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TheStreet Open House

A Cheap Stock Holds Key to a 'Green' Future

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By David Sterman

NEW YORK ( TheStreet) -- The global energy picture is changing so fast that it's getting hard to keep up. In just the last five years, we've seen:

  • Crude oil briefly spike above $140 a barrel in 2008
  • A number of governments -- especially in Europe and China -- subsequently rush to deploy solar and wind power
  • The U.S. find ways to tap into vast reservoirs of natural gas
  • The Chinese, Indian and Brazilian economies grow so fast their energy needs threaten to alter the current global balance between energy supply and demand
  • If there's one thing for sure, it's that more neck-snapping moves in the global energy market will take place anew in the next few years. And investors will need to be prepared to act accordingly.

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    The rush to embrace wind and solar power now seems to have been a bit hasty. Key countries such as Germany and Italy have radically cut spending in this area and, for investors, solar- and wind-power stocks have been duds anyway because supply overwhelmed demand and pricing plunged.

    Yet it's abundantly clear that in the future, the world will have to do more with less. Demand for energy will only rise, and the supply of energy may not keep pace. We'll have no choice but to make more judicious use of the power we have. Electric utilities are just now starting to take steps to enhance the efficiency of their networks, looking at ways to serve more customers without building more power plants.

    This, in a nutshell, is the premise behind a "smart grid."

    By adding a degree of intelligence to their systems, utilities can more effectively monitor and control power-consumption patterns. And though a number of companies seek ways to profit from this niche, only one has a longstanding track record and the products that can help utilities "get smart."

    I'm talking about Echelon (ELON), a company that has been around for more than 20 years and has already seen several spurts of growth on the heels of major utility contracts. Right now, its stock is near 10-year lows, as growth has slowed in a constrained global economy. But the steps are in place for a solid rebound in sales -- and the lagging share price.

    Hard Slog to Current Lows

    Shares of Echelon, which currently trade below $5, changed hands for $80 back in 2000. At the time, the company was in the midst of completing a huge contract with Italy's electric utility Eni (E).

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