A Play on the Coming Energy Shortage: Part 2
Cramer is always on the hunt for a bull market, and tonight he’s found one in the smart electrical grid, which he calls the grid of the future.
Two-way digital technology to control your appliances and major electrical systems, which would lower your electric bill and fight climate change, may seem like a pipedream, but it’s close to becoming a reality. Cramer believes in the smart grid not because governments around the world are pouring money into upgrading their utilities for environmental and energy conservation purposes, but because this technology helps the utilities themselves make more money. That’s why the worldwide market for smart-grid technology is expected to grow to $200 billion by 2015.
“That’s called the addressable market,” Cramer said, “and believe me it’s big.”
He recommended Cooper Industries as a conservative play, but said he likes Telvent GIT as well, though it carries a bit more risk.
When a utility wants to upgrade its grid, they can call Telvent to do the work. TLVT implements advanced metering infrastructures, smart meters that collect a layer of intelligence to monitor and manage power usage. Many of meters can connect to the utilities remotely, saving them the cost of sending someone around in a truck once a month and allowing them to collect data at hourly intervals. This is the same business as Itron , the smart-grid play that has returned 25% since Cramer recommended it on Oct. 19.
Telvent also provides many other smart-grid technologies that don’t get the same level of public attention as smart meters, like Supervisory Control and Data Acquisition systems that control and monitor the generation and distribution of power in order to improve efficiency. The market for SCADA systems is estimated to be worth about $1.7 billion on its own, and Telvent is tied with General Electric, on the number-two spot.
TLVT is not a pure play, as just 20% of its sales are smart-grid related. But that percentage, Cramer thinks, will increase. Telvent’s really a mosaic of different businesses. It makes technologies that help to manage everything from oil and gas delivery systems to intelligent transportation systems. The company also has an agriculture business where its systems provide farmers, traders and food processors with weather data and market intelligence with 700,000 subscribers. That’s 60% of US agricultural production. Also, TLVT has systems that help water utilities conserve water, and Telvent has a traditional IT consulting business.
“This is a one stop shop for everything that’s going to be the future,” Cramer said.
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