Aerovironment (AVAV) Breakout – A Diversified Play On Alternative Energy

architecturalwind_avav_small There are few stocks breaking out to all time highs and even fewer, if any, green stocks trading at all time highs. I have one for you today.  The company is Aerovironment (AVAV), often recognized for its rooftoop wind turbine systems with  farms in place at Logan Airport in Boston as well as other commercial properties.  However, that isn’t their only green initiative.  They also develop a solar pump controller to facilitate access to water in remote  areas as well as test and charging systems for electric vehicles.  Add to the mix an unmanned aircraft business and you have a nice way to play the alternative energy space with some diversification behind it.

Despite being a bit erratic financially from quarter to quarter, the company has been profitable for many years and is expected to grow steadily in 2009/2010 after taking a bit of a hit in earnings this year.  Earnings are expected to grow around 15% next year and improve a bit to around 20% in 2010.  Net margins (~10%) and ROE (~14%) are solid and management owns 25% of the company, all of which add up to a solid company.

Jim Cramer singled out Aerovironment on his show the other day as one of the few stocks that will rally under an Obama victory, ironically not because of its green initiatives but because of the unmanned aircraft business which Obama is a fan of.  CEO Tim Conver told viewers that AVAV is well positioned to compete in the defense sector and his company has no debt and $112 million in cash. 

Technically, the stock has run up quickly following Cramer’s call, vaulting from around 28 to 36 in just a few trading days.  That has pushed into a breakout to new all time highs, almost always a bullish scenario.  However, its too extended in the short term and needs to digest recent gains.  I’m looking at a position closer to the 50 day moving average around 32 a nice area to scale into a position.


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