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Stock market trading from the Windicator

The past three months represented a better quarter for wind power stocks overall than the first three. The four publicly listed wind companies, Vestas, NEG Micon, Gamesa and Nordex, together outperformed the top European stocks, with their combined share prices rising by 23% over the last quarter compared to a 16% rise by the stock market indexes. But it was a tale of mixed fortunes.

Vestas, on the back of news of recent new orders, notably in the US, performed strongly with its share price increasing by 42% on the previous quarter. And the positive news flow from Gamesa continued, resulting in another upward swing in share price -- in the past three months by 18%. Though not yet a done deal, its acquisition of Made (page 25), further consolidating its dominant position in Spain, was the latest of a number of factors that has seen it become the strongest wind stock performer. The key question for Gamesa is whether it can make its stable domestic business into an international one. The question for Vestas is whether it can make its international business stable.

In contrast, NEG Micon and Nordex continue to struggle. The absence of anything remotely resembling positive news coming out of NEG Micon (particularly noticeable in light of the activity from Vestas) has far from impressed the market. Its share price has tumbled a further 10%. Nordex, with a leadership crisis and running at a projected loss, continues in its unenviable position as the sector's "untouchable."

While there have been new "buy" recommendations from some market analysts, driven in the main by the performance of Vestas and Gamesa, others appear to have been swayed by the poor performers. Overall their recommendations have shifted from "hold" to "sell." Even so, the performance of Vestas and Gamesa may mean that the equity markets will, theoretically, become open to new share issuance, while in the previous quarter they clearly were not.

The recent strengthening, however, remains driven by recovery not growth, not to mention the perception that wind company shares are relatively cheap and represent a bargain. Investors remain hesitant, however, preferring to err on the side of caution, with only a few coming back to the market. As one analyst notes, everything now is about rebuilding investor trust and confidence -- a new Production Tax Credit in the US and a clearer indication of how far the German market may or may not decline will be essential for attracting capital, he says.

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