Stocks that Move the Market
PWER: Boring Rules
In bear markets, boring rules. The last thing you want to be is a really interesting company with no capital and a big idea. People with big ideas are getting their hats handed too them and shown the door by the market. "Thank you for playing, enjoy you're career in consulting!"
Power-One is so boring that they got the ultimate nod on Friday: inclusion in the S&P 500.
And what is it that Power-One does? They make transformers. Honestly. This is their core competency. They make power systems that turn regular old line current into the highly refined, nectar-of-the-gods quality DC power that the entire information economy runs on. Not the dinky little thing inside your desktop computer though, we're talking about the big stuff: giant power plants that serve entire telecom switching offices, high end rack-mounted power units to run flight-simulators, supercomputers, industrial grade switches, etc. This is what's known as "Information Grade" power, and it turns out it's incredibly hard to deliver.
PWER delivers. And their competitive position is wonderful. With over 2,500 different products targeted at everything from small boxes to entire buildings, they truly cover the entire information landscape. And what they don't make, they acquire: PWER has quietly snatched up any niche player it sees with a technology that looks interesting. Along the way, they've managed to create deep relationships with most of the key players in the Telecosm: Cisco, NT, Lucent, Extreme, Nokia, Qwest, Williams, WCOM. Look under the hood and you'll find the nondescript Power-One Logo.
And the stock has delivered too. This year, as the market has come to understand the importance of power generation and maintenance to the technology industry, PWER has been "discovered". The stock started the year with a nice trend line off the February lows (thick blue line), but really kicked into high gear in May, following a great quarter and subsequent initiations from Morgan Stanley and Goldman Sachs. The stock stumbled briefly in July after missing rocketship expectations for earnings by 2 cents, and since then has whipsawed in the August NASDAQ recovery and September's subsequent slaughter. But unlike NASDAQ, Power-One put in a strong base between 55 and 60 (well above its long term support around 40). The base was due, as much as anything, to an upgrade by Morgan Stanley on October 3, but was a near death experience, keeping PWER within the trading range defined by its 2 standard deviation Bollinger bands based on the 50 day moving average (the bands are in black lines, the moving average the green line in the middle).
So where to from here? Friday was a critical day for PWER, as it poked its head over its 50 day moving average, and turned the slope of the average positive for the first time since September 21st. Another up day and PWER will be back in its all time high range of 80-90 (the thick grey lines), where I'd expect it to consolidate for a few weeks.
With a stronger than average market position and a stronger than average stock, PWER is very well positioned both to weather any coming storms and to take advantage of a solid stock price in making acquisitions. PWER's switch is definitely in the "on" position. |
