Thank you, whoever is buying AMSC. I don’t know why you’re doing it, but it is providing hope where hope’s been dwindling. This may be about stocks, but it is also about good times coming out of bad.
There are technologies that can positively disrupt entrenched industries. I try to invest in some of those. One is AMSC, which originally was called American Superconductor. Without getting into great detail (see my semi-annual portfolio reviews for links to that) the company has the potential to do for power what fiber optics did for telecommunications: use new tech to dramatically increase capacity, efficiency, and reliability. With superconducting cables that means better transmission lines, motors, and regulators. Great idea. It hasn’t worked as planned.
For years the company was shadowed by the financial implosion of a very lucrative market and one of their divisions: wind power. Unfortunately, one of their main Chinese customers decided to use the same tech to turn from customer to competitor. Court cases became more important than marketing and sales, at least within the investing community. Recently, the court case was solved. Damages were much greater than the award, but the case finally was resolved.
In the meantime, the company’s promise for its main product hasn’t been making headline news or disrupting anything. Regardless of the court case, the business could’ve progressed, but it didn’t exhibit stellar growth or gain attention from technological achievements. Hope faded, but my investment was in an IRA so there was no benefit to balancing the loss against some other gain. I continued to hold the stock.
There wasn’t another gain to balance against, anyway. My portfolio of potentially positively disruptive technologies wasn’t disrupting anything.
Despite that, in the last year AMSC has more than tripled from $4.68 to $15.42. Look back a bit further and the stock has almost quintupled from $3.13. All without making much of a headline.
It’s tough watching good ideas languish. Whether in stocks, the arts, social justice, the environment, good ideas exist but most don’t receive recognition or traction. And then, something simple and quiet can happen that propels the idea. Without a real example, it can feel as if nothing positive is going to break through. And yet, we hope.
Hope is not a strategy. It is a gamble, a speculation, an attitude. And yet, people win the lottery.
My portfolio has become entertainment as much as investment. When stocks fall too low they can go through reverse splits, delisting, and dilution. I continue to watch my stocks because I am interested in how the system works, and how it is changing. I’m also interested because I have hope for energy efficiency, treatments for cancers and accidents, and the elimination of millions of resource-intensive computer screens. AMSC, AST, GERN, and MVIS represent some of those companies. All have great potential. All have languished – except AMSC’s price.
Distressed stocks can be like distressed houses, their prices may be much lower than their market value, or the market may actually be overvaluing them. It’s hard to tell. That’s why there is risk in investing, and in flipping houses.
Most of the stocks in my portfolio are at least somewhat distressed. If they were all to experience the same quintupling like AMSC that would be good, but it wouldn’t mean a re-retirement for me. Five times a small number can still be a small number.
Gains aren’t limited to simple figures that we have names for, like 5X = quintupling. FFIV, the holding I sold to pay for the downpayment on my home, rose from under $3 to almost $200. What do you call that? These things do happen; especially, with stocks that are undervalued by emotion rather than arithmetic.
I don’t know if something similar will occur with any of my other stocks, but they’re all targeted at large markets with high barriers to entry and large unmet needs. Such stocks can gain premiums. As I said over on the MVIS Reddit board;
“And then, dilution. The top line revenue estimates are as impressive (and speculative) as ever. The number of shares, however, has ballooned to the point that $200 is more like $10; and I suspect many would accept a buyout at $5.“
The upside potential isn’t necessarily limited by the market. Sometimes it is limited by the investment community.
If, however, ideas are allowed to grow, gain acceptance, and become important in the new necessities of our world, then a $1 stock may rise much higher than $5. Whether they get to $200 or higher is less likely, but it would be very welcome. Then that re-retirement becomes much more likely. I can hope.