"I’ve always been partial to going with the 'pick-and-shovel' companies; in the solar sector, that means buying the companies that make the equipment that makes photovoltaic (PV) panels," says Gregg Early.
In The New World, the high tech expert offers a pair of plays: Spire Corp. (NASDAQ: SPIR) and CVD Equipment (NYSE: CVV).
"The companies I like have established positions in markets that have a proven commitment to distributed power generation and continue to make major investments in renewable energy technologies, with solar being the lead technology.
"Two pick-and-shovel companies that I like are tiny companies, but they’ve been working smart, expanding their customer base and gaining strong international reputations along the way.
"Spire is a Massachusetts based company that is closely held--about 80% of its stock is held by the CEO and executive officers--and has come into its own as a manufacturer of turnkey PV production lines.
"Much of its recent business is selling facilities to power companies in Europe and Asia that are interested in making their own PV systems as opposed to contracting to large foreign PV firms. The advantage of these deals is it allows these companies to stay in control of the knowledge base.
"Although its business may suffer along with the sector, most of this has been priced in already, or, as Warren Buffett said of the market in general, overpriced in. Spire Corp is a buy at current levels if you have some risk capital you want to play with.
"CVD is another company that’s a worthy speculation if you’re interested in getting to the pick and shovel makers of the US PV industry.
"CVD is an acronym that stands for chemical vapor deposition, which is a chemical process for building high-performance, high-purity solid materials by converting gases into solids and layering them on substrates.
"CVD doesn’t make equipment for university and Fortune 500 research labs, but it has a uniquely skilled workforce that will partner with small companies to help develop technologies that pass scrutiny.
"For the startup, that means more money can go into materials and research than going about the expensive and time intensive process of staffing skilled scientists.
"In these times especially, this strategic partnering is a very attractive possibility to start-ups and R&D facilities of big companies as well.
"CVD also has been very involved in flexing its nanotech muscles, which has certainly boosted its PV business, in particular thin film PV.
"Its First Nano product group manufactures the EasyTube equipment product line used by researchers around the world to develop and grow a wide variety of next generation nanowire, nanotube and thin film materials.
"And the big kicker is, the company doubled its revenues in 2008. It’s even hard for me to believe they pulled that one off in such a lousy economy, but this is what’s so compelling about this little company. And management is solid and committed. CVD Equipment is a buy at these levels."
