4 Ways to Tap Into Wind Power

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4 Ways to Tap Into Wind Power

Why the big decline in turbine orders? The federal Production Tax Credit is set to expire at the end of 2012, so developers of wind farms have fast-tracked projects to take advantage of the tax credit. CEO Jeff Immelt doesn’t expect the tax credit to be renewed.

For this reason, being part of a bigger entity that can cushion the blow of a weakened industry in the U.S. is a smart way to play the wind game. Eventually, the market will rebound.

Trinity Industries

Lastly, I’m going to suggest Trinity Industries (NYSE:TRN), a company that manufactures railcars, barges, highway guardrails and many other products.

I first recommended Trinity in a September article about conglomerates. Trinity is a leading manufacturer of wind towers in the U.S. Its wind tower revenues for the first nine months of 2012 were $189.5 million, approximately 8% of its overall manufacturing revenues. It’s a tiny piece of the pie, I’ll grant you, but it’s part of a very strong business — the value of that shouldn’t be discounted.

As I indicated in the previous discussion about GE, the wind turbine business is a tricky one. While Trinity has a wind tower backlog of $754 million, $413 million of which is currently under litigation with a customer that breached a long-term supply contract. As a result, the near-term outlook for this slice of its business continues to be very downbeat.

No worries. Trinity’s overall business in the first nine months of the year did a standup job, with revenues up 38% to $2.9 billion, and with an operating profit of $419.2 million, itself an increase of 46%. This is one beauty of a company.

PowerShares’ Global Wind Energy Portfolio

I’ll leave you with a fourth option: PowerShares’ Global Wind Energy Portfolio (NYSE:PWND).

PWND is a global portfolio of 28 wind-related companies, and — wouldn’t you know it — GE and NextEra Energy are among its holdings. The fund has been trading for more than four years now, and its performance has … well, it’s been awful, off 75% since inception, for a not-exactly-cheap 0.75% in expenses.

However, if you believe in the idea of reversion to the mean, PWND is about ready to blast off.

On the off chance you do go this route, make it a small part of your portfolio. Reversion to the mean is common, but not a certainty.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2012/12/4-ways-to-tap-into-wind-power/.

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