Generating Return: Generac Holdings (GNRC $192.50)
Photo: Generac
Back-Up Power Generators Are the Covid Device of the Moment.
Noisy, low-tech internal combustion engines, rigged to generate emergency power in a blackout, have always caught the attention of the professional investor during a disaster. Nothing drives a power generator company’s value more than a hurricane, ice storm, or major power outage working its way through heavily populated areas. Investors wake up, realize what a hash job Thomas Edison and George Westinghouse did deploying the American electrical grid a century ago. The financially literate then beaver away, usually by candlelight, toting up the money lost from no cold food, no hot water or live Internet.
$150 billion annually is the oft-quoted figure for the cost of America’s feeble power grid.
Is it any wonder that a back-up generator company, like Wisconsin-based Generac Holdings, is worth an astounding $11.2 billion, even though its technology was used by General Ulysses S. Grant.
But now generator companies are telling a broader story: The global covid pandemic has turned old-school back-up power systems into the device of the moment.
Powering The Covid Castle
According to generator installers, designers, energy providers, and wholesalers, back-up power generators are seeing once-in-a-generation demand. Wholesalers say aggressive buyers are purchasing units by the tractor-trailer load. Installers complain of shortages in add-ons and other systems. Customers face installation delays well into 2021. And energy suppliers now say simply managing the delivery of propane and diesel, for these units, has become a major burden.
The driver here is the pandemic-driven race to work and study from home, in once remote areas.
Real estate developers we spoke with in Maine, Colorado, Michigan, and upstate New York, confirm national reports that home demand is essentially bottomless. Real Estate data sources, like those from Realtor.com, say among the “hottest” markets are once unlikely places, like Columbus, Ohio, Manchester, New Hampshire, and Rochester, New York, all of which operate under the limits of America’s flimsy power grid.
In 2019, Rochester Power and Electric, for example, released statements concerning service outages 10 times.
No Powerful Option
What generator installers also confirm, is how non-viable alternative power options stubbornly remain. Installers say, car maker Tesla’s home power replacement system, called the PowerWall, would cost at least 3 times as much as a traditional generator, with some installations requiring yet more expensive units and systems.
Certainly, investors could find a bit of a shock in valuation in an operation like Generac Holdings. It’s stock is trading at close to 43 times earnings. That’s a fortune to pay for a company that really has no story to tell in the energy topology of tomorrow.
But when a simple analysis of the time customers must travel to a hospital is considered, Tenet’s prospects fade. We counted roughly a dozen closely located competitors to Tenet’s. But it won't matter: Power generators are evolving from a last-line of defense against the occasional disaster, in a first-order lifeline that connects the newly remote worker and student to their jobs and classrooms.
They are the critical machinery that keeps the dream of a normal life alive. Demand for them will be like a trip to the Acropolis in Athens: A cliche that will never get old.
