This article is part of our real-money portfolios series .

Were you among the millions who lost power thanks to Superstorm Sandy ? Maybe you were among millions who lost power from the derecho storm that moved from the Midwest to the mid-Atlantic last summer. Or maybe you've been prey to a local power outage caused by a tree getting blown over in a summer thunderstorm?

Regardless, you are almost certainly among the many who have, at one time or another, experienced a loss of electrical power lasting anywhere from a few hours to many days. And, you may even realize that this has been increasing in frequency over the past several years. Below is a graph showing the number of outages affecting 50,000 or more customers in the United States since 2000.



Source: Electric Disturbance Event annual reports, Office of Electricity Delivery & Energy Reliability, DOE.

One thing that will certainly improve that situation is for us to rebuild the electrical power infrastructure in this country. But that will likely take years (and lots of arguments). In the meantime, many will buy backup generators. And the leading company in that space is Generac Holdings .

What it does
Generac's been around for over 50 years, but it's only been a public company since early 2010 . It manufacturers backup power generators for homes, RVs, and commercial and industrial customers. Its portable generators are used to bring power and light to places that need it temporarily (e.g., nighttime road construction). And it can connect its permanent generators to a natural gas line and use that as fuel, automatically switching on when you lose power. Currently, it owns about 70% market share for home standby generators, according to Generac's market research.

Not only is keeping your home powered important to you, but keeping the power on is a necessity for businesses. For example, restaurants, grocers, and convenience stores all need to store food at controlled temperatures and can lose thousands of dollars if their power is off for too long. Hospitals need to keep critical equipment running. This is an underserved market that Generac is going after. 

The opportunity
Even if we were just talking about an aging electric grid, the opportunity for the company is quite large. Add in the fact that we're experiencing more severe weather and how that affects electrical power reliability, and the opportunity expands just a bit.

Further, with the housing recovery finally gaining traction -- and thus homeowners more willing to invest in their homes -- and with cheap and plentiful natural gas to hook into the generators, the timing for investing in this company looks pretty good. Finally, the company just acquired Ottomotores , which gives it a foothold in Latin America as it moves internationally.

Dark clouds
Of course, investing is never 100% sunshine. Other means of generating one's own power (think rooftop or even portable solar panels), especially at small businesses like the ones Generac is going after, could short-circuit some of the company's plans. Then there's the tendency for memories to fade. Jerry Revich of Goldman Sachs downgraded Generac to sell recently, writing, "Generator sales typically peak within nine months of a big storm like Sandy." That can certainly be true, but that's a short-term outlook. The number of large outages per year is on a decade-long upward swing, as shown above, and that should drive the company's business forward for several years, at least.

Out-of-synch expectations
It certainly has over the past few years. Generac has grown revenue at an average rate of 26% per year for the past three years, with earnings growing even faster at better than 29% per year on average. Yet analysts are expecting less than half that growth for the next few years. And the current price shows that the market is expecting only 9% growth in free cash flow over the next few years (discounted at 15%). Given the opportunity, and what I view as a trend in its favor, those expectations seem low. Therefore, I'll be buying shares of Generac for my Messed-Up Expectations portfolio.

Come and discuss these and other investments on my Messed-Up Expectations discussion board

With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disrupters since the personal computer in "3 Stocks to Own for the New Industrial Revolution." Just click here to learn more.

This article is part of our real-money portfolios series, where we give some of our most promising stock analysts cold, hard cash to manage on the Fool's behalf. We'd like you to track our performance and benefit from these real-money, real-time free stock picks. See all of our analysts (and their portfolios).

The article Don't Be Left in the Dark -- Generac Holdings Is Underpriced originally appeared on Fool.com.

Jim Mueller has no position in any stocks mentioned. He's an analyst for the Motley Fool Stock Advisor newsletter service. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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