S.E.E. Change? S.E.E. Change Go Slow

As interest in all things green has surged, business groups in Washington have jumped cheerfully in. But as one association’s initiative illustrates, these high-profile efforts aren’t without risks.

In September, 2005, chief executives from Dow Chemical, Sun Microsystems, Xerox and three others joined then Senate Majority Leader Bill Frist at an event near the White House to tout a new initiative called S.E.E. Change.

Sponsored by the Business Roundtable, an advocacy group representing 150 bosses of big companies, the initiative set out to burnish business “as a force for good” in matters of society and environment. Along with the event, the Roundtable took out full-page ads in several big newspapers and won widespread press coverage, including an item on Forbes.com.

In Pictures: A Gallery Of Green Spin
The progress so far? S.E.E. Change (which stands for Society, Environment and Economy) has added 10 new members to a founding roster of 18 companies who committed to showcasing and tracking their sustainability efforts. Not an insignificant increase, but a long way from the S.E.E. objective of getting all 150 Business Roundtable companies on board.

“It’s an aspirational goal,” says Marian Hopkins, director of public policy for the Business Roundtable. “[S.E.E. Change participants] can be great advocates to other member companies.”

Full story at Forbes.com

Savvy Savi Thrives Within Lockheed

Washington, D.C. – Savi Technology, an 18-year-old Mountain View, Calif., developer of systems to track cargo and other assets using radio frequency identification (RFID) technology, has had so many corporate parents that you almost need one of its chips to track it.

A year ago, Lockheed Martin (nyse: LMT – news – people ) bought the then-private Savi for a reported $400 million. And as Savi co-founder Vikram Verma, who now runs the Savi Group within Lockheed, tells it, the unit seems to have finally found a good home.

At the time of the June 2006 acquisition, Savi had 300 employees and $80 million in revenues. In contrast, Lockheed, a government contracting behemoth headquartered in Bethesda, Md., has 140,000 employees and $39.6 billion in sales.

That raised the possibility that Savi might get lost within Lockheed, as it had in other big corporations. But Savi has brought Lockheed veterans into its operation to both boost its government contracting expertise (its first big defense win was a contract worth $70 million in 1994) and, frankly, to raise its stature within the Lockheed organization, Verma says.

It seems to have worked. At a recent Sanford Bernstein conference, Lockheed Chief Robert Stevens singled out Savi and its business as one of Lockheed’s most promising areas of opportunity for the next five years.

Full story at Forbes.com

Home Builders Hit The Hill

Washington, D.C. – On Wednesday, 1,300 home builders will call on Capitol Hill as part of a legislative conference organized by their trade group, the National Association of Home Builders. They’ll do so against a grim industry backdrop.

“For the first summer in many summers, we’re not helping to keep unemployment numbers down,” says Jerry M. Howard, 51, the NAHB’s chief executive. “For the first time in six years, we are a drag on the economy rather than a plus.”

Publicly held home-building companies have weighed on the stock market too. Consider the table below, which lists the 10 biggest U.S. home builders by latest-12-month revenues. On average, the group shares have dropped 12% year-to-date, versus a 9% gain for the S&P 500.

Fittingly, Howard is sending his troops out to congressional offices with a simple, overarching message: Don’t kick us when we’re down.

“Our strategy is to remind policymakers of our importance in economic and societal terms,” he says, “and to convince them to take no action that would exacerbate this downturn in the housing industry.”

One area of potential exacerbation: immigration. The NAHB has come out strongly against the proposed immigration overhaul now being considered by the U.S. Senate, particularly its portions cracking down on employers that hire illegal workers, directly or through subcontractors.

Full story at Forbes.com

Stock-Picking Contest: Update

Each autumn, we hold a stock-picking contest called “Love Only One.” Twelve investment bigwigs must each choose one stock to beat the S&P 500 long over a 12-month period, while five more must lag the index with a bearish pick over the same time frame.

Pickers who complete the mission are eligible to return for another year. Those unsuccessful get replaced by new experts.

The Love Only One class of 2006 to 2007 is holding up well. Since the contest’s price date of Oct. 31, 2006, bulls have posted an average 16% gain, vs. a rise of 11% for the S&P 500. The bearish picks are down a collective 8%.

Full story at Forbes.com

Aerospace And Defense? Fly Commercial

Investors in aerospace and defense are playing with fairly high stakes these days. Over the last five years, the sector’s stocks in the Standard & Poor’s 500 have outperformed the broader index by 20 percentage points. In the aggregate, U.S. aerospace stocks now trade at 17 times the projected next-12-month earnings, a premium to the market multiple of 15 times projected earnings.

“You’re not going to get the same performance out of the aerospace stocks that you did in 2004, 2005, 2006,” warns J.B. Groh, an analyst covering the sector for Great Falls, Mont., brokerage firm D.A. Davidson & Co. “You can still beat the market, but not in the same dramatic fashion.”

Groh, 39, doesn’t speak from vast experience–he started covering aerospace and defense in 2004. But he’s had an admirable track record since. According to research firm StarMine, which tracks analyst performance, over the past 36 months, Groh has bested an industry return of 89% (cumulative) by 50%. In our most recent analyst ranking, conducted in partnership with StarMine, Groh was the No. 1 stock picker in his category.

Underlying that success has been his preference for the commercial rather than the defense side of the sector. When he first chose the companies he would cover several years ago, Groh saw a contrarian play in recommending suppliers of equipment to the airlines.

At the time, both sectors had been hit by the effects of the war in Iraq, a so-so economy and severe acute respiratory syndrome, or SARS. The latter, a viral illness first reported in Asia, was blamed for 774 deaths in 2003 and whipped up fears that aircraft cabins were prone to contagion. In mid-2003, traffic across the Pacific dropped 40%.

“I thought, well, you still have to travel,” says Groh.

Full story at Forbes.com

Anxiety On The Home Front

WASHINGTON, D.C. – The housing industry slump has Wall Street flummoxed.

“There’s still a lot of uncertainty among us as to when the recovery will come,” says Daniel Oppenheim, who covers the home building business for Banc of America Securities. Indeed, analyst profit estimates in Oppenheim’s industry are all over the place.

Yet in uncertainty lies the chance to make money, especially if you listen to the right experts. For that, we turned to our partners at San Francisco analytical research company StarMine and our recent tabulation of the best security analysts.

StarMine gives out separate awards for picking stocks and for estimating earnings. The rap on the most accurate earnings estimators is that they tend to be Excel jockeys, more adept at spreadsheets than market-timing heroics. This label fits Daniel Oppenheim, 32, who ranks as the third best earnings forecaster in his category, household durables, according to StarMine.

Oppenheim’s secret? Each month, he and colleagues survey 4,000 real estate agents across the U.S. The topics: what kind of foot traffic those agents see, the price movement of listed properties, incentives offered by home builders, overall inventory of homes on the market and the amount of time needed to close deals. The numbers give Oppenheim a sense of pricing–the key to home builder profitability–in the 40 biggest markets for new home construction.

Broadly, the data these days tell Oppenheim that home prices have further to drop. “We still have excess inventory relative to demand,” he says. That, combined with recent upheaval in the mortgage business, has Oppenheim cautious. He’s got “hold” ratings on all but two of the stocks he covers.

The only two stocks on his buy list are Standard Pacific and Hovnanian Enterprises. In their past two reported quarters, both builders of single-family homes lost money. But Oppenheim feels both have proven themselves the most realistic in writing down the value of their landholdings. As such, their book value, or the difference between assets and liabilities, more accurately reflects market conditions that of other companies.

Full story at Forbes.com

It’s Not Easy Being Green

These days, Wall Street recoils from pure-play fuel cell companies. Several in the table below have seen their share price cut in half over the past year. Two trade below a buck.

But Washington remains bullish on fuel cells.

“We’ve seen an uptick in the interest level,” says William Mitchell, vice president of marketing at Nuvera Fuel Cells of Cambridge, Mass.

Mitchell and other fuel cell industry reps recently hosted a meeting to pitch their wares to federal government purchasing managers. More than 80 showed up. “That was sort of groundbreaking,” he says. “It shows they really think there’s some valuable products coming out.”

Tuesday, Nuvera was up on Capitol Hill to show off its products to Congress at an event sponsored by the U.S. Fuel Cell Council, a trade group. Presenting companies, among them giants like United Technologies and Chevron, had sales booths set up in a congressional caucus room, while rides in fuel-cell powered cars were ongoing down the street.

Full story at Forbes.com

Stanford Group’s Erik R. Olbeter

These are difficult times for companies offering technical services to the federal government. The grind of waging war in Afghanistan and Iraq has threatened agency technology budgets and darkened the outlook for big Beltway businesses such as CACI International and SRA International.

Covering this area from Stanford Group’s Washington offices, Erik Olbeter has kept his footing. For eight months in 2006, for example, he cautioned against shares of Dynamics Research, an Andover, Mass., company that does engineering work for defense and intelligence customers. The stock dropped 44% during that period.

But it wasn’t all bearishness that won Olbeter his No. 8 StarMine ranking among all analysts for 2006 stock calls. Last August, he put a buy rating on DynCorp International , at $10. By the end of the year, shares of the company, which provides governments with services ranging from narcotics eradication to vehicle maintenance, had climbed to $16.

Full story at Forbes.com

Defense Investors, Pay Heed

Investing in the defense business these days is a musical-chairs situation. Both military budgets and stock valuations in the defense and aerospace sector look historically high. When will the music stop?

We can’t answer that question, but we can offer up individuals likely to make the right calls in this tricky environment: the defense and aerospace analysts winning awards in our annual analyst survey, published this week on Forbes.com.

Our ranking, prepared for us by research firm StarMine, assesses analysts in two areas: the outcomes of their 2006 stock recommendations (buy, hold, sell) and the accuracy of their earnings forecasts for the four quarters through March. For more on the methodology, click here.

In terms of stock recommendations, these three folks won top spots among defense and aerospace analysts: J.B. Groh of D.A. Davidson & Co., Troy Lahr of Stifel Nicolaus and Heidi Wood of Morgan Stanley. J.B. Groh is a repeat winner, climbing up to first place from his No. 3 ranking last year.

Of those three, Troy Lahr is geographically closest to Washington, D.C. Stifel Nicolaus, part of Stifel Financial, is headquartered in St. Louis but has a big presence in Baltimore, thanks to its 2005 acquisition of Legg Mason’s brokerage business. Lahr, who came to Stifel via Legg Mason, says the robust defense industry presence in Maryland was one factor in his becoming a defense analyst six years ago.

These days, Lahr’s wary of prospects for big military contractors such as Lockheed Martin and Northrop Grumman. Defense budgets, he expects, will increase in the 5% to 7% range in the next year or two. “Beyond that, it’s probably going to start slowing down” he says. “A lot of these companies are really at peak valuations relative to the growth outlook.”

Full story at Forbes.com

Dude, Where’s My Scissor Lift?

WASHINGTON, D.C. – Like the private sector, the U.S. federal government is bullish on technology for keeping better track of stuff. Take the Department of Defense’s supply-chain experimentation with radio frequency identification, or the Federal Aviation Administration’s push to usher in satellite-based air traffic control.

One venture-backed company looking to cash in here: Ekahau. The Saratoga, Calif., outfit, 65 employees strong, sells systems that track goods using wi-fi technology. Wi-fi, for anyone wondering, refers to kind of wireless local access network–the kind you use at Starbucks to surf the Internet on your laptop.

In terms of its business, 15% of which comes from customers in the public sector, Ekahau is targeting physical spaces much bigger than a coffee shop. Example: Hill Air Force Base. Located in northern Utah, Hill employs thousands and is home to seven U.S. Air Force wings. Its Ogden Air Logistics Center does maintenance and overhaul work on hundreds of F-16, A-10 and C-130 aircraft each year, as well as engineering and logistics management for weapons such as the Minuteman intercontinental ballistic missile.

The Air Force has a keen interest in better ways to manage the gear involved in all this upkeep. The faster mechanics get the tools they need, the faster planes get out of the hangar and back into service.

A year ago, Ekahau’s tracking system was chosen for a related pilot project at Hill by Knowledge Based Systems (KBSI), a contractor to the Air Force. The company slapped Ekahau tags (see box image) on scissor and wing lifts, stands, dollies and other equipment relied on by Hill’s repair staff. Ekahau’s software, known as the Ekahau Positioning Engine, managed location information flowing from the tags, as well as laptops and PDAs carried by Hill personnel.

“The pilot went very well,” says Michael Graul, a senior research scientist with Knowledge Based Systems. “We were able to pick up within 15 feet where an item was.”

Full story at Forbes.com