Here's Why Siemens Energy Is No Longer a High-Flying Stock
In my HOAX WhatsApp group, the worst response a stock can earn is a one-word comment from me: Oops. I used one Friday on Siemens Energy (SMNEY) . Siemens Energy shares, which have a main listing in Frankfurt, but also trade on the OTC, were down a mere 27% Friday.
A mere profit warning does not merit an "oops," but what Siemens Energy was indicating was much, much worse than "one bad quarter." In fact it would seem that Siemens has the ultimate defect of a manufacturing company: Its products break. Often.
From the CNBC article:
Siemens Energy estimates that component failures may be occurring in between 15% and 30% of its installed fleet of turbines, but Green noted that there is still a "slight question mark about where that liability ends."
That is an absurdly high failure rate. I have been following manufacturing companies in some way, shape, or form for the past 30 years, and I have never seen such a high failure rate quoted. In fact I am having difficulty recalling one that was above single-digits.
But the absurdity of Siemens manufacturing issues, which manifest themselves in the Siemens Gamesa wind turbine business, which is a subsidiary of Siemens Energy, only serves to present the real moral of this story, from a public policy perspective: wind turbines are dumb.
It is just a foolish way to generate energy. It is also very dangerous to birds. In addition, offshore wind turbines, which are even dumber than onshore ones, have been linked to a recent spate of whale deaths on the East Coast of the U.S.
Collateral damage aside, it just is not windy all the time. Duh!! But know-nothing public servants have mandated these bird-shredders to fight the Trojan Horse of climate change. Solar is much more efficient, although it takes up much more space per kW generated and obviously requires extensive battery networks, since, yes, the sun does not shine all the time, especially at night. Duh!
Until Friday, Siemens Energy had actually been a high-flier, with its stock doubling since the October lows. Oops! Did analysts not realize that this company produced a product with a 30% failure rate? Nope, but, again, remember this -- the same analyst community that is foisting upon you ideas like the planet is melting (it's not), Tesla's (TSLA) can drive themselves (they can't), and that Generative AI is a game changer for companies like Microsoft (MSFT) and, again, Tesla, (it's kind of scary, but it won't change profit margins or returns on capital.)
So there is always an "oops" lurking around the corner. To avoid them, just avoid companies that are being extraordinarily overvalued owing to faddish ideas. Alternatively, you could even avoid stocks altogether, until the S&P 500 corrects back to more attractive valuations, which would occur below the 4,000 level.
Bloomberg's U.S. Rates and Bonds page is showing a 5.24% yield for the 12-month U.S. Treasury note Friday. That's an attractive number, and carries with it no chance of an oops. I am nearly doubling that -- my last two model portfolios, NOFIN and FAITH, both yield about 9.4% -- but that involves taking idiosyncratic, company-specific risk.
I'd like to think I am not stupid enough to invest in something as Sancho Panza-style dumb as windmills, but, again investing in equities involves risk. To fully present an "oops" just say "bye-bye" to the stock market and buy bonds.
(Microsoft is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells MSFT? Learn more now.)
Source: RealMoney
