American Superconductor's Wires Are Hotby
Minutes after the Dow Jones wire reported at 2 p.m. on Mar. 8 that financier George Soros had taken a 5.3% stake in American Superconductor, the stock jumped almost 2 points, to 32 a share. Not many investors have heard of American Superconductor, a development-stage company formed in 1987 to develop commercial uses for its patented high-temperature superconductor ceramic wires and wire products. "It's the only play in superconductivity whose potential is difficult to overstate," says financier Ken Langone, managing director at Invemed Associates, a New York investment bank. CS First Boston and Invemed last month co-underwrote a secondary offering of 1 million AMSC shares at 291 4 a share.
"AMSC is a stock to keep for the long term if one wants to participate in the gigantic global demand for superconducting products," says Langone. High-temperature superconducting (HTS) wires provide advantages over conventional wires, he explains, because they conduct electricity with little or no energy loss.
MEGAMARKET. AMSC is developing the application of HTS wires and wire products in a variety of power systems, including electric generators, high-field electromagnetic systems, and transmission cables.
A big bull on AMSC, analyst Theodore O'Neill at Boston-based investment bank H.C. Wainwright notes that the market for superconductors and ancillary products could reach $8 billion to $12 billion by the year 2000.
By then, AMSC "could earn $15 a share and do so on an entirely self-funded basis," he says. Part of the earnings will come from the fruits cf a number of strategic alliances AMSC has formed with major global companies, such as Italy's Pirelli, Germany's chemical-and-drug giant Hoechst, and Toronto-based INCO, the major nickel-and-copper mining company. AMSC has contracts with a number of government agencies to build prototype HTS electromagnetic coils. Already, the company has sold several prototypes to private-sector customers.
Joan Lappin, president of Gramercy Capital Management, which has accumulated a 7% stake, figures the stock could hit 60 in two years and then double again two years thereafter. She bases her targets on earnings by analyst O'Neill of about 2 a share in 1996, $1.40 in 1997, $3.60 in 1998, and $7.40 in 1999.
Rarely do you find a company with an "important cutting-edge technology and smart, honorable people behind it," says Lappin.