Two Stocks to Weather the Storm

03/26/2008 12:00 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Jim Jubak, senior markets editor of MSN Money, finds two companies whose businesses should hold up well no matter what happens to the economy.

On February 26th, Maxwell Technologies (Nasdaq: MXWL), [which makes energy-storage and power-delivery products], reported a fourth-quarter loss of just four cents a share, a huge 17 cents a share better than Wall Street had projected, on revenue of $17 million. That revenue number represented year-over-year growth of 14.6% and beat the Wall Street consensus estimate of $15.3 million for the quarter.

Efforts by new chief executive officer David Schramm to pursue only business that yields a profit-rather than growth for growth's sake-in the company's ultracapacitor unit seems to be paying off.

Revenue from ultracapacitors, an energy-storage technology that's ideal for fast-charge, fast-discharge uses such as in hybrid or all-electric cars-rose only 7% from the third quarter, but the company made substantial progress on reducing manufacturing costs. That led to an improvement in gross margins to 29% in the fourth quarter from 24% in the third quarter.

The timing of any big jump in ultracapacitor revenue continues to hinge on the rate of adoption by the auto industry. During the quarter, Maxwell announced a contract to supply ultracapacitors to Continental, a German auto supplier, for use as the energy-storage element in an electrical system board that Continental is designing. BMW is expected to take 100,000 to 200,000 boards for use in a 2010 hybrid.

Continental is also known to be working with other automakers on ultracapacitor electrical systems. I think the potential here justifies sticking with these shares even in the present terrible market conditions.

I'm raising my target price of $14 a share by December 2008 from a prior $12 a share by November 2008. (The stock closed below $11 Tuesday-Editor.)

On February 20th, Itron (Nasdaq: ITRI), [which makes meters and other products for energy and water companies], reported earnings of 81 cents a share, nine cents a share above Wall Street expectations, on revenue of $480.5 million, [also] well above the Wall Street consensus.

Even better, the company told Wall Street to increase its revenue estimates for the first quarter [and] for all of 2008, [when] the company expects revenue of $1.87 billion to $1.91 billion versus the current $1.82 billion Wall Street projection.

A few days later, Itron announced that it had won a major contract from Pepco Holdings, one of the largest electric utilities in the mid-Atlantic region, with two million customers, for its metering-data-management product. Pepco will also use Itron software to manage peak utility loads and improve revenue predictability.

In addition, Itron is one of two finalists for a Southern California Edison program to deploy 1.4 million electric and 900,000 gas "smart" meters.

I'm raising my target price on Itron to $108 a share by December 2008 from my prior target of $92. (It closed just above $94 Tuesday-Editor.)

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