RocketCap Smart Grid Stock Index

We first published the RocketCap Smart Grid Stock Index on this site. We have upgraded it in the intervening time period and discuss the new version on this page.

On 11 May 09, we explained the Smart Grid and discussed why it’s important, and said we would focus on investment opportunities in this field:

http://www.rocketcap.com/smart-grid-the-next-big-thing/

Also on that day, we introduced the RocketCap SG Stock Index (RSGSI) in this post:

http://www.rocketcap.com/the-rocketcap-smart-grid-stock-index/

Later, on 24 May 10, we presented a report that analyzed 23000 patents in the Smart Grid field, and identified the firms with the most patents in Smart Grid technology:

http://www.rocketcap.com/intellectual-property-leadership-of-smart-grid-business/

As time has passed we have decided to focus the RSGSI on those firms with these characteristics:

• Be publicly traded
• If a vendor, the firm must have expressed consistent commitment to supplying the Smart Grid market (i.e., electric utility companies) with electrical/electronic and software systems.
• If an electric utility, it should be deeply involved in implementing Smart Grid systems.
• Preferably, the firm should own at least one patent on some form of Smart Grid technology.

Given these revised criteria, the list of RSGSI firms has been modified and the number of firms reduced from the original version. Their stock symbols and the number of their Smart Grid patents are listed here:

 

Name	Symbol	Number of Smart Grid Patents
ABB Ltd.	ABB	188
General Electric	GE	141
Siemens	SI	56
Itron	ITRI	53
Eaton Corp.	ETN	39
Cooper	CBE	20
IBM	IBM	14
CenterPoint Energy	CNP	3
American Electric Power	AEP	2
Duke Energy	DUK	2
Progress Energy	PGN	1
Cisco Systems	CSCO	0
Comverge	COMV	0

 

Two components are notable, Cisco and Comverge, since neither has any granted Smart Grid patents. But Cisco has committed substantially to the Smart Grid, with investments and organizational dedication, since they perceive Smart grid offering Cisco a substantial new market for their networking equipment and software. Comverge is mostly dedicated as a firm to Smart Grid supply as well.

The RSGSI Construction

As noted before, we have chosen to define the index by taking the average price of the shares of the RSGSI firms. The charts are given below, and they follow the same format as for RIPSI.

A much simpler and more powerful way to define an index, in our opinion, is simply to average their prices. Thus, the average reflects the “typical” price of the firms within the index. If the index comprises a set of firms that focus on a specific economic or financial activity, then the index price is a pertinent representation.

We say the RSGSI firms are a good representation of firms that will directly gain from the growth of Smart Grid systems.

Here is the daily price chart for RSGSI:

This chart compares the gross returns of RSGSI and  the S&P500 over the same 6-month time period:

Finally, this chart shows the corresponding gross returns for each of the 13 components of RSGSI:

We note the RSGSI is performance was degraded by COMV on this horizon.