Acorn Energy: A Little Technology Company About to Explode!
Saul is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Acorn Energy (NASDAQ: ACFN), is actually a publicly traded venture capital company. They buy small technology start-up companies that have technologies and products that are close to fruition, finance them, and nurse them along until they reach commercial success.
They’ve done this before; selling one of their subsidiary companies through an IPO in 2007, and selling another company in 2010 for $101.0 million. They had invested only $18.5 million in this company, which means they made over 400% profit on the deal. This provided them with plenty of cash (they currently have about $33 million in cash and cash equivalents) that they use to pay a 3½-cent quarterly dividend.
They currently own four small companies that are in various areas of energy and energy security. These subsidiaries have technologies that address large markets, and are not capital intensive.
What’s really exciting about Acorn Energy is that two perhaps three of these subsidiaries, which in the past had hardly any revenue at all, have turned the corner to commercial success, and are about to hit it big.
Just since June 20th here are the press releases Acorn has issued:
GridSense, an Acorn Energy Company, Announces New Substation Monitoring Application at Two Utilities (June)
Acorn Energy, Inc. Joins Russell 3000 Index (June)
GridSense, an Acorn Energy Company, Partners with California Utility to Measure Photovoltaics' Effect on the Power Grid (June)
US Seismic Systems, an Acorn Energy Company, Ships All-Optical Array for Marine Based Oil & Gas Operations (Jun)
US Seismic Systems, an Acorn Energy Company, Ships World's Largest Down-Hole Optical Seismic Array (July)
Acorn Energy Companies DSIT and US Seismic Collaborate to Win $900,000 BIRD Development Grant (July)
DSIT, an Acorn Energy Company, to Build a Sonar Simulator for an Asian Defense Contractor (August)
US Seismic Systems, an Acorn Energy Company, Receives Order for the World's Largest All-Optical Down-hole Seismic Array (August)(This is apparently larger than the previous world’s record that they delivered in July).
US Seismic Systems, an Acorn Energy Company, Receives an Order for a Permanently Deployed Down-Hole Seismic Fiber-Optic Array for CCS Monitoring From the University of Calgary (Sept)
DSIT, an Acorn Energy Company, Receives Multiple Recurring Orders for Development and Production (Sept)
The subsidiary that can potentially hit the biggest home run is US Seismic Systems, which has developed a fiber-optic sensor system for use in oil and gas reservoir management and pipeline monitoring. An oil and gas producer can use US Seismic’s fiber-optic sensors to monitor the flow of its reservoirs, improve the management of its production, and increase the yield of reserves that can be extracted.
US Seismic’s sensors are very low-cost and have far, far, greater sensitivity than legacy products. They can also withstand high temperatures and hostile environments. This makes a purchase decision fairly easy for an oil or gas producer.
The US Seismic sensor system has been tested for the past six months with seven oilfield producers; six of those have already placed large commercial orders. No one has turned them down. The seventh has only had the system for a few weeks. As you can see from the press releases, some of these orders have been of world-record size. And they expect the companies who have placed initial orders to continue to place many more.
The potential market is huge for a little company like this. We’re talking about revenues in the billions if their system becomes widely used in the oil fields. Acorn has been investing more money to ramp up production to keep up with orders and expected orders
In my blog about a number of weeks ago I pointed out that out of the last 29 or so insider trades in Acorn, dating back to June 2010, an amazing 28 had been purchases at market!! The only sale was by the CEO of an acquired company.
This is so astounding and hard to believe for a development level company that you might want to verify the details of the transactions yourselves.
I compared this with other technology companies. For example, I looked at 3D Systems (NYSE: DDD). 3D systems is a 3D printing company which is one of two dominant companies in a new field. It has gotten a lot of publicity recently. Their last 25 insider trades had all been sales. Not a single insider buy. Amazon (NASDAQ: AMZN) seems to be taking over the world of online retail commerce. You'd think their insiders would be buying. But their last 23 insider trades showed 22 insider sales, and a single tiny insider buy. Insider sales were more than 99.8% of the dollar total. IPG Photonics (NASDAQ: IPGP) has cornered the fiber laser market and is gaining sales and market share like mad. However the insiders have made 19 straight insider sales. Google (NASDAQ: GOOG) is a dominant company in online search and is expanding into many other areas of technology. However they've had hundreds, yes hundreds, of insider sales in the last two years. Not a single insider buy. NOT ONE!
But this is what developing technology companies ordinarily do!!! It’s normal for them. They pay their senior employees with stock and the employees often sell the stock almost as fast as they get it.
When I discovered this anomaly, all these insider buys with Acorn, I wondered: "What’s going on? Why are all these insiders buying all the shares of Acorn that they can get?"
Well, in the March quarter conference call, they estimated that by 2014 their revenues would be 5 to 10 times as large as in 2011. That’s not 5 to 10 per cent larger. That’s 5 to 10 times as large! They felt they were at a tipping point. In fact they were pretty euphoric, and gave the impression that they were low-balling what they really thought because no one would believe it.
When you look at the press releases since June, you see why they felt that way.
And that's why all those insiders have been buying.
I have long positions in Acorn Energy, Amazon, IPG Photonics and 3D Systems. The Motley Fool owns shares of Amazon.com, 3D Systems, Google, and IPG Photonics and has the following options: short NOV 2012 $35.00 calls on 3D Systems. Motley Fool newsletter services recommend 3D Systems, Amazon.com, Google, and IPG Photonics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.