How to Profit From the Greatest Engineering Feat in History

By
A A A

Do you know what the National Academy of Engineering named as the world's greatest engineering feat?

It wasn't the pyramids. It wasn't Hoover Dam. It wasn't the Burj Khalifa, the world's tallest building at 2,717 feet, either.

It was the United States' electrical grid.

The grid is an amazing marvel (it contains 186,000 miles of transmission lines!), but here's the surprising thing -- fundamentally we're still using the same technology Thomas Edison and Nicola Tesla used over a century ago. But I think that's about to change... and in a big way.

You may know that I'm the Chief Strategist behind Game-Changing Stocks . My entire goal is to find situations where a major shift is taking place. When I find these game-changing events, I also find stocks that will profit from it. And I think the update to a "smart grid" is going to be a game-changer.

Profiting from the smart grid
The name "smart grid" really doesn't tell us much. But those two words imply a ton of changes to our current system. The smart grid is simply a series of upgrades to the nation's power delivery system that increases utilities' ability to manage power generation and distribution and enables customers to monitor their use.

What really drives home the benefit of an updated grid is the idea of "lost power." The existing system is a one-way enterprise that does not provide any information about power once it leaves the generation plant. The smart grid, using sensors, advanced meters and other upgraded devices, allows for real-time monitoring of and communication with every component on the grid. With a smart grid, a utility would know exactly where on the grid an outage, or a leak, is occurring.

And during peak demand periods, the grid could allow the utility to conserve power by, for example, adjusting thermostats or disabling clothes dryers. Pricing could also be adjusted. If demand is running high, like summer afternoons when the country's air conditioners are running as hard as they can, utilities could raise their prices, which would incentivize major industrial customers like factories to scale back their use, perhaps shifting production to the night shift and easing the burden on electrical resources.

The existing grid -- which is actually three separate systems, the Eastern grid, the Western grid and a sub-grid just for Texas -- is also limited in its ability to add non-traditional sources of power. Renewable sources like solar and wind energy are good and getting better all the time, but they're weather dependent and not always available.

Adding technology to the grid that would let it sense when and where those resources are available would help integrate the assets to the grid. What's more, integrating the three grids and building it out in key areas could lead to a far more meaningful level of renewable power use. As it stands, several huge renewable power projects -- including one backed by T. Boone Pickens -- have been put on hold because they literally couldn't be plugged into the system.

What I think makes the smart grid the most exciting, however, is that just about everyone would benefit. It's rare that you can line up interests like this. When you do, it's a tell-tale sign that it's time to get in front of the trend.

For example:

  • All consumers will be able to use the grid's features, like smart meters, to help control their household expenses.
  • Business and industry will be able to monitor their costs, increasing profitability that will add to theeconomy -- and not just peanuts. These upgrades can put a few percentage points on GDP , and at a very robust return on investment.
  • Utilities themselves will have a much more efficient system with lower costs, easier maintenance, satisfied customers, and fewer outages. Simply finding lost power could add +10% to their top line.
  • The whole system will require thousands of jobs , from people to build the equipment to those who will install it to those who will monitor it and keep the system running.
     
  • Environmentally minded users will have better access to more renewable "green" power.
     
  • The upgrades include added features that will increase the grid's security features, making it less vulnerable to cyber attacks, which will please national defense interests .

Action to Take --> There is also another class of people in line to see benefits: the investors who own the companies that will do all the work -- and make all of the profits.

The federal government has committed $3.4 billion in stimulus funding to update the grid, which has been matched, so far, with some $8 billion in private sector funding. That's more than $10 billion already dedicated to the project, and the select few companies with the technology and know-how to update the greatest engineering feat of all time will see the lion's share of that cash.

If you're a conservative investor, the big names in the industry, like Honeywell ( HON ) and Siemens ( SI ) , should see plenty ofcash flow into their coffers thanks to updating the grid.

But when I find a game-changing opportunity, I'm most interested in the smaller upstarts. These companies offer the most opportunity for growth. In fact, I highlighted several of these small companies in a recent issue of Game-Changing Stocks .

[Out of fairness to my current subscribers I don't want to mention the smaller game-changers I highlighted in my recent issue. But if you sign up for Game-Changing Stocks today, you can read the latest issue immediately. We're also offering a 30-day money-backguarantee , making your subscription risk-free. Click here to learn more .]


--Andy Obermueller

Andy spent a decade as a financial journalist writing for some of the largest newspapers in the nation. His acumen helped guide the financial news read by over a million people each day. Read more...

Disclosure: Neither Andy Obermueller nor StreetAuthority, LLC hold positions in any securities mentioned in this article.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.


This article appears in: Investing , Investing Ideas

Referenced Stocks: HON , SI

Andy Obermueller

Andy Obermueller

More from Andy Obermueller:

Related Videos

Stocks

Referenced

100%

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com