Stock market trading from the Windicator

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It was a quarter of dramatic stock price performance from the listed wind companies. Dramatically positive, that is, with the Windpower Monthly Index (below) rising an astonishing 23.5% against a general market increase of 6%. The market capitalisation of Vestas, Gamesa, Repower and Nordex reached more than EUR 6.7 billion in early September, an increase of more than 45% over six months ago.

The question is whether the increase is deserved. Oil prices rallied over the period -- and there continues to be an implicit assumption that what is good for OPEC is also good for global wind. Analysts acknowledge the generally more positive prevailing mood towards renewables, as well as the fact there are very few large, wind-only, companies -- the former Bonus and GE Wind are buried within industrial parents, Enercon is private and Gamesa has non-wind activities. For this reason, more than history or megawatts sold, Vestas serves as the sector's bell-weather stock. It is the first stock investors pile into when they think "high oil" or "buy green." It is also why there is such variance among Vestas' analysts as to whether the current stock price is deserved. For some the current price strength represents "a great selling opportunity," while for others a combination of high oil prices and the future fruits of the company's new "Will to Win" program provide two very good reasons to be buying more shares. There is no market without buyers and sellers, but the dissonance from analysts is stark. It is hard to see how it can be both "a seller's market" for turbine manufacturers and a period of potential cut-throat pricing from the large manufacturers at the same time.

These dissonant tones were evident at Vestas' half year results, when profits were lower than anticipated yet the share price rose, partially because sales levels were increased. Those looking at the present were disappointed. Those looking favourably towards the future were encouraged. On balance the optimists prevailed. For now all the attention appears helpful to Vestas, but it does not require a long memory to hark back to when either negative sector sentiment or less positive company news flow made that attention far less welcome for the company.

Gamesa, which posted a very strong quarterly performance, up 22.4%, arguably ought to be receiving as much attention from international investors. Bolstered by rumours of the sale of its aeronautical division, which would make it virtually a wind-only company like Vestas, plus the recent approval of the domestic renewable energy plan, Gamesa continues to be the largest of the wind companies. It has a market capitalisation of approximately EUR 3.4 billion, more than half of the Windpower Monthly Index.

Repower also experienced a strong quarter, which was particularly good news for wind manufacturers of a similar size looking to take advantage of the positive sentiment around wind and the desire for more listed companies. Indeed, during the quarter Clipper Windpower, with bases in the US and UK, listed in London (page 37) and India's Suzlon Energy followed suit on the Bombay Stock Exchange (page 38).

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