www.echelon.com
DETAILS
Index Membership: N/A
Sector: Technology
Industry: Networking & Communication Devices
Full Time Employees: 325
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Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month Report.