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How to Play the 2011 Blackouts

Written By Brian Hicks

Posted July 21, 2011

At close to 100 degrees here in Baltimore, it’s hot… real hot. (If I hear one more person ask me, “Is it hot enough for you,” I swear I’ll lose it.)

But there’s an easy way to profit from it… if you play it safe.

You see, every time it gets really hot like this, blackout warnings are issued.

And power grid stocks, like Beacon Power (BCON) have a good chance of spiking on the news. This is the company with flywheel technology, which stores power. These guys can buy power from the grid at cheaper costs and sell it at higher cost.

There are antiquated U.S. power grids that will not be able to handle the demand on scorching hot days. And Beacon has done quite well on the failure.

On August 14, 2003, a power failure in the northeastern USA and central Canada hit 50 million people. BCON popped from 25 cents to $1.25.

On September 19, 2003, Hurricane Isabel destroyed electricity for 4.3 million people across the United States and part of Canada. BCON popped from 60 cents to more than $1.

On September 4, 2004, five million people in Florida lost power after Hurricane Frances. BCON ran from 25 cents to 75 cents.

On August 26, 2005, 1.3 million people in Florida lost power because of Hurricane Katrina. BCON ran from $1 to $5.

The stock ran slightly in 2006 on the Queens Blackout news, and again in 2007.

The stock doubled in the summer of 2008. It ran from $4 to about $11 going into the summer of 2009.

And while it didn’t do much but drop in 2010, we could see a bump if the lights go out in New York.

Know this, though. This is an extremely speculative play. If you decide to trade it, play it safe. Don’t risk the house. Don’t risk more than you can afford to lose.