The Place to Be Over the Next 10 Years

I’m amazed by the strength of this bear market rally and can only surmise that investors that have been sitting on the sidelines decided to invest a small portion of their cash after a period of exasperation. We had a lot of bad news in a short period of time and the main stock market averages corrected significantly in a short period of time. In a sense, the stock market’s worst fears about the economy were priced into stocks in record time.

I’ve written about a number of stock market winners over the last month, most of which were U.S.-listed Chinese stocks. In the last week of November, I wrote in this column about the power generation business in China as an industry that’s almost recession-proof. This is especially the case since that country announced an enormous infrastructure stimulus package. Specifically, I wrote about one interesting small company that’s experiencing a lot of growth right now.

The company is called A-Power Energy Generation Systems, Ltd. (NASDAQ/APWR). This U.S.-listed Chinese stock helps design and build micro power grids for industry and small communities in China. The company is now also selling large-scale wind power generating systems.

In China, the nationwide energy grid is a patchwork at best. So, many cities and many industrial sectors are opting to build their own smaller generation plants in order to get more reliable electricity. A-Power Energy has doubled in price on the stock market on heavy volume since I first explained about this company last month. This stock is a prime example of an equity security that benefited reatly from the sentiment-based bear market rally.

Without the wind at its back from the fast change in investor sentiment, this stock wouldn’t have moved like it did. It serves to illustrate that you can make a lot of money in a bear market if you don’t give up watching and waiting for the right stock and the right timing to come together.

A-Power Energy recently quoted the International Energy Agency (IEA) estimates that China’s primary energy demand will increase 3.2% annually from 1,742 million tons of oil equivalent (MTOE) in 2005 to 3,819 MTOE in 2030. The company cited the IEA as projecting that China’s energy demand will grow more rapidly in the near term, projecting a 5.1% annual increase from 2005 to 2015. Based on these growth rates, China will overtake the U.S. as the world’s largest energy consumer shortly after 2010. The company also quoted the IEA estimates that China needs to add more than 1,300 gigawatts (GW) to its electricity-generating capacity over the coming years, more than the total currently installed capacity within the entire U.S. market.

With this kind of growth, the power generation business in China is the place to be over the next 10 years.