Broadwind Energy: Cramer, Someone Had to Say Something

by: Terence Channon May 22, 2008 | about stocks: BWEN.OB / TRN    
Terence Channon

Terence Channon

About this author:
Become a Contributor Submit an Article
  • Font Size:
  • Print

First, I will not lie. I have enjoyed and benefited from the recent Jim Cramer obsession with Broadwind Energy, Inc. (OTCBB: BWEN.OB).

I have owned shares for sometime – actually, before it was BWEN and was called Tower Tech Holdings and traded under the symbol TWRT. About 2 years ago, I found a company that was in the wind energy business and getting some support from a very reputable hedge fund manager, Jeffrey Gendell. I figured it was worth picking up some shares at $2-$4 per share. I even wrote about TWRT (now BWEN) in my column at AskMen.com about Green Investments back in the Summer, 2007 where I mentioned TWRT as one of the little, speculative plays with some upside potential. Since then, I sold a fair amount of my shares in the $10-$12 range, some at $25, and kept a small position to let ride. Certainly, my only regret at this stage is that I did not go 'all in' on this one, but the stock market is about investing and not gambling.

I, too, am a big believer in the future of the wind industry in this company and really like what I see in companies like Trinity Industries (NYSE: TRN), Thermadyne Holdings (NASDAQ: THMD), and Miscor Group, Ltd. (OTCBB: MIGL). I have positions in the latter two. I was hoping for more of a chance to continue to build my position in MIGL in the $10 range, but the word is somewhat getting out on MIGL in the short-term.

Here is my problem and somewhat has to say it. Cramer was absolutely nuts mentioning BWEN in the light that he did. In the bits I listened to him regarding BWEN, he is clearly misinforming viewers. I personally am one to conduct my due diligence and not just jump in on a stock based on a hot tip, but unfortunately, I have learned that most of the retail investing community that watches Cramer is not. A mere mention of a stock in a positive light by the Mad Money author can send the stock soaring. Cramer should know this and while I am fine with his position as an entertainer, some things should be pointed out.

Again, I do agree that the future of wind energy is big. I am no expert or industry ace, but I have been studying this aspect of alternative energy for the past 2-3 years. In fact, I have been so keen on it and learning about it that I missed the huge run up in solar stocks because I have come to understand that solar is far less cost-effective and viable than wind energy.

Here are my concerns with Cramer's obsession with BWEN. These are not necessarily deal breakers, but none are being discussed and I fear retail investors are simply buying in on the dream of quick riches. In making an informed, long-term investing decision, the latter should be considered.

  1. I have nothing against the OTC BB or even the Pink Sheets. There are some very reputable companies on both venues and it seems likely that BWEN will make it to the NASDAQ sooner than we think. However, OTC BB stocks are not widely followed and often thinly traded, which makes them subject to some serious volatility. BWEN is no exception to this. A huge influx of retail investor buying can really make some movement happen. The Cramer mention is not that different than those mailers you receive on OTC BB companies. For all intensive purposes, this mention of BWEN is really no different.
  2. $1 Billion Company? Cramer continues to reference BWEN as a $1 billion company. As of today, May 21, BWEN boasts a market cap of $2.3B ($25/share with 90M shares outstanding). If you read the SEC filings, you will see that the fully diluted number of shares outstanding, after warrant exercises, can easily see this stock with 100M shares. Additional acquisitions or equity financing are also not out of the question. BWEN's market cap is far greater than $1 billion.
  3. 1Q 2008 Results Did anyone bother to read the company's 10-Q for first quarter of 2008? At first glance, it looks great. Revenue swelled to $36M from $2.2M a year ago. However, $29M of this revenue is from the acquisitions, particularly Brad Foote. Of this $36M, only $6.6M came from the manufacture of wind towers. Yes, this is 200% more wind tower revenue from the same period last year, which is impressive, but it's not the whole story. Note also that Brad Foote makes products for many industries, not just the wind industry. Yes, revenue is revenue, but how much of the $35M is really wind energy related. It is even likely that some of the $6.6M of fabrication revenue is not associated with the wind energy arena. Additionally, a closer look shows gross margin in the fabrication division declined by 9% and net income rose only 10% although revenue grew 200%. For a comparison, take TRN that saw $84M of wind tower revenue in 1Q 2008 vs. $48M in 1Q 2007. TRN also has a $1.6B backlog in this division and a $3.2B market cap.
  4. Wind Energy Pure Play? Yes, BWEN is positioning itself nicely to be the comprehensive wind energy company offering fabrication, installation, service, parts, and transportation. However, is BWEN a wind energy company or a manufacturer, electrical contractor, and trucking company? For instance, BWEN acquired Badger Transport, which is a trucking company that is capable of transporting large items, such as wind towers. It is unclear how much, if any, of Badger's historical revenues have been from the transport of wind towers. BWEN is certainly putting the pieces together nicely, there is no question, but these observations escaped mention from Cramer.

Please do not get me wrong. BWEN is well positioned and will benefit from this growing industry. BWEN has the financial support needed to grow. BWEN's second quarter numbers might be astonishing in terms of wind energy related revenue growth, but we do not know those yet. For those holding, I hope BWEN goes to $50 or $100 or even higher. I simply found it irresponsible for BWEN to be mentioned as haphazardly and whimsically as Cramer continues to do so over and over again. He should know better, but then again, he is just an entertainer and I'm watching and talking about it, so I suppose he wins anyway you slice it.

Disclosure: Long

Related Articles

This article has 30 comments:

  •  
    May 22 08:29 AM
    I agree 100%. I was think Herb G would come out and say this, glad you did. The best play on the otc bb is CPTC. It is at $1.10, it has a $250M market cap. They make the DeWind Wind Turbine. They have actual sales of $15-$20M a quarter, but the best thing is, if you read the 10Q, they are working on two monster wind deals, that could involve hundreds of wind turbines in sales to Texas and Brazil, with revenues that would be $1 Billion. That one looks like the next GE. Plus they have $40M in backing from CS. CPTC.OB is the best pure play wind stock. They also sell the best high performance wire to connect the wind tower to the grid. Everyone should check out CPTC instead of BWEN.

    Good Luck to All
    Reply | Link to Comment
  •  
    May 22 08:33 AM
    A much needed reality check. Cramer and other financial critics will rail against bubbles, while simultaneously creating them with their sideshow barking. I also hope the stock goes to $100/share, because I don't hold any and would love to short it at that level (see CROX).
    Reply | Link to Comment
  •  
    May 22 09:41 AM
    I agree with Rdurant on CPTC. I own it. I have e-mailed Cramer on this Co. but have no notice from him.
    Reply | Link to Comment
  •  
    May 22 10:54 AM
    I do not believe Cramer was wrong. Broadwind has deals with GE, and Gamesa Wind would go to BWEN to make their windmills when they can go to anyone in the world. THey have long term contracts with GE and Warren Buffett and T. Boone Pickens go to GE when they need windmills who then go to BWEN. I've seen this many times on CNBC when all these Wonder boys of the market go on television to say sell the stock and they were buying it because they wanted it to go down. Or they were shorting the stock. I'm sure everyone remembers the scandal of CNBC and all the liars who drove stocks up and down but had opposite positions. Is Terrence buying more on the way down or shorting it. He says BWEN will be listed on the NASDAQ. That is major folks, the stock will soar. Yes they bought a transport company because it's difficult to transport windmills, they are large and they want to cost contain, and they just doubled their manufacturing space in Manitowoc Wisconsin ... they have windmills to build. Cramer was right on all his energy plays, let's see FWLT, up over 100 pts, NOV, RIG, APC, CHK, XTO, SU APA, TRN WGOV .... He said it was a spec play, but I'll go with Cramer who must be worth over 100 Million and seems to know his stuff.
    Reply | Link to Comment
  •  
    May 22 10:57 AM
    Cramericans know that you buy at your own risk. Cramer only suggests stocks that he believes in. I don't buy everything he recommends....that would be foolish. He always tells his viewers to do their homework on any stocks they're thinking of buying. If they don't, then they only have themselves to blame if their stock tanks.

    I know Cramer makes mistakes, but I can't criticize someone who has made me more money than I thought possible in the stock market.
    Reply | Link to Comment
  •  
    May 22 11:08 AM
    BWEN has been unreal I have a scan here of all Wind Energy stocks

    www.investorslive.com/.../ or here www.investorslive.com/.../
    Reply | Link to Comment
  •  
    May 22 11:26 AM
    As author, I will respond. I do not use the writing outlets to try to manipulate the stock and I fully disclose my positions.

    I thought I was clear that BWEN is in a great position to make some money and fair exceptionally well in the coming years. I know Cramer says to do homework, but most do not listen to that, just his picks. When Cramer says that but then just rattles off a company (which is part of his entertainment value that makes him successful), it was like Charles Barkley saying "I am not a role model." By the virtue of where Cramer is at, he has reached that deity status to some extent.

    I took most of my position off of the table b/c I had a 12-bagger in 2 years; that does not happen often, and yes, Cramer's mention helped it get there. I just had a concern with how Cramer continues to whimsically mention this stock and how some points could have been better clarified about exactly where this company is at today, especially when compared to its competitors. I like what they are doing; I like where they are at. I just saw some glaring omissions from the cheerleading act of Cramer.

    There are many options/outlets for manufacturing wind towers, such as TRN (which is 12x bigger than BWEN today in terms of real manufacturing output and revenue) - not just BWEN - so the landscape will be competitive.

    Market Maven, Cramer is wrong just as often as he is right; everyone has examples.

    Emily, give yourself Kudos for making money - not Cramer. He gave you an idea; you obviously did your homework on the ones you chose and your intelligence is what closed out the win, not the idea.
    Reply | Link to Comment
  •  
    May 22 12:08 PM
    Way to go Terrence!! Thank God someone finally threw Cramer under the bus! He may not be able to own stocks outside of his charitable trust but he sure got a big fat raise a few months ago.... Believe me America, Cramer benefits from his big mouth. As a fellow wind investor, I wish Cramer would get off the bandwagon. Wind is the next big thing... the Dutch have known this for how long??? Wind is free, there is a growing infrastructure, and increasing investments from, of all people, OIL MEN!!!!!
    Reply | Link to Comment
  •  
    May 22 12:21 PM
    Dude - for your #2 above, clearly Cramer was talking about $1B in sales, not market cap.

    I echo Emily above - Cramer always warns viewers to do their homework and not jump right in on his views! He often says "wait 5 days" and also warns against thinly traded stocks (saying you're an idiot if you go in after hours and/or non-limit orders). He couldn't be more clear on all those point (if you watch him with any frequency).
    Reply | Link to Comment
  •  
    May 22 01:44 PM
    Windpro- You are in the wind industry and have not heard of DeWind?
    Reply | Link to Comment
  •  
    May 22 01:54 PM
    I bet windpro is not really a windpro after all...
    Cramer is that you pumping and dumping???
    Reply | Link to Comment
  •  
    May 22 02:03 PM
    Hey bfoley - read the 1Q from BWEN just filed last week. They do not have anywhere near $1B in sales - not even close. $36M sales for 1Q with 80% of those sales showing up only because they acquired EMS and Brad Foote. They mighy get to $1B in sales someday, but it is not today.
    Reply | Link to Comment
  •  
    May 22 02:08 PM
    Yes, agreed, also that Cramer will say wait 5 days, but mentions nothing of the sort in his BWEN bits.
    Reply | Link to Comment
  •  
    May 22 03:36 PM
    Windpro- They have a 50 Hz.model up in Germany for 18 months. The new design uses a windrive unit manufactured by Voith of Germany.
    Look at them. Do a little more research on DeWind (CPTC).

    www.voithturbo.com/ind...
    Reply | Link to Comment
  •  
    May 22 03:44 PM
    Windpro-The warranty is up to 5 yrs. with an extened warrany.

    biz.yahoo.com/iw/08042...

    Reply | Link to Comment
  •  
    May 22 04:16 PM
    Terence Channon- Do you have an opinion on CPTC?
    Reply | Link to Comment
  •  
    May 22 09:37 PM
    If you only knew what misery these wind farms have brought to those of us who have to live near them. They make noise that keeps us awake. They've torn apart our communities. You don't care. It's all money to you. This is green the way the face of the Wicked Witch is green. Solar spares people's well being. Wind turbines 40 stories tall are not green, not efficient, not good. But who cares, right? Money Money Money
    Reply | Link to Comment
  •  
    May 23 12:48 AM
    There is a lot of speculation in this name, in renewable energy as a whole. If you think for 1 second the current valuation of BWEN is directly related to it's trailing sales, you're kidding yourself. 10-Q, 10 shmoo. You can only do so much homework. Speculation, momentum, these are the terms used when you decide to go "long" renewable energy, at least at this point.

    Political speculation is also playing a huge role. If the Democrats take control, BWEN will quickly grow into it's valuation, and then some. At that point you could see $100 BWEN. If McCain gets in ........BWEN might go back to being a penny stock.

    You guys like to quote Jim Cramer, he said just recently, "if you're not a Speculator, you're probably not a good investor".

    This is all about risk tolerance.

    Speculation, Speculation, Speculation.

    For the record I'm Long of BWEN.
    Reply | Link to Comment
  •  
    May 23 07:13 AM
    Wind may be an efficient energy play, but those turbines are the butt ugliest blemish you can put on a landscape. If they want to put one around me, I'll fight it tooth and nail. I see them going up in economically depressed areas, where people will do anything for a dime. I'll bet most move as soon as they can afford to. They are an eyesore beyond belief!
    Reply | Link to Comment
  •  
    May 23 09:03 AM
    Cramers gust's of wind eminate from both ends, lets hope they don't finish with a big lump in the end. The speculators watching TV and putting their money to work with all the enthusiasm of game show contestants surely deserve better. Door #3 anyone?
    Reply | Link to Comment
  •  
    May 23 07:55 PM
    I think that there are many ways that you can look at the stock's value. I prefer EARNINGS growth !! Yes margin deterioration can be an issue but if it is more than OFFSET with sales growth, the net result is increased EARNINGS growth - the money in the pocket. This is ECONOMICS 101 and is not uncommon in a growing industry. That is why companies often give volume discounts to key customers so they net more EARNINGS at the expense of less margin. As far as tchannon is concerned, his comments may have contributed to damage to other investors.
    Reply | Link to Comment
  •  
    May 23 08:06 PM
    ZOLT.... what do you folks feel about this pure play ???
    Reply | Link to Comment
  •  
    May 23 08:57 PM
    Before everyone goes haywire with ridiculous valuations, you need to pull a Buffet.. what do these companies fundamentally offer the market. Are they particularly clever manufacturers... system integrators... do they have patents.. a powerful brand name.
    The answer is mostly.. none of the above. I have toured some "Wind" factories. It is basic metal fab, purchased turbines and structural steel. Nothing that would suggest a sustainable competitive advantage and nothing that could not be done better by long-established manufacturing operations.
    I am waiting for a company with a sustainable dominating strategy to sell.. ridiculous valuations will get "popped" very quickly once wind power becomes a profitable market to enter.
    In the mean time.. they strike me as more "internet" bubble stories with ridiculous valuations.
    Reply | Link to Comment
  •  
    May 23 11:58 PM
    Vestas, GE, Siemens. FPL energy, the largest provider of wind generated electricity in the US, 7500 turbines, uses turbines from GE, Siemens and Vestas, NEG Micon, Mistubishi, Kenetech, and a few others. But the top 3 have a proven track record.

    Is the DeWind turbine special? Someone has mentioned it doesn't need expensive, patented, power conversion gear the GE turbines have.

    How and where does DeWind plan on cashing in? Internationally? Any thoughts Windpro?
    Reply | Link to Comment
  •  
    May 25 09:27 AM
    Sounds like the author of this article is a young jealous kid that is really upset because Cramer tells it like it is.
    Reply | Link to Comment
  •  
    May 26 01:47 AM
    To All: Wind generators slaughter birds by the thousands, especially raptors for some reason. How "green" is that? This is murder on the wholesale level. A bird in the hand, one small bird, is worth a thousand wind generators.
    Reply | Link to Comment
  •  
    May 27 09:33 AM
    Jake2- More birds are killed by the AUTO. Stop driving your car and walk. A bird in the hand, one small bird, is worth a thousand CARS.
    Reply | Link to Comment
  •  
    Jun 01 11:14 AM
    Congress is studying the feasibility of wind towers off the northeast coast providing all electricity needs of the East coast. This will happen in the next 15-20 years. There are many players in the mix providing academic opinions, cost projections, etc. Wind energy is not a speculative play but a certanity. There will be a wind farm off the Martha Vinyard's area in the Atlantic soon. Leasing issues are being resolved now! Will BWEN be one of the primary plalyers simply depends on its ability to capitalize its capabilities. It has a shot but is a speculative play but wind is not. This article is on target. Cramer's recommendations are dart shots in the dark as the major companies remain undetermined but there is a race to wind alternative and BWEN is in the race! Good Luck to all especially the human race!
    Reply | Link to Comment
  •  
    Jun 02 01:05 PM
    It is my understanding that GE and Gamesa already have contracts with Broadwind Energy. Could you list the direct competitors to Broadwind Energy? With on-going substantial investment in German precision gear-making machinery and continued expansion at several manufacturing sites I am trying to assess who else is competitive with Broadwind who is also expanding a manufacturing capability. There is probably economies of scale in terms of volume and I suspect that fewer and fewer companies will have the cost advantage that Broadwind is building. I have read that their manufacturing process "can be done by just about any gear manufacturer". If this is so then how come we do not see the presence of major competition? John Deere and Cat probably have this kind of expertise but it is my understanding that both of these firms are at capacity with their core business. Comments?


    Reply | Link to Comment
  •  
    Jun 12 11:51 AM
    User 155438 - I would welcome a private communication on your questions. My firm has interests in this arena. Perhaps the information we have would be helpful. I'll check this blog for a response. If you respond positively, I'll setup a one-time email address and reply to the blog with it. Unless you have a better method for establishing direct contact.
    Reply | Link to Comment
More Comments on BWEN.OB »
Top Rated Comment Streams:

Numbers are net rating-

See all Top 100 »
More by Terence Channon