Adrian “Ad” Rawcliffe, CEO, Adaptimmune (ADAP)
Word count: 2,971
TWST: Let’s start with an overview of the company, its history and how it has evolved over the years.
Mr. Rawcliffe: Sure. So Adaptimmune is an integrated cell therapy company. We’re focused with a platform derived from affinity enhanced T-cells and we’re targeting solid tumors. And that’s different. We also have a pipeline of clinical products with a first BLA — Biologics License Application — to be submitted this year for a rare tumor type called synovial sarcoma. We presented data at ASCO this year on that. And we think that will be the first transformative medicine for patients with metastatic synovial sarcoma for several decades, actually.
Behind that we have a pipeline of affinity enhanced T-cells, the most advanced of which other than the one that’s being submitted for the BLA, is across a range of tumor types in a family of trials called SURPASS. And it targets a target that’s present on head and neck, bladder cancer, lung cancer, gastroesophageal cancers. And we’re in mid-stage trials in those indications with the intention to take future products towards the market in due course, and we’re presenting data from the Phase 1 SURPASS trial at ESMO this year. So we are an integrated cell therapy company, submitting a BLA this year, broad platform coming, broad pipeline coming behind that.
And in terms of how we’ve evolved? I think we’ve evolved consistent with the space and our leadership position in it. We, as a company — we’ve been a company for 14 years. So we’re long standing in the cell therapy space. And we’ve seen that space evolve from science projects to real products on the market. And the next frontier, the holy grail for cell therapy is the ability to get cell therapy to work in solid tumors. And that’s where we’ve been focusing all our energy. And we are absolutely at the leading edge of that with the first engineered T-cell therapy in a solid tumor space, with a BLA submission this year.
TWST: I know you have different terminologies here, so I just want to make sure. Is that a part of SPEAR or is that something separate?
Mr. Rawcliffe: So a SPEAR describes the underlying technology platform. It stands for Specific Enhanced Activity Receptor. So it describes the fact that we engineer the T-cell receptors on T-cells to be able to recognize cancer, specific targets on cancer with enhanced affinity. And that overcomes the main thing that happens with your immune system and cancer, which is your immune system just can’t recognize cancer with enough specificity to go ahead and kill it.
And so we engineer the T-cell receptor, which is the business end of the T-cell. It’s the thing that T-cell uses to recognize what it wants to kill. And we engineer that so it can see cancer targets. And then when it does, the T-cell does its job; it kills those targets, and it brings in the rest of the immune system as well to attack that cancer. So the way to think about these cells is like they’re the stormtroopers kicking in the door; if these cells can attack cancer cells, then the rest of the immune system piles in behind to eradicate the tumor.
TWST: And where are you in terms of clinical trials?
Mr. Rawcliffe: So our lead product, or afami-cel, for synovial sarcoma has completed the hypothesis testing cohort for its pivotal trial. We announced that the trial was positive last year with a clear separation between the responses that we see, the response rate that we see and historical controls. And we have RMAT designation with the agency — that’s Regenerative Medicine Advanced Therapy designation — that gives us access to talk to the agency — the FDA — about the program and we’ve talked to the FDA about the pivotal SPEARHEAD-1 trial, and its design and that will be the basis of the BLA that we will submit this year. So that’s the most advanced program.
Then behind that, the next-generation T-cell, with the same target as afami-cel, but with enhanced potency is in Phase I and Phase II trials. The Phase I basket trial we call SURPASS, which is across a broad range of tumors — that’s really a signal-finding study in late-stage patients to try to see where we see responses. And that’s the data that we are putting out at ESMO later this year. And then as we see responses in particular tumor types — we’ve seen responses in head and neck, bladder, and gastroesophageal and ovarian cancers so far.
Based on data in gastroesophageal and ovarian cancers, we initiated a Phase II trial last year in gastroesophageal cancers and plan to initiate another Phase II trial this year in ovarian cancer. And subject to the data, we aim to put those on a path to registration and ultimately becoming a commercial product.
TWST: Is there anything else you have in the pipeline that you’re expecting to be able to present soon?
Mr. Rawcliffe: Yes, so the other very exciting thing that we’ve got is that all of the stuff that I’ve been talking about before and all of our clinical pipeline is what’s known as autologous cell therapy. An autologous cell therapy basically means they’re your cells, and we take them out from each individual patient, we engineer them for our enhanced T-cell receptor, our SPEAR T-cell receptor in there, and we send them back to you. And so it’s a personalized treatment for you, with our engineered T-cell receptor. And that as a process takes time. And it’s obviously patient specific and what we have been working on for six years now.
There are a number of other companies in the space all trying to get a universal cell, donor cell that could go into any patient. That’s very difficult to do. And that’s called allogeneic. So you’ll hear the autologous platforms and allogeneic platforms, and we have both. Our allogeneic platform is in the research phase, is yet to go into the clinic. We plan on filing an IND for that next year. But that’s super exciting for us and for the field.
And if successful, that has the opportunity to have an off-the-shelf cell therapy. So rather than having to go through this complex manufacturing process, which although well-established now and we were good at it, as are the other cell therapy companies in the autologous space, it does take time and it is costly. You would have an off-the-shelf product available immediately for a patient when they received the diagnosis and wanted a cell therapy treatment. And that’s to say our first IND for that will be filed next year.
TWST: I was curious, how did the pandemic impact your research, your work? And where are you now in that process?
Mr. Rawcliffe: I think the interesting thing about the pandemic was, and this is true not just for us and for other biotech companies, I think it was true for the majority of society, is the realization of just how much you can do completely remotely. And at the same time, after a period of time, we’ve found that there were some very important things that it was difficult to do entirely remotely, that some level of face-to-face contact was necessary.
So from a sort of operations of the company perspective we were actually quite successful through the pandemic. We were able to very effectively take everybody remote and then bring them back, and actually our style — our approach to work remotely or in the office — has changed and alongside many others we’re implementing a hybrid model based on specific roles. So I think that is a significant change brought about by the pandemic, that increased flexibility.
The other thing for us, obviously, is clinical trial recruitment. And as well as the operations of Adaptimmune, you’ve got the operations of the hospitals that were also hit, not just in terms of their processes in place to combat COVID in their workplace, which I think puts additional constraints on patients seeking help, but also the fact that many of the hospitals were overrun at certain points in time with large numbers of COVID cases and prioritized those and obviously didn’t prioritize even late-stage cancer patients. And so, there was a definite period of time where recruitment slowed.
I think one of the advantages that we’ve had is that we are running our trials both in North America — U.S., Canada — and in Europe. And actually, when you chart the waves of COVID backwards and forwards, it was rare that all those locations were shut down at the same time. So by and large, we were able to continue to recruit the trials, but there were definite effects on — for example, MD Anderson Cancer Center in Texas was one of our major recruitment sites and went through phases of having very strict COVID responses and a lot of cases, and so on a site-by-site basis, that was significant.
I think, overall, we’ve come through that, I think, quite strongly. I think that’s true of the sector, as well as not just of Adaptimmune. I mean, it’s notable that during the pandemic we recruited our pivotal trial almost entirely during the pandemic. That went fine. We raised a quarter of a billion dollars on the basis of ASCO data that we put out in 2020. And we did that entirely virtually. And we executed a very large deal with Roche Genentech, which we signed at the tail end of last year, so late 2021, but most of that was negotiated through the pandemic, through various waves of the pandemic. So I think we’ve managed to come through it stronger on the other side, although COVID clearly had a significant impact.
TWST: Can you talk about the deal with Genentech and why it’s important?
Mr. Rawcliffe: So I referred earlier to an allogeneic platform. And this is a genuine platform. So whilst we can use it to develop our products, and the first product we will put into the clinic is targeting MAGE-A4 and is wholly owned, which is the same target as afami-cel, but this will obviously be an off-the-shelf version. The applicability of that platform is much broader. And so we’ve had a strategy for some time to make that platform available to partners and to leverage and monetize that platform to some extent, so that they can pursue their own programs and targets of interest on an allogeneic stem cell derived allogeneic platform, which is what our platform is.
And so in 2020, we did a deal with Astellas that enabled them to have a number of targets that we’d work on closely and move through. And then last year, we did a much larger deal with Roche Genentech. They paid us $150 million upfront and they will pay us another $150 million over the five years subsequent to the signing of that. And there’s development milestones downstream, and I forget the exact biobucks number we put out there, but it was — I think it was $3 billion of biobucks associated with the program. But more importantly it’s real validation by an acknowledged scientific leader in the space, Roche Genentech, that Adaptimmune platform can be the basis of a long-term set of products.
And Genentech’s interest is very long term. The deal has two parts to it — one part of which is a very long-term approach to a personalized off-the-shelf therapy that we’re working with our partner Genentech. So it’s super exciting, super validating, and part of the strategy to leverage that platform because it has potential way beyond what we could possibly hope to do with it.
TWST: I was wondering, what are your priorities for the next 12 months to 24 months? And what would make that timeframe a success?
Mr. Rawcliffe: We have four very clear priorities. And particularly in this biotech market, it’s really critical that we’re focused on those. So number one, we are submitting our BLA for afami-cel. That is a gargantuan task. There have only been five successfully filed cell therapy products in history. And so we plan on being the sixth or possibly the seventh. And so there isn’t a roadmap, there’s a lot of stuff that we’re working through with the FDA as we go and we plan on submitting the BLA this year. And subject to regulatory review, that product will then be available commercially in late 2024. So that’s a key priority. And so the BLA itself and standing up a small focused targeted effort to commercialize afami-cel for patients with synovial sarcoma.
Secondly, the SURPASS family of trials. This is the opportunity to make cell therapy mainstream in the solid tumor space because the SURPASS product has shown activity across a broad range of tumors, and prosecuting those trials into late-stage development and towards the market is going to be key to demonstrate the value of our platforms.
Thirdly, is the allogeneic platform that I referred to. Focusing on that and delivery of the IND for MAGE-A4 and progression of the partnerships with Genentech and with Astellas.
And then lastly, we have believed for the longest time that to be successful in cell therapy, you have to own your manufacturing. There’s a whole set of rationale about why that’s particularly important in autologous cell therapy versus in monoclonal antibodies or other therapy types. And we’ve invested significantly in that over the years, and it’s really paid off. The capabilities we have to be able to manufacture ourselves, I think puts us in a very strong position, both when it comes to executing on clinical trials and as we move forward to commercialize that product out of the same facility where we did the clinical trials, actually.
And so, investment in that so that we can supply both the commercial demand for afami-cel in synovial sarcoma, and the late-stage clinical trial demand — that investment in the CMC space is a fourth priority for us.
So, what does success look like? We will be one of the very, very few biotech companies that’s actually commercialized its own product that it discovered eight years ago in the clinics in Oxford and has developed all the way through clinical trials. And we will now be putting that on the market. Not only will we be one of that select group, which is a small group, but we will have done the first engineered T-cell therapy in a solid tumor as well, which is another major first. And we will have established the potential of cell therapy in solid tumors, and that will be a similar step to the one that, for example, Kite Gilead took when it established that you could do CAR T therapy for B cell malignancies for the lymphomas and leukemias. It will show that we have been able to do that for solid tumors, which I think is a huge step for the field.
TWST: I was wondering what are some of the challenges you face? What keeps you up at night?
Mr. Rawcliffe: So, this is a very complicated space. And as is true with all new modalities of therapy, new types of therapy, there’s no playbook for a lot of this. And so what we’ve had to do is build a team who all come with their own skill sets from different places, but who have integrated around getting cell therapies to market and that knowledge to be very different. So that, I suppose it’s unknown. If you’re not comfortable with ambiguity in this space then being the cell therapy CEO is not a good place to be. So I think you’ve got to be comfortable that we’re doing stuff that just hasn’t been done before.
I think there’s not that much that keeps me up at night. I think that historically there has been, and it was when we weren’t sure what the benefit for patients was from our therapies. But the reality is at the moment that everywhere we look in our trials, we see — most of our trials are not blinded – so I see patient data as it comes through, sometimes in semi real time. And so everywhere we’re looking at the moment, we are seeing the positive effects these cells are having on patients. And once you’re convinced of that, all the ambiguity is manageable. Because you can see that scan and that patient had a huge tumor at baseline, and it’s gone now. And so you can see that your cells are doing something.
And so, you know, the road may be unknown, it may or may not be navigated before with certainty. But I think if you believe that you’re doing something profound for patients there’s a hell of a lot of ambiguity you can deal with elsewhere.
TWST: What’s the most important thing a potential investor should know about the company?
Mr. Rawcliffe: Adaptimmune is the leader in engineered T-cell therapies in solid tumors. We’ve built a successful, integrated, completely dedicated and specific company to advance cell therapies. And that’s what’s going to make us successful, establishing these as a mainstream therapy in solid tumors. And the field is enormous. If you think that monoclonal antibodies are a big space, a big target market, a big economic potential, big upside, cell therapy will dwarf that in time. And Adaptimmune is right at the forefront of getting that access.
TWST: Was there anything you wanted to mention that we didn’t discuss?
Mr. Rawcliffe: I think the only thing that is what I just said about where we’re positioned relative to the field. I think that’s the take home for Adaptimmune at the moment. BLA this year, everything to play for.
TWST: Thank you. (CJ)
Adrian “Ad” Rawcliffe
CEO
Adaptimmune LLC
351 Rouse Boulevard
Philadelphia, PA 19112
(215) 825 9260
(215) 825 9459 — FAX
www.adaptimmune.com
email: usinfo@adaptimmune.com
Hartaj Singh, Managing Director and Senior Analyst at Oppenheimer and Company, recommends Gilead (GILD)
Hartaj Singh is Managing Director and Senior Analyst, Biotechnology at Oppenheimer & Co. and recommends Gilead (GILD) for investors looking for a biotech investment.
Earlier, Mr. Singh was Managing Director and Senior Biotechnology Analyst at BTIG Securities.
He began his sellside career at Lehman Brothers and subsequently moved to the buy side covering biotechnology at Visium Asset Management and Tecumseh Partners.
He began his career as a clinical trial project manager for ClinTrials Research and also worked as a strategic analysis manager for Johnson & Johnson (JNJ), both of which give him experience in clinical trial design.
Mr. Singh has a B.A. in biology from Case Western Reserve University and also did graduate work in computational neurobiology. He received an MBA from Duke University’s Fuqua School of Business.
For investors looking to get started in biotech, Hartaj Singh believes Gilead (GILD) is at an excellent entry point.
“Yes, we have a “buy” on Gilead (GILD).
And we have one of the highest price targets on it.
And it’s just human psychology that if things are not looking good in the outside world, you will generally tend to go to areas or stocks that are safer. So you’ll avoid higher-risk stocks.
And in that kind of an environment, the larger caps look very good. They don’t tend to be as volatile.
The large caps in biotech have already seen their valuations pretty depressed for a few years now, since valuations started declining during the back half of 2015. And since then, because of drug pricing concerns, and some other concerns, large-cap biotech has been undervalued.
So, it’s already cheap; it already looks cheap.
And in a recession, potentially, investors would go to names that seem to be safer. And then Gilead (GILD) screens especially well because it doesn’t have a lot of binary pipeline readouts.
It’s got good likely top- and bottom-line growth of about in the low- to mid-single-digits.
And then it’s got a 4% to 5% dividend yield.
Its dividend yield is probably the best in biopharma right now.
So if you’re looking for a safe haven, what in a very bullish economy would seem like a very boring stock that everybody would avoid, right now Gilead (GILD) may be kind of boring and it has a great dividend yield.
So we think actually Gilead (GILD) should perform better and better, especially if the environment seems to potentially indicate a recession going forward.”
Funding rates have affected startups rather than the Gilead (GILD) level biotechs.
“Biotech consumes a tremendous amount of cash.
There is a number that’s often thrown out, which has been published by various data sources, that it takes about $1 billion to get a drug to market, but that includes all the other drugs that failed.
And one out of every 13 drugs that gets into human beings for clinical trials actually makes it to market. So in biotech, the failure rates are tremendous.
But investors make the money off of the one drug that works, because essentially, it’s a moonshot or star-shot kind of project that more than makes up for all the other losers.
But that also gives an insight as to why biotech is so sensitive to the economic environment.
When cash is very constrained, meaning like in a recessionary environment, the incremental dollar from investors is more and more difficult to get.
And then, of course, sectors like biotech become very difficult to fund. And so, valuations start going down.
When a market is on an uptrend and people have more and more money to spend and can take riskier bets, then biotech is usually one of the first sectors to recover, because that’s when the risk-on mood is around to be invested.
However now, investors will probably gravitate towards projects and companies that have less risk. So there will be fewer preclinical projects, more clinical projects.
And more focus on diseases where there’s a higher understanding of molecular biology, which is called the disease pathology — the underlying way the disease works — and then also where there are validated targets.
And that usually is in oncology, immunology, genetics, and the genetic underpinning of various diseases that become much more interesting.
So you won’t necessarily see somebody going after, for example, ALS or Parkinson’s.
But you’ll see investors go after parts of Parkinson’s or Lou Gehrig’s disease that have an underlying genetic component, and that’s a really a smaller subset of the overall Parkinson’s disease population.
So those areas have become much more focused upon by investors.”
Hartaj Singh has a portfolio approach that includes stocks like Gilead (GILD) but also some riskier companies.
“Percentage-wise, if you’ve got $100 to invest, biotech probably should never be more than $10 — so 10% of your portfolio.
Then, out of that $10, invest about $4 to $5 in companies like Gilead (GILD) and Vertex that are bigger, smart beta; put about $4 to $5 in companies that are smaller and speculative.
Out of that four or five that are smaller and speculative, you probably want to put $2 to $4 in like United Therapeutics and Sarepta, and then $1 into companies where you’re looking for the home run, but which also might go to zero.
So you’re doing a mix of some smart beta with mid-cap companies like United Therapeutics or Sarepta that will give you some alpha and then, you just shade in a little bit of spice with that last dollar to get your home run.
And whether the markets are up or down, I would recommend that over and over again.”
Read the complete 2,892 word interview with Hartaj Singh is Managing Director and Senior Analyst, Biotechnology at Oppenheimer & Co., exclusively in the Wall Street Transcript.
Masakazu Takeda, CFA, CMA, Portfolio Manager for SPARX Asset Management
Mr. Takeda highlights his top portfolio picks Hitachi, Sony, Mitsubishi, Tokio Marine, and Keyence in this 2,332 word interview exclusively found in the Wall Street Transcript.
Masakazu Takeda, CFA, CMA, is a Portfolio Manager for SPARX Asset Management Co., Ltd., subadviser to the Hennessy Japan Fund, and he has managed the fund since 2006.
Prior to joining SPARX in 1999, Mr. Takeda was employed by the Long Term Credit Bank of Japan — currently Shinsei Bank — and LTCB Warburg, now UBS Securities.
Mr. Takeda received a B.S. in liberal arts from International Christian University, and he is a CFA charterholder and a chartered member of the Security Analysts Association of Japan.
“We strive to invest in high-quality Japanese companies with a global footprint.
Through our fund, the investor can get exposure not just to the Japanese economy, but also the global economy around the world, whether it’s Asia, Europe or the U.S.
They can get exposure to the global economy through high-quality management teams, high-quality companies with lots of liquidity, with big market caps and with better transparency in terms of accounting.
So I think the Hennessy Japan Fund is an interesting way to get exposure to the global economy over time.
And as I said, they are some of the most well-run companies in Japan with top market share in their respective fields.
We try to focus on just a few key ideas, only 25 to 30 names, and we run a low turnover strategy. We just look for great capital compounders and just let the businesses create wealth for the fund holders.”
Mr. Takeda considers Hitachi to be a valuable “growth stock”:
“Hitachi is one of the largest industrial manufacturing conglomerates and it’s over a century old.
They make everything from industrial equipment to heavy machinery, home appliances, consumer electronics, diagnostics, IT services, railway, social infrastructure, management services, etc.
Up until 2008, Hitachi was actually a badly run company.
After 2008, after the financial crisis, they got their act together and they went through a lot of restructuring.
It became an average-quality company. That was around the mid-2010s.
We just watched the company from the sidelines during that time.
Since around 2016, we noticed that the company was undergoing a transition from being just a pure manufacturing-centric business model to a more asset-light, consulting-based business model.
Now, Hitachi can not only sell hardware to industrial customers, but also sell software services, maintenance, aftersales, operational outsourcing, monitoring services, and so on.
So they can sell this as a package. In a nutshell, Hitachi is now turning into a more software-based, asset-light scalable company.
Despite their core operational history up until 2008, the stock is only trading at 10 times p/e. But we expect the company to grow at 10%-plus for the next three to five years.
So that’s what I mean by “growth in disguise.”
Because of the misperception by the market, even though their expected growth rate is in the low-teens, the stock is trading like a value stock and its return on equity is already 15% after years of restructuring.
We like the quality of the company as it stands today.”
Mr. Takeda considers Mitsubishi to be a similar investment option as Hitachi.
“Mitsubishi Corporation (OTCMKTS:MSBHF) is actually classified under the wholesale sector.
The essence of the business is actually an investment business.
So, Mitsubishi Corporation, they use their own balance sheet to invest in various operating assets around the world, as well as investment securities around the world.
So their balance sheet — it’s a collection of unique assets.
The way to value the business, you should look at the growth rate or per-share net asset value.
And over the last five, 10 and 15 years, they’ve been consistently growing their per-share net asset value.
We look at per-share book value as a proxy for net asset value at high single digit to 10%. And so, we think Mitsubishi Corporation is a growth company.
Yet, the stock is trading at a high-single-digit multiple and just barely one time book with a dividend yield of 4%.
I think the misperception comes from the fact that the bulk of the revenue is generated in commodity businesses — coking coal business, as well as oil and hard commodities.
So the stock is valued just like any oil company out there.
But the fact of the matter is Mitsubishi Corporation is an investment company.
So there are multiple revenue sources and we like its long-term growth track record. And again, moving forward, they have ample investment opportunities globally.
The reason why Mitsubishi Corporation is so unique is because in the old days, post-World War II, the economic recovery period, trading companies played a key role by assisting Japanese companies in import and export operations.
It used to be a commission-based business.
However, around the 1980s and 1990s, a lot of Japanese companies started to build up their export channel.
Companies like Mitsubishi shifted their business model to more of an investment type of business.
That’s how they shifted over the years. We like their investment capabilities.
It’s a business, too, owned by Berkshire Hathaway (NYSE:BRK.A).
Warren Buffett invested in this company in 2019 and 2020.
We’ve been invested in this a lot longer than Berkshire Hathaway.”
The portfolio manager likes his current stock positions:
“Right now, obviously, the market conditions are very challenging.
But given the concentrated nature of our portfolio, our active share is well over 80%.
So, from time to time, our fund behaves very differently from the market, which we cherish.
Our goal is to outperform the index and also produce absolute returns on a mid- to long-term basis at a minimum three to five years on a rolling basis, if not longer.
And based on that, we like our portfolio today.
There are a lot of companies with manufacturing excellence, as well as businesses with strengthening intangible assets, businesses that are trading at value stock-like multiples.
Growth prospects are just as bright as pure growth businesses and the underlying companies in our portfolio, they are very different from each other.
So we consider our portfolio concentrated and diversified, and with that I think we can over time comfortably outperform the index.
Now is a time to be patient.
But for anyone interested in investing in the fund, I think the valuation of the portfolio is becoming increasingly attractive.”
Get more detail on his top picks of Hitachi and Mitsubishi, as well as the reasoning behind the Sony, Tokio Marine and Keyence picks, only in the Wall Street Transcript.
Masa Takeda, Portfolio Manager, SPARX Asset Management Co., Ltd.
www.hennessyfunds.com
Bobby Edgerton, Co-Founder of the Capital Investment Companies, Believes Walmart (WMT) and the New York Times are Undervalued
Bobby Edgerton believes that Walmart (WMT), the retailing giant, is undervalued because its real estate is carried below actual value. He also believes that the New York Times (NYT) is undervalued, also because the real estate is carried at low values.
Bobby Edgerton is a Co-Founder of the Capital Investment Companies and has served as an executive officer of the companies since 1984.
He is also the firm’s Chief Investment Officer and has been in the financial services industry since 1979.
After winning the North Carolina State High School Golf Championship, Mr. Edgerton accepted both a basketball and golf scholarship from Wake Forest University and graduated with a B.A. in business and finance.
After graduation, he attained a rank of First Lieutenant in the U.S. Army Signal Corps, where he commanded a thousand-man training company at Fort Gordon, Georgia, during the Vietnam War.
During his amateur golf career, Mr. Edgerton played in four United States Amateur Championships.
“If you want to be a really good investor, you need a good philosophy and you need to realize that every company, big or small, has two values.
Number one is precisely to the penny what the stock market values the company at. Walmart (NYSE:WMT) is being valued right now at about $380 billion.
The land and buildings at cost are on the books at $120 billion.
Now, they’ve been buying land and buildings for about 45, 50 years.
So you can imagine what that real estate’s worth now, if you mark it up to some realistic value.
I’d say their real estate is worth at least two thirds of what Wall Street is valuing the whole company at.
What if they securitized that real estate one of these days, formed a REIT, put the real estate in the REIT?
Then Walmart would probably have more cash than Apple. And Walmart is down right now.
And that is insane to sell Walmart now when they’ll cash flow about $40 billion this year.
So depending on whether you use EBITDA or cash flow, or free cash flow, that’s between $30 billion and $40 billion. The stock is clearly undervalued.
So great investors, number one, they buy stocks that have been sold off that are worth more than they’re selling for in the stock market.
And if you do that, you need to know your competence.
You need to have an encyclopedic knowledge of the world’s best companies.
Most people don’t know who Lamb Weston (NYSE:LW) is.
Lamb Weston is a potato company — they sell McDonald’s (NYSE:MCD) about 400 million pounds of french fries a year.
Dentsply Sirona (NASDAQ:XRAY) is the king of dentistry. They service about 600,000 dental physicians worldwide.
How can you be a great investor if you don’t know who these companies are? And the best way to learn that is to read Value Line, a great publication.
If you take the time to go through those 2,000 companies and you know more about more different companies than anybody, you’ve got a great chance of making money.
I have a five-point program.
Number one, when you buy companies, you make sure they’re down and out of favor, but they have a lot of cash and not much debt.
Number two, you reinvest your dividends; you don’t spend your dividends.
Number three, you’re a good saver over time, and you spend your life buying as many good companies as you can.
Number four is taxes. If you make your gains long term gains, instead of being a trader, you’re going to pay a lot less tax.
And the fifth point is that the two ways you make money in the stock market are, number one, you buy good companies and you never sell them — you just let them grow over the years.
For example, you hold Lowe’s for 20, 30 years, you hold UPS and FedEx for 20 or 30 years, Disney, and on and on.
The second way you make money is when you own a stock and it goes from out of favor to in favor — if you sell the good stock that’s up, you can buy two or three good companies that are down.
Every good company has some downtimes, just like sports.
And I tell my clients, especially the ones that come in for the first time, “You’re not buying the stock, you’re investing in the company. So if you buy the stock and you buy and sell it daily, you’re really not investing in the company.
But if you buy Coca Cola when nobody wants it in a down market, or a stock like Disney, which is down right now — buying and selling stock is a lot different than investing in the company for the long haul.”
Aside from Walmart (WMT), Bobby Edgerton also likes the real estate value hidden in the New York Times (NYT) company:
“And maybe my number-two buy is The New York Times (NYSE:NYT).
The New York Times fell on kind of hard times back in 2012.
They had a CEO who borrowed a lot of money, bought The Boston Globe, and bought part of the Boston Red Sox.
They also sold part of The New York Times building.
Then they hired Mark Thompson. He had never run a company before, he was the head of the BBC.
He solidified the company, paid off every penny of debt, got the cash up, and no debt.
Once he got the job done, he then retired.
And in walks Meredith Kopit Levien who began reading The New York Times when she was in high school in Richmond.
She went to UVA and became a star at The Cavalier Daily.
She also shined at a famous consultancy run by David Bradley up in D.C. And she was also a star at Forbes, getting Forbes out of so much print and into more online digital subscriptions.
So The New York Times brought her in.
And now she’s the CEO there.
And personally, I would vote for her for president if she could run.
So The New York Times is now valued at about $7 billion but it’s worth a lot more than that.
They still own 53% of The New York Times building. And the stock is just numerically down.
They now have 10 million subscribers, the majority of which are digital.
And she’s doing a lot of interesting things — specialty apps on the web, like cooking and sports, and more.”
Get the complete interview, only at the Wall Street Transcript.
Axos Financial (AX) and Capital Bank (CBNK) are two small banking stocks that fly under the radar but each has specialized sustainable competitive advantages that the CEOs have developed.
Gregory Garrabrant, the President and CEO of Axos Financial, Inc. (NYSE: AX)
Gregory Garrabrants has been the President and CEO of Axos Financial (AX) since 2007.
Prior to joining Axos Bank, Mr. Garrabrants was a senior vice president and the head of corporate business development at the nation’s seventh-largest thrift, focusing on entry into new business segments, mergers and acquisitions, joint ventures and strategic alliances.
Before his senior executive roles at banking institutions, Mr. Garrabrants served the financial services industry as an investment banker, management consultant and attorney for over 15 years at Goldman Sachs, McKinsey & Company and Deloitte Consulting.
Mr. Garrabrants earned his Juris Doctorate, magna cum laude, from the Northwestern University School of Law and his Master of Business Administration, with the highest distinctions, from the Kellogg Graduate School of Management at Northwestern University.
He has a Bachelor of Science degree in industrial and systems engineering and a minor in economics from the University of Southern California. He is a Chartered Financial Analyst and member of the California Bar.
“…We were one of the first internet-only banks and over time what we realized is that the digital interaction capabilities that would allow us to gain customers were obviously going to continue to become more ubiquitous as the smartphone came out.
So, remember the iPhone came out seven years after the bank started.
So when we first started, we were a little bit ahead of ourselves from a technology perspective because there was no real way to deposit checks online with photo capture and things like that.
There were just certain tasks that we had to do through the mail or things like that that were a little more difficult, but then over time what happened is we put a lot of money into our own platform, which is our own app.
That app allowed us to digitize pretty much every single element of the customer interaction process, not only for consumer banking, but also for commercial banking. It allowed us to take a variety of, I’d say, pain points out of the process with respect to using data to be able to make sure we didn’t hold checks, we approved transactions more rapidly, and all those kinds of things.
I think in general, we’ve continued to evolve the underlying banking process, expanding it from consumer to commercial, but then also launching our own online trading platform.
We’ve launched our own robo-advisor platform so you can manage money through us, you can stock trade, and pretty soon you’ll be able to trade cryptocurrencies through our platform as well.”
The President and CEO of Axos Financial (AX) has a cure for what ails the cryptocurrency market, FDIC insurance:
“I think what we’re doing on the crypto side is very interesting.
We recently announced an alliance with Tassat Pay which allows us to work with institutional crypto clients and allows us to transfer value 24/7 between different participants in the crypto market, which is an important component of settlement because the crypto markets never shut down and you can trade at any time.
So that’s one innovative project we’re doing. We also have crypto trading that’s going to be launched in our online platform and I think we’ll be one of the first financial institutions that have done that.
So we will have integrated banking, stock trading, robo management — so automated wealth management and crypto trading.
Literally somebody could deposit their check, immediately get credit for that check and be able to be in the market immediately for a variety of assets or place some of their savings immediately into the market in a variety of ways.
And so, I think that that does reduce a lot of friction that is currently in the processes that are involved in trying to open a crypto account with some of the existing players.
We also think that particularly given the change in the crypto environment that having recognized players that are where money is FDIC insured with respect to the banking deposits and things like that, there’s some credibility benefit to us doing that business.
Those are just two examples. We have quite a few more.”
Edward Barry, CEO, Capital Bank (NASDAQ:CBNK)
Edward Barry joined Capital Bank (CBNK) as Chief Executive Officer in 2012.
Since that time, Capital Bank has rapidly expanded throughout the D.C. area and into Baltimore.
Under Mr. Barry, Capital Bank has consistently been recognized as one of the top performing banks in the U.S.
In 2014, Capital Bank won Product Innovation of the year in payments by Retail Bankers International. In 2015 it was named to the Future 50 by SmartCEO magazine.
Prior to joining Capital Bank, Mr. Barry held senior positions at Capital One Bank (COF), Bank of America (BAC), and E&Y/Capgemini (CAP).
On a more personal level, Mr. Barry believes in giving back, and is on the board of the Mid Atlantic Chapter of The Make-A-Wish Foundation.
Similar to Axos Financial (AX) CEO Gregory Garrabrants, Edward Barry joined Capital Bank (CBNK) as Chief Executive Officer in 2012 in order to differentiate what had become an out of favor financial sector:
“The community banking landscape has been under assault really over the last several decades.
If you just look at the numbers, the number of community banks in America has been steadily declining for very long periods of time.
And the formation of new community banks has slowed.
So you’re seeing every year a net decrease in the community bank landscape.
And that’s really a sad thing because historically the community banks really filled a lot of the gaps from the larger banks.
They’ve been very good on the small business sector and in some of the local communities that tend to get underserved.
And what we saw with the advent of PPP in the COVID crisis, there was a big resurgence of community banks across America.
Most of the PPP loans went to community banks that stepped up in the time of need and were very responsive.
So I think there’s a bit of a renaissance now going on for community banks as they’re seeing opportunities to justify their existence in the marketplace on both the business and consumer side and take advantage of things like fintech to help level the playing field between them and a lot of the larger banks that are out there where they can now go head to head and offer the same suite of services and in many respects a much higher quality of service just given their greater customer intimacy, more flexibility and just being deeply embedded in their local community as opposed to some of the larger banks.”
One point of differentiation for Capital Bank (CBNK) is their Open Sky division.
“OpenSky is a company we acquired several years ago and it was a hidden gem as part of a larger institution.
OpenSky is a digital credit card platform that’s focused on underserved customers.
So really targeted towards people that have had credit blow-ups in the past or people that are new to credit.
So as an example, maybe students, people graduating from college, immigrants — so people that are generally frozen out of the credit markets. And so this is a way for people now to get established or reestablished in the credit landscape.
The number-one reason we hear from our customers that sign up for the product is they want to get a mortgage and they can’t qualify.
So it’s really this way we work with them and help educate them. And we’re trying to build other suites of services around it to help them with their journey of homeownership.
It’s had a lot of success with COVID as a lot of people have really doubled down, saying I want to repair my financial health and my financial lives.
And we saw a big uptick in customer base.
Different from our core community bank lending, the OpenSky business is nationwide.
So we serve customers all across the U.S. through our technology. And we have just over 600,000 customers that are active on our platform, working to improve their financial loss.”
Get the complete detail on both Axos Financial (AX) and Capital Bank (CBNK) by reading the complete interviews with their CEOs, exclusively in the Wall Street Transcript.
Gregory Garrabrants, President & CEO, Axos Financial, Inc. (AX)
Las Vegas, NV 89148
email: investors@axosfinancial.com
Edward Barry, CEO, Capital Bancorp Inc. (CBNK)
Rockville, MD, 20850
www.capitalbankmd.com
Fla Lewis III, Principal, Weybosset Research & Management
C.H. Robinson Worldwide (NASDAQ:CHRW) and Expeditors International (NASDAQ:EXPD) are only two of the stock picks from these top level money managers that are seeking to buy when others are selling, the traditional way to Warren Buffet level wealth.
Fla Lewis III is Principal of Weybosset Research & Management, LLC. At the start of his career, he went to work at Kidder, Peabody & Co. in 1980.
He was named Assistant Vice President in 1985 and Vice President in 1986. He was affiliated with Kidder, Peabody Asset Management from 1990 until 1995.
In January 1995, he joined Compton Capital Management as Vice President and Senior Portfolio Manager.
Mr. Lewis graduated from Brown University with honors. He was awarded the Samuel T. Arnold Fellowship, Brown’s highest honor for a graduating senior.
After study in Vienna and London, Mr. Lewis received a Master of Arts degree from Harvard.
“It’s in times like these that people are running as hard as they can away from stocks, all stocks.
But it’s a good time to look around, see what’s available out there as babies are being thrown out with the bathwater.
In our case, we’ve bought three new stocks since the first of the year. And remember, we don’t do many transactions.
We bought nothing in 2020, for instance, and that was just because the whole thing happened so fast.
We didn’t understand what was happening, so we didn’t act.
But this time around two companies that I’ve been following for nearly 30 years caught our attention.
I had met up with them in the 1990s and the early 2000s and love the businesses, love the management, loved everything about them, except they were selling at very, very high prices. I just couldn’t get myself to pay those prices.
I’m talking about C.H. Robinson Worldwide (NASDAQ:CHRW) and Expeditors International (NASDAQ:EXPD).
These are two freight forwarding companies.
Their businesses overlap to a degree, but they’re both pretty much in different aspects of the same business. I followed them for a long time, admired them intensely, and just woke up one day earlier this year and discovered they were selling at the cheapest prices relative to earnings, book value, etc., that they had ever sold — I mean ever.
They came public in the 1980s or ’90s. And were selling at by far the lowest prices since coming public.
Nothing had changed except the prices.
The business was the same. And they were selling at prices that were low enough that even I would gladly pay.
And just to show that we’re not afraid of anything, we put some money into a big furniture retailer, RH (NYSE:RH). RH used to be Restoration Hardware.
And RH has been more controversial and more difficult. But we think it’ll work out. If it works out, it will work out very well indeed. And we think it will work out.”
Fla Lewis further details his investment love for Expeditors [Expeditors International (NASDAQ:EXPD)] and C.H. Robinson [C.H. Robinson Worldwide (NASDAQ:CHRW)]:
“Our two freight forwarders, Expeditors [Expeditors International (NASDAQ:EXPD)] and C.H. Robinson [C.H. Robinson Worldwide (NASDAQ:CHRW)]: Imagine that you own a manufacturing business where I live, Massachusetts.
You source your materials abroad, maybe in Asia.
A lot of your customers are in Europe.
You’ve got to bring stuff from China.
You’ve got to get it from where it’s manufactured to a port across the ocean, through customs, across the North American continent to where you have your facilities and turn out whatever it is that you’re that you’re turning out.
And then you’ve got to get it from Massachusetts across the Atlantic into Europe or wherever it’s going.
Well, you know, it’s going to be some combination of sea and land and air.
And if you’re going to figure out the best way to put all these things together, you better have a pretty good in-house transportation outfit — or you can call C.H. Robinson [C.H. Robinson Worldwide (NASDAQ:CHRW)] or Expeditors International [Expeditors International (NASDAQ:EXPD)] and they’ll arrange everything for you.
Expeditors [Expeditors International (NASDAQ:EXPD)] and Robinson [C.H. Robinson Worldwide (NASDAQ:CHRW)] are what are called asset-light businesses.
They own no trucks. They own no airplanes. They own no ships.
They’ll just arrange for the best combination of trucks, airplanes, trains, intermodal transportation, whatever, to get whatever it is you’re moving from where you need to move it to you and then to other places.
They just make the arrangements. They don’t move it for you.
It’s complicated. We read about problems in the global supply chain.
Well, these guys are the right ones to help you with it. And they’ve got a lot of experience and a lot of contacts.
They know how to handle these things. You can have your own staff and hope that they are good, or just bring these guys in — and I’ll bet they will save you some money while they’re at it.
So I followed these companies for a long time.
The story has remained largely the same for the past 30 years or so.
So all of a sudden, the price is right, so what are you going to do? We stepped up and bought shares of those companies. They’ve held up pretty well since we bought them.”
David A. Katz, CFA, Matrix Asset Advisors, Inc.’s President and Chief Investment Officer
David A. Katz, CFA, is Matrix Asset Advisors, Inc.’s President and Chief Investment Officer.
He has overall responsibility for the firm’s investment efforts. After initially working at Management Asset Corporation (Westport, CT), Mr. Katz co-founded Value Matrix Management with the late John M. Gates in 1986.
He served as the firm’s Senior Vice President and Chief Investment Officer and was Head of the Investment Policy Committee.
In 1990, he merged Value Matrix Management organization into Matrix Asset Advisors.
Mr. Katz chairs the Investment Policy Committee and is a Portfolio Manager/Analyst.
He appears frequently as a guest on CNBC and Bloomberg Radio.
He graduated summa cum laude from Union College with a degree in economics.
He also received an MBA from New York University Graduate School of Business.
In addition to the Fla Lewis recommendation of buying Expeditors [Expeditors International (NASDAQ:EXPD)] and Robinson [C.H. Robinson Worldwide (NASDAQ:CHRW)] at current market prices, David Katz has some value picks of his own for investors looking to deploy cash:
“Moving on to the dividend side, a little bit less exciting, but also very good long-term businesses. Air Products & Chemicals (NYSE:APD) has just been beaten up this year from the $300 level.
Now down to the $230 level. It pays a very good dividend. It’s a green play and a very attractive industry leader; we really like management.”
The current market fear feeds Mr. Katz’ long term optimism:
“…You’ve just had a 20% market pullback in the first half of the year.
And the headline is: worst start to the year in 52 years.
Investors are rightfully concerned.
We think the best advice that we can give investors is, if you have a sound long-term plan, you don’t want to change your investment strategy in reaction to the market selloff.
You don’t want to be selling stocks at this point in the cycle if possible.
We think, if anything, you’d want to be a buyer of stocks rather than a seller. You want to stick to your plan.
Generally, if you’re using the stock market to develop your long-term wealth, you’re going to confront many bear markets over your lifetime.
And the best advice is you have to stay with stocks during the good and the bad times.
And generally, the market recoveries are very swift.
They occur when they’re least expected.
Your biggest returns occur in the very early stages of a bull market recovery.
And also, you get some significant bounces during a bear market.
So don’t time the market, instead focus on good businesses and good industries.
And one thing that we’re also doing for clients, which we think individuals want to consider, is harvesting tax losses at this point in the cycle, because we don’t think they’re going to be as deep by the end of the year.
So you can lower your tax bill, sell a stock or double up on a stock and then sell it after 31 days.
So tax strategies make enormous sense at this point in the year.”
Words of wisdom from both Fla Lewis III, Principal, Weybosset Research & Management, and David A. Katz, CFA, is Matrix Asset Advisors, Inc.’s President and Chief Investment Officer, exclusively in the Wall Street Transcript.
David A. Katz, CFA, Chief Investment Officer, Matrix Asset Advisors
email: matrix@matrixassetadvisors.com
Fla Lewis III, Principal, Weybosset Research & Management LLC
www.weybosset.com
Plug Power (PLUG): developing a sustainable hydrogen fuel cell energy network
Plug Power (NASD:PLUG) is the hydrogen fuel cell company that counters the argument that the publicly traded enterprise is only concerned with only next quarter earnings.
For the last 20+ years, Plug Power (NASD:PLUG) has been chasing the dream of using green hydrogen fuel in commercial, industrial and consumer applications. Recently, the success of PLUG in this endeavor has led to its recognition as a “best in class” hydrogen fuel application company and a sharp increase in its stock price.
In an October 20, 2003 interview in the Wall Street Transcript, David Smith, a Vice President in the US equity division of Smith Barney Inc. gave investors a first look at the young company. Mr. Smith was covering power technology and multi-industry companies for Smith Barney, and had joined the firm in early 1997.
At the time, Smith Barney’s analyst team was the number one Institutional Investor ranked electrical equipment/multi- industry research team and PLUG was trading at about $65 per share.
In this interview, the Wall Street Transcript asked:
“This fuel cell space has been an area that everybody is talking about, yet nothing much seems to happen. How do you see it?
Mr. Smith replied
“Yes, it is definitely a farther-out-there sector.
I often refer to it as a DCF-based sector and that really comes under the valuation on the stocks.
There are a lot of assumptions that are actually made into when markets will develop.
Very few, if any, of the companies today have commercial products. You will probably see the first commercial fuel cells that you can buy as a consumer hitting the market in 2004 through 2020.
And the order that you are probably going to see that in is beginning with micro fuel cells (for laptops and cellphones) and then standby and backup power systems, and then residential and small commercial stationary systems followed by, farther out, bus and automotive markets.”
With fuel cells, a similar metric applies in a residential application, but mind you, the systems have got to come down in price probably 10 times from where they are today. Plug Power (PLUG) has come out and said they are going to be offering a system later this year at $3,000 a kilowatt.
We think you have to get to $300 per kilowatt to be in a home.
I am not saying that’s not going to happen, I think it is going to happen through technological development, I think it is going to happen through a supplier base developing, and also through mass manufacturing.
But ultimately you have to get down to a point where it makes sense for the consumer to buy one of these.
Realistically, the recent blackouts have shown us that we are dependent upon electricity for almost everything, from gasoline, to getting cash
at the ATM, to buying groceries ‘ reliability and quality are an issue.
Within the home today, we are not as reliant on power quality. I think ultimately today we really look at it and say, ‘How much are we spending on our electricity bill?’”
The initial applications projected in 2003 seem slightly odd from 20 years of hindsight.
“A couple of small companies are out there making them today that will actually go right into the back of your cell phone and into your laptop, and you will fuel them with a methanol cartridge.
Mechanical Technology (MKTY) last week announced a deal with Gillette (G), whereby Gillette is going to co-develop a methanol-based cartridge refueling system that will go onto your cellphone and you will be able to walk downstairs in your office building or outside of your apartment and actually buy one of these cartridges and the cartridges are going to be designed to last between 15 and 30 days.”
And while no one today is powering their iPhone with Plug Power (PLUG) hydrogen fuel cells bought in street level retail stores, there are some applications predicted by Mr. Smith of Smith Barney that resonate today.
“It will cost them a lot of money, but the opportunity cost could be huge if someone like a Plug Power (PLUG) which is teamed up with Honda (HMC) came out with a residential system so that you could refill your car in your garage.
I really think that the automotive market is going to be driven by competition.
We are already seeing it with Honda and GM (GM) and Toyota (TM) battling it out to have the first hybrid vehicle units on the road.
Similarly, the hydrogen infrastructure is going to be battled out in the competitive field from companies like Honda saying, ‘Why don’t you put a system into your home…by the way you can also refuel it while you are at home, and you don’t have to go the gas station ever again.’
In addition, companies that make specialty gases today that already make hydrogen could open refueling stations on the road for additional
competition to the oil companies.”
Even at this stage, as Mr. Smith points out, the role of the US government in determining if this renewable source of energy would prevail was important.
“…the first thing I can point to is this year’s State of the Union address, in which Bush actually mentioned fuel cells; nobody expected
that.
He actually devoted a whole paragraph to fuel cells and how they were needed to attain energy independence.
That is critical in light of global events of the past 24 months.
Having said that, though, some people are starting to question the commitment of the Bush government, although in my view I think that they have done a pretty good job at getting the FreedomCAR program up and rolling and directing some funds and realizing as well that it is not going to happen overnight. ”
Soon after the Smith Barney PLUG analysis, Stephen Sanders, a Vice President with Stephens, who was promoted to Analyst in January 1999 and in 2000 initiated coverage on the energy technology subsector.
“Looking more at the pure play energy technology theme, we cover a company called Plug Power (PLUG), which makes proton exchange membrane (PEM) fuel cells for small stationary applications like backup power for telecom companies.
The company has done a good job of reducing costs and improving system reliability over the past several years. Year in and year out, they’ve
made good steady progress, and they are now selling a product that is competitive in select markets with incumbent technologies that are based on mature technology.
So it’s a company that is quite a ways from profitability but is worth spending time on due to their long-term potential. So if you are looking for a higher-risk, higher-return fuel cell play, Plug is an interesting company.”
In 2004, Mr. Sanders also indicated the impact of political considerations.
“Politically and economically, we are seeing a much more intense focus on energy independence.
It’s obviously an election year ‘ coal, gas, and oil prices are high; the economy is chugging along; environmental concerns are becoming more acute and energy is in the news daily.”
If we fast forward to 2014 to a February 3 interview with the President and CEO of Plug Power (NASDAQ: PLUG) we are told a more prosaic yet realistic focus for the company. Unfortunately for “buy and hold” investors, the price of PLUG per share had dropped to $3.
Andy Marsh joined Plug Power as President and CEO in April 2008 and the stock traded between $30 and $35 per share that month.
Under his leadership, Plug Power had become a leading innovator in the alternative energy field, with a focus an entirely new hydrogen fuel cell (HFC) market in the material handling space.
“Plug Power sells fuel cells, which power forklift trucks.
And that’s what I’ve told you over the last three, four years, but the business has really expanded over the past six months where today we actually sell full turnkey solutions for distribution centers and manufacturers, which include the hydrogen infrastructure, hydrogen, the fuel cell power for forklift trucks, as well as a service for that equipment.
Our customers include people like Wal-Mart; Sysco, the international food distributor; BMW; Mercedes; and Kroger, just to name a few…
I’m a pretty simple guy.
Customers like Wal-Mart and Kroger came to us and said that it would be much simpler for them, since we’ve already been involved in 45 deployments, if Plug Power would take over the complete responsibility for the deployment.
GenKey would reduce their administrative load, provide them a single point of contact and really enable them to work with the company that knows how to execute on a program as they change their systems from batteries or from diesel-powered forklift trucks to hydrogen-powered forklift trucks.
It was really driven by customers, and that’s really why we had such great success in the fourth quarter, and we are able to book over $32 million in revenue with people like Kroger, who signed up for our turnkey deal.”
So from that “turnkey deal” in 2014 we jump to the Wall Street Transcript July 10, 2020 with a new interview with the President and CEO of Plug Power (NASDAQ: PLUG) and a price per share of between $8 and $9.
“I am going to give you a long-term view of the world.
Plug Power is a member of a global group called the Hydrogen Council, which includes 80 companies looking to develop this market.
We hired McKinsey to put together a study to tell us where it thinks the market is today as well as the applications that will make fuel cells more attractive than alternatives by 2030.
The long-term view of hydrogen is that it is a $2.5 trillion market, and that view includes storage of hydrogen for power processing and industrial heating where hydrogen is much more effective.
For example, if you are going to use electricity for steel or cement manufacturing, a need is there.
We talked about on-road vehicles here, but we also are interesting to a company like National Grid that is looking to convert a natural gas base into a hydrogen one to heat buildings in the U.K. by 2040.
Overall, it is a huge pie.
What is going to come first?
As the cost of hydrogen continues to go down, it opens opportunities for fuel cells.
The lower cost of hydrogen is really closely tied to green hydrogen and a continual reduction in price of renewable energy. But over the next five years, we will see the cost of renewable hydrogen, green hydrogen, on par with hydrogen produced by natural gas.
That opens up huge markets because hydrogen itself today in the fertilizer and other industries is already a $30 billion to $50 billion market opportunity.
We see huge opportunities for ourselves just in material handling over the short term and over the next 10 years at a $30 billion annual TAM for on-road vehicles.
Over the next 10 years, we see that could be as big as $300 billion.
For large-scale stationary products, it could be as much as $15 billion, and that includes providing fuel cells for data centers.
You would think: Why would anybody do that?
Well, people like Microsoft are having issues today siting diesel generators at new data centers in places like Virginia, California and Singapore, where they are demanding that all their solutions be clean and green.
Top that off with the fact that the noise pollution associated with diesel generators has made it unattractive in many areas.
So there is a large market opportunity for fuel cells and hydrogen that are real today and will become more real by 2030.
The Hydrogen Council has a great report that was issued this past January at our annual meeting, and in it, McKinsey laid out the program of how there are 15 different markets in which hydrogen will be competitive with present technology by 2030.
I suggest your audience might want to take a look at that website…
Our guidance for 2020 is to do over $300 million in gross billings, with $20 million in EBITDA.
If you look at our plans going forward, by 2024, we have been very public about our plan to be a $1 billion revenue company with about $750 million coming from our traditional business with customers like Walmart, Amazon, Home Depot, BMW, throughout the United States and in Europe.
We expect $200 million from on-road vehicles.
We are doing some exciting work with a company like Lightning Systems that is providing vehicles to Amazon, and we have a number of other partners we have been engaged with.
We see the stationary market being a $50 million market opportunity for us.
We have laid out a five-year plan that says, at the end of 2024, our revenue will be $1 billion, our EBITDAs will be $200 million, and our operating income will be $170 million.”
Currently PLUG is trading at about $21 per share, and the Wall Street Transcript has recently published a new interview with the CEO and President. Read the entire interview as well as the past interviews for Plug Power, still on the cutting edge after over 20 years.
Utility Stocks for your portfolio from John Ullman, President and Founder of John G. Ullman & Associates
Utility Stocks have traditionally been the safe haven in an economic downturn with dependable free cash flow generation that covers a generous dividend income to investors.
The Wall Street Transcript has recently interviewed several award winning investment professionals in our exclusive network. These are some of their current top picks from which investors can begin to build a portfolio of utility stocks.
In a 5,174 word interview, exclusive to the Wall Street Transcript, John Ullman and his team of professionals detail their investment philosophy and several of their recent top picks among utility stocks.
John G. Ullman is President and Founder of John G. Ullman & Associates, Inc. Earlier, he was President of USGM Securities, Inc., and at Corning Inc., he worked in financial management.
He received a bachelor’s degree in economics from Johns Hopkins University. He received an MBA from the University of Chicago, with a focus in financial management.
“Our investment methodology is buying securities based upon our determination of good value.
While there are certainly growth stocks in the portfolios, we use fundamental analysis to try to find stocks that we see as undervalued, in sectors that we very much like.
At this point, we are interested in health care, infrastructure, technology, with some of these technology stocks being ones that are in fields that we like.
However, some of the firms have been somewhat out of favor, so the valuations are much lower.
An area that over the years has worked very well for us is value-based stocks, with a mathematical process tied to their underlying values.
We also have foreign holdings in particular countries. Right now, that is very low, but in the reasonably near future we would like to look at adding back into some of the developing countries.”
Utility Stocks recommendation from Mark Abdalla, Senior Equity Research Analyst, John G. Ullman & Associates
Mark Abdalla, CFA, works for John Ullmann as a Senior Equity Research Analyst at John G. Ullman & Associates.
Previously, he worked at Strategic Financial Services, Manning & Napier, and BNP Paribas.
A graduate of Carnegie Mellon University, he received a master’s degree in economics from Boston University and an MBA from Cornell University.
“One specific company within the Utility sector that we like and own shares of is Dominion Energy (NYSE:D).
The utility company sold off its midstream assets in 2020 for $8.7 billion, and it also cut its dividends.
It did a little restructuring.
The stock sold off at the time.
Generally, investors do not like it when dividends are cut.
The midstream assets were sold to Warren Buffett. It was seen as if Warren Buffett was getting a good deal in terms of value for the assets, but we liked the long-term strategic thinking of management at the time.
We also liked the valuation of the stock price, it having sold off because of these moves.
And with that, we increased our position in Dominion Energy.
One of the strategic initiatives that Dominion’s management is taking is investing heavily in the renewable energy sector.
Management plans to spend $37 billion in renewable energy growth capex, so that is capital expenditure in renewable energy projects that will be in offshore wind.
The company plans to spend heavily in the offshore wind sector right off the coast of Virginia, in addition to onshore wind and solar farms.
These initiatives are supported by tax credits, and the company is protected by semi-automatic rate increases. Therefore, we feel that this utility company is favorable in terms of a risk/reward scenario that would take place.
In addition, we think the downside is fairly limited, while the company can grow along with these initiatives.
One other reason why we see the Renewable Energy sector to be favorable is that it is being supported at the state level.
States are now mandating certain renewable energy goals to meet their climate change endeavors. We view climate change as a long-term problem, and some of these solutions are being tackled by the utility companies themselves.
So, many renewable energy stocks are priced very, very high.
We stay away from those. But we found utilities such as Dominion Energy to be a safer way to invest in the renewable energy sector, given the reasonable valuation.
The price of oil and natural gas is high right now; that is another reason to invest in renewable energy, given that it is an alternative source of energy.
But that said, the price of oil and natural gas can come down. It is very volatile, and it is really determined by geopolitical factors, in addition to overall supply/demand.
While climate change is a long-term problem, we see utility companies with their resources being a major player in tackling that problem.
So overall, we like their management’s strategic thinking, their plans, their investments, in addition to the valuation of the stock.”
Utility Stocks expert Timothy Winter, CFA, portfolio manager, Gabelli Funds
Timothy Winter, CFA, is a portfolio manager of The Gabelli Utilities Fund, The Gabelli Utilities Trust, The Gabelli Global Utility & Income Trust, and the Love Our People and Planet ETF and a research analyst covering the utilities industry for GAMCO Investors, Inc.
He joined the firm in 2009 and has over 25 years of industry experience.
Previously he served over 15 years as research analyst covering utilities at AG Edwards, as well as Jesup & Lamont and SM Research. Mr. Winter has received numerous awards and recognition for his work in the industry.
He was a three-time All-Star Wall Street Journal winner and five time ranked number-one Electric Utility Team by Institutional Investor.
In 2018 he received Thomson Reuter’s U.S. Analyst Award and was ranked the number-one stock picker in the electric utility sector and water utility sector and number two in the gas utility sector.
Mr. Winter holds a B.A. in economics from Rollins College and an MBA in finance from Notre Dame. He is a CFA charterholder.
His 2,253 word interview in the Wall Street Transcript reveals his top utility stocks.
“The first name to highlight is NextEra Energy (NYSE:NEE).
They are the biggest electric utility in the world: $150 billion of equity cap, $210 billion of enterprise value.
They are also by far the leading and largest renewable energy developer in the world, and specifically, they’re focused on North America. And 60% of their earnings do come from regulated business in Florida, Florida Power & Light, which benefits from customer growth and solid regulation and a healthy rate plan for the next four years.
NEE management outlined the tremendous opportunity and capital needs for U.S. decarbonization and clean energy by 2050.
The numbers are staggering.
Currently, the U.S. has 1,100 gigawatts of power generation including coal and nuclear, natural gas, wind, solar and hydro.
The U.S. needs 7,000 gigawatts of renewable energy to decarbonize the U.S. economy by 2050, including 3,500 gigawatts from the power sector.
And so, as they’re the leading developer of wind, solar and battery storage, and they’re also investing in hydrogen, NEE is hands down the leading player with 50% market share of wind development and going to participate in this huge megatrend.
So that’s the number-one company.
NEE also owns 58% of NextEra Energy Partners (NYSE:NEP) which is also a renewable company.
They own wind, solar and some natural gas pipelines that are unique from NextEra Energy.
And it’s a dividend play.
NEP grows the dividend 12% to 15% per year and acquires renewable projects from NextEra Energy and/or from other entities, or develops its own renewable projects.
So those would be the one and two on my list for sure.”
One step up from these utility stocks are the copmanies that supply utilities with the components to generate power for the people.
Benjamin Nolan, CFA, Managing Director, Transportation sector, covering Shipping and Energy Infrastructure at Stifel Financial
Benjamin Nolan, CFA, is a Managing Director in the Transportation sector, covering Shipping and Energy Infrastructure at Stifel Financial Corp.
Mr. Nolan joined the firm in 2013. Before joining Stifel, he covered both equity and debt of companies in the maritime sector at Knight Capital.
He also spent six years at Jefferies as an Equity Research Analyst covering the shipping sector and spent several years as a corporate Financial Analyst for EOG Resources in the oil and gas business.
He received a BBA degree in finance from Texas A&M University and an MBA from the University of Houston.
Mr. Nolan has won numerous StarMine and Institutional Investor awards for stock picking, earning estimating, and research analysis.
In this 3,081 word interview, from February of 2022, and exclusively in the Wall Street Transcript for our subscribers, Benjamin Nolan explained how the utility stocks are dependent on the supply of LNG.
“So we started maybe two years ago with COVID. Initially, there was a downward pressure in demand.
And then, so was LNG demand.
The price got really low in 2020, to the point that a number of the U.S. export facilities actually shut in some of their capacity for several months, because there was no economic incentive to produce and export the LNG.
That changed pretty dramatically starting maybe a little over a year ago.
Demand began to recover pretty quickly in a lot of places around the world.
That was first seen in Asia.
And then, as a consequence of that, all of the U.S. production came back to being fully online.
And in fact, in some respects, it overcorrected.
So there was starting last summer, much more demand for natural gas, and there was the ability to produce and export that was in part due to a few outages in places like Australia or Norway, but in general, underlying demand was just extremely robust.
The price of LNG internationally went up 10-fold, 12-fold from the trough of 2020, when it was $3, $4.
We saw prices in Europe and Asia just a few months ago over $40. It’s come off a little bit since then, but it is still extremely strong.
The other big factor that has been in play lately is Europe. Europe has seen a relatively strong level of demand.
It’s a function of coal-fired power generation closing down, nuclear power generation closing down.
At the same time, there’s been disruption of gas flows coming from Russia and a relatively healthy level of demand.
And that has been unable to be met by renewables, which was the original hope. And it could get worse if something terrible were to happen with Russia and Ukraine.
So, at the moment, everybody wants LNG.
And the problem is that these export projects take many years to develop and produce.
So you can’t just decide that you want more. It won’t happen overnight.
The good news is that there are a number of projects that are being constructed now.
In fact, one in the U.S. in Louisiana just came on stream and is shipping its first cargo as we speak.
But again, it’s going to be a slow growth process for incremental LNG.
So I think, as we look out today, prices are high. It doesn’t seem as though there’s any real reason that they should be falling back, at least anywhere in the next year or two.”
The development of the LNG market globally leads Ben Nolan to an interesting company dependent on the utility stocks.
“The other important part of it is — and really what we’re talking about primarily here is for power generation — you do have a lot of developing economies, various places around the world — India, Pakistan, Bangladesh, even China — where their power consumption is going up a lot.
They’ve got to figure out how they’re going to meet those demands and the cleanest and, generally, one of the cheapest methods of being able to do that is with natural gas.
Now, it’s not carbon free.
So perhaps you could argue that it’s just a bridge fuel, but if it is a bridge fuel, it’s a multi-decade bridge fuel.
And then, point number two is that there are a lot of places around the world where we know natural gas exists and there’s not really a strong domestic use for it, or at least it’s not enough to use all that’s available.
And so it’s simply a function of resources being available, but not where they’re needed.
And so, that’s what LNG is all about.
Taking that natural gas, condensing it down to a size that makes economic sense to transport it when you refrigerate it and get it cold enough to be a liquid — it condenses down to 1/600th of its size.
And then you can move it and power the world.
The challenge is, it’s really expensive to get something negative 260 degrees. So that’s a challenge. Again, it takes some time.
It’s pretty expensive to do.
But if you’re doing it in scale, then there’s both the resource and the demand.
So LNG is, you might argue, a sort of an old energy, not perfectly clean source of fuel, but it is cleaner, and I think almost definitively is very much still a growth business.”
The development of the LNG market globally leads Ben Nolan to an interesting company dependent on the utility stocks.
“…the other aspect of LNG that makes all of this work is transportation.
So that means ships.
There are a decent number of those on order. Longer term, there’s going to be the need for more, and growth in that category, but that’s going to be a little bit more of a cyclical play.
Ships can be built or removed or the distance that a ship needs to travel can vary.
And so, a little less of a structural investment, a little bit more of a trading play.
I also think that some of the people who produce the equipment that is used for LNG have some nice tailwinds behind them.
The one that I would call out there is Chart Industries (NASDAQ:GTLS), that makes the equipment that liquefies it, that turns it from a liquid back into a gas, that puts the tanks that would go on trucks on trucks.
And so I think as the volume increases and it’s produced and consumed and everything else, there are the sort of picks-and-shovels type players that would really stand to benefit. Chart is the one I would call out there.”
This stock pick is up about 50% from Mr. Nolan’s recommendation and is one example of how even a safe haven sector like utility stocks can often perform as well as many riskier portfolios.
Benjamin Nolan, CFA, Managing Director & Research Analyst, Stifel Financial
email: nolanb@stifel.com
Timothy Winter, CFA, Portfolio Manager, GAMCO Investors, Inc.
email: twinter@gabelli.com
Mark Abdalla, CFA, Senior Equity Research Analyst
John G. Ullman, President & Founder
John G. Ullman & Associates, Inc.
![Plug Power [NASDAQ: PLUG] President and CEO Andy Marsh](https://www.twst.com/wp-content/uploads/2015/09/AndyMarshPlugPower-96x109-1.jpg)
Plug Power [NASDAQ: PLUG] President and CEO Andy Marsh
Under his leadership, Plug Power has been a leading innovator in the alternative energy field, helping create an entirely new hydrogen fuel cell (HFC) market in the material handling space.
This new market has proven to be one of the first successful endeavors to commercialize HFC technology, and today, the firm’s fuel cell solutions, including its GenKey suite and ProGen engine line, are leveraged by global marketplace leaders such as Amazon, Walmart, and Carrefour to power industrial electric vehicles.
As the Plug Power (NASDAQ:PLUG) President and CEO, Marsh plans and directs all aspects of the organization’s goals and objectives, and is focused on building a company that leverages Plug Power’s combination of technological expertise, talented people and focus on sales growth to continue the company’s leadership stance in the future alternative energy economy.
Under his leadership, Plug Power (NASDAQ:PLUG) continues to spearhead hydrogen fuel cell innovations in both mobility and stationary applications, and his ability to generate revenue growth of more than 296% since 2012 has landed Plug Power on Deloitte’s Technology Fast 500 list in both 2015 and 2016.
Previously, Mr. Marsh was a co-founder of Valere Power, where he served as CEO and board member from the company’s inception in 2001, through its sale to Eltek ASA in 2007.
Under his leadership, Valere grew into a profitable global operation with over 200 employees and $90 million in revenue derived from the sale of DC power products to the telecommunications sector.
Prior to founding Valere, he spent almost 18 years with Lucent Bell Laboratories in a variety of sales and technical management positions.
Mr. Marsh is a member of the board of directors for the California Hydrogen Business Council, a non-profit group comprised of organizations and individuals involved in the business of hydrogen.
He holds an MSEE from Duke University and an MBA from SMU.
In August/September 2017, Mr. Marsh was invited to join the Global Hydrogen Council as well, an international council of major auto manufacturers that is focused on the proliferation of hydrogen fuel cell technologies.
“Plug Power (NASDAQ:PLUG) built the first commercial market for fuel cells.
We’ve shipped over 60,000 fuel cell products — so more than anyone else in the world.
These are used primarily in distributions and manufacturing facilities to power forklift trucks.
We also have built over 185 fueling stations. So that capability and that turnkey solution really was just the starting point.
Today, we’re building the first green hydrogen network across the United States, which by 2025 will produce over 200,000 tons a year of green hydrogen.
We’re in a wide variety of applications around the world, be it for on-road vehicles with our JV with Renault in France called HYVIA, to generating hydrogen in Europe with our partner ACCIONA, the largest provider of renewable green hydrogen.
With SK, the second largest conglomerate in South Korea, we are building large-scale stationary products to provide power to the grid.
And in Australia, we’re leveraging our electrolyzer technology, and we’re building a gigafactory with Fortescue Future Industries to be able to build large-scale electrolyzers for that market.
So Plug [Power (NASDAQ:PLUG)] is known as the global leader in fuel cell and hydrogen technologies. We’ve been doing this for a long time, 25 years.
From a company-culture point of view, this is a very entrepreneurial company.
You don’t create a market from scratch, which Plug has done, without being entrepreneurial.
And we’ve gone from $1 million in revenue when I started with the company 14 years ago to doing $925 million in revenue this year.
And then, as we’ve grown, we’ve also added processes and the right folks. We’re building out large-scale manufacturing led by people who built out the Tesla gigafactory in Reno, Nevada.
The company is broadly recognized as the manufacturing leader in this space, and to do that you need to have discipline. And we add processes which allow us to move faster in keeping with our entrepreneurial company business model.”
Hydrogen fuel cell power is global and Plug Power (NASDAQ:PLUG) is participating in the next phase of its development:
“In the United States, in the infrastructure bill, there’s actually $9.5 billion for clean hydrogen initiatives; $8 billion for four hydrogen hubs and about $1.5 billion for manufacturing and electrolyzers.
That’s really just the start.
For example, on the hydrogen hubs, we’re closely working with the northeast hub being driven by the New York State Energy Research and Development Authority — NYSERDA.
And Plug is instrumental in defining the plans and outlines for what a northeast hub would be.
We’re also deeply involved in the hubs for West Virginia and California. I think everyone who looks at the infrastructure bill wants us involved, knowing Plug is the U.S. leader.
In the climate bill, one of the areas that has not been controversial is support for the generation of green hydrogen.
It’s something that Senator Manchin and Senator Schumer both strongly support, which would have a production tax credit for green hydrogen which would be $3 a kilogram.
A kilogram is about equivalent to two gallons of gasoline.
So that’s a really exciting prospect for Plug [Power (NASDAQ:PLUG)], and we think there’s a two in three chance that it will become law.
On top of that, when you go to Europe — Europe has a very, very aggressive plan to support green hydrogen deployment.
I was in Denmark this week and Denmark has a plan to have 65 gigawatts of wind power by 2030.
Most of that wind power would be used for the generation of hydrogen, via parts like our electrolyzers.
We already have one deal in Denmark with a company called H2 Energy that is supported by Trafigura which will deploy 1 gigawatt of our electrolyzer products in the near future. So, a very strong climate to support hydrogen in Europe.
And you see the same in Korea where the Assembly this past May passed edicts on deployments of hydrogen.
And leaders like Mackenzie, Goldman, BloombergNEF all believe that approximately 20% of the world’s energy will come from hydrogen.
And many people know that Plug [Power (NASDAQ:PLUG)] is the leader in this area.”
Andy Marsh, President & CEO, Plug Power (NASDAQ:PLUG)
Timothy Winter, CFA, portfolio manager, The Gabelli Utilities Fund, The Gabelli Utilities Trust, The Gabelli Global Utility & Income Trust, and the Love Our People and Planet ETF
Timothy Winter, CFA, is a portfolio manager of The Gabelli Utilities Fund, The Gabelli Utilities Trust, The Gabelli Global Utility & Income Trust, and the Love Our People and Planet ETF and a research analyst covering the utilities industry for GAMCO Investors, Inc.
He joined Gabelli Funds in 2009 and has over 25 years of industry experience.
Previously he served over 15 years as research analyst covering utilities at AG Edwards, as well as Jesup & Lamont and SM Research.
Mr. Winter has received numerous awards and recognition for his work in the industry. He was a three-time All-Star Wall Street Journal winner and five time ranked number-one Electric Utility Team by Institutional Investor.
In 2018 he received Thomson Reuter’s U.S. Analyst Award and was ranked the number-one stock picker in the electric utility sector and water utility sector and number two in the gas utility sector.
Mr. Winter holds a B.A. in economics from Rollins College and an MBA in finance from Notre Dame. The Gabelli Funds portfolio manager is a CFA charterholder.
“The utility sector includes renewable power and storage developers, wind, solar, utility scale batteries and so on. Utilities are actively involved in the research and development for new technologies and improving existing technologies like hydrogen and carbon capture.
I’ve covered the sector for 30 years. And the utility funds are obviously focused on utility stocks. Love Our People and Planet is 30% to 40% focused on the E part of ESG, where a lot of that has to do with clean energy and with all elements of saving our planet.”
The Gabelli Funds manager has developed “a deep understanding of the major macro and micro themes in the environment and a deep understanding of how these themes impact the sector and each individual business model.
So for example, the biggest issues or themes of our time are decarbonization and the current energy crisis.
To pick winners, one must understand how returns, earnings and cash flow of the various different players in the energy ecosystem are impacted in the environment.
With utilities specifically, they earn returns when the state regulators recognize their investment and set rates to allow a return on the investment.
We try to have a good understanding of the regulatory environment of the various states and countries. We also want to have a grasp of the political environments, service area economies and management motives.
And then, we dig deeper down into the various groups, subgroups and players and forecast earnings, cash flows and risk profiles.
We then compare the valuations which suggest whether we should be buying, selling or holding. We go top down to identify big themes and then bottom up to ensure we identify those we think will be winners.”
This long term view guides Gabelli Funds portfolio manager:
“In the bigger picture, successful long-term investment requires consistent long-term energy policy.
In Germany, for instance, because of Fukushima, they’ve eliminated nuclear.
Because of climate change, they’ve eliminated coal.
Because they don’t have the fracking ability and the abundant natural gas reserves that are available in the U.S., they have grown more dependent on renewable power and energy imports.
Renewable power is the future, but wind and solar cannot run as baseload power or 24/7, and battery storage is not fully developed.
Germany and parts of Europe are experiencing shortages and high prices.
This energy crisis has been building for several years but was put on hold by the economic shutdowns and really reached crisis proportions in the fall of 2021, when Europe started to see real shortages and prices going through the roof.
The situation has been made even worse by the Ukraine invasion.
So yes, the very policies and desire to eliminate fossil fuels are leading to the unintended consequence and need to use more fossil fuels.
Is it a long-term trend? I would say, no.
And that’s why I just called it a double-edged sword that we have this near-term issue — near term meaning three to five years, perhaps — as there’s a massive push towards investing in clean energy. And, yes, it’s impacting my companies in the U.S. and in North America.
This is one of the reasons why we like the electric utility sector and the gas utility sector as plays in investing in clean energy in the decarbonization of the world.
Because they have a diversity of fuel sources, and understand the need for affordability and reliability, and are methodical and careful in where and how they invest capital.
As gas prices in North America and the United States go from $3 per MMBtu to $8 or $9 per MMBtu, it is causing concerns and issues.
It shines the spotlight on the lack of investment in natural gas infrastructure and the pipelines that have been canceled.
Companies have been discouraged to invest because they don’t know if they will be allowed to earn the returns going forward. Again, wind and solar are great and the economics and reliability are improving, but they’re not ready to run all the time, and battery storage is not to the point where we can make this dramatic shift as a country to 100% renewables.
So there has to be a transition.
And so, the back and forth, which is the hallmark of the United States, does allow for the debate in energy policy.
Utilities benefit even during the back and forth of the pendulum shifts because they earn returns investing in energy infrastructure.”
The Gabelli Funds portfolio manager has a job to back his theory with his investor’s money:
“The first name to highlight is NextEra Energy (NYSE:NEE).
They are the biggest electric utility in the world: $150 billion of equity cap, $210 billion of enterprise value.
They are also by far the leading and largest renewable energy developer in the world, and specifically, they’re focused on North America. And 60% of their earnings do come from regulated business in Florida, Florida Power & Light, which benefits from customer growth and solid regulation and a healthy rate plan for the next four years.
NEE management outlined the tremendous opportunity and capital needs for U.S. decarbonization and clean energy by 2050.
The numbers are staggering.
Currently, the U.S. has 1,100 gigawatts of power generation including coal and nuclear, natural gas, wind, solar and hydro.
The U.S. needs 7,000 gigawatts of renewable energy to decarbonize the U.S. economy by 2050, including 3,500 gigawatts from the power sector.
And so, as they’re the leading developer of wind, solar and battery storage, and they’re also investing in hydrogen, NEE is hands down the leading player with 50% market share of wind development and going to participate in this huge megatrend.
So that’s the number-one company.
NEE also owns 58% of NextEra Energy Partners (NYSE:NEP) which is also a renewable company.
They own wind, solar and some natural gas pipelines that are unique from NextEra Energy. And it’s a dividend play.
NEP grows the dividend 12% to 15% per year and acquires renewable projects from NextEra Energy and/or from other entities, or develops its own renewable projects.
So those would be the one and two on my list for sure.”
Get the complete interview in the Wall Street Transcript.
Timothy Winter, CFA, Portfolio Manager, GAMCO Investors, Inc.
email: twinter@gabelli.com
