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April 26, 2008

The Week In Cleantech (Apr. 20 - Apr. 26) - Are Alt Energy Stocks Decoupled From Oil Prices?

On Monday, Michael Kanellos at CNET's Green Tech Blog told us that cellulosic ethanol was to surpass corn...in 14 years. Turns out he got that info from one of the leaders in making enzymes to break down cellulose. So if it takes about 14 years for cellulosic ethanol to scale up production levels to about 15 billion gallons annually, or roughly 10% of current liquid fuel consumption in the US, could there be a risk that cellulosic misses the boat altogether? Most of the estimates thrown out there for the cost of cellulosic to be competitive with corn are in the neighborhood of four to eight years, but once costs come down will the industry be able to scale up fast enough to even stay relevant in the race for alternatives to gasoline?

On Tuesday, Toby Shute at The Motley Fool argued that Google's gigawatt was gaining steam. What gives Google an edge in renewable energy, according to the author? The firm's expertise in scalable solutions. I've never been a big fan of launching into things in which you don't have a competitive advantage or even expertise, so I'm somewhat skeptical of Google's forays into wireless and especially clean power . Nevertheless, the folks at Google can certainly tell a strong business model from a bad one, and I'm sure they know a thing or two about execution. Maybe one day I, too, will be silenced.

On Thursday, Matthew Hougan at Seeking Alpha shone light on solar ETFs. This piece provides a detailed overview of two solar ETFs launched recently. ETFs are a great way to balance concentrated exposure to a sector with a healthy amount of firm-level diversification, at a cost that makes sense for retail investors. For solar, you have the choice: you can go pure play or solar light.

On Thursday, Katie Fehrenbacher at earth2tech asked if PG&E would own solar power plants. The argument made here is interesting, namely that large utilities can leverage their strong balance sheets to acquire cheap capital for the construction of large-scale renewable energy projects like a solar thermal plant. Given the nature of these projects, where there is long-term revenue certainty and costs is where big gains can be realized, the ability to come in with cheap capital can make a notable difference over time. In fact, as the solar industry follows wind and consolidates, there is where you should expect the big players to have a significant advantage.

On Friday, Dan Lewis at AEI wondered whether Brazil's latest oil find would undermine its booming ethanol industry. Broadly speaking, he is wondering whether whatever oil can be found and economically extracted from unconventional sources is enough to put a dent in the current supply-demand imbalance, if indeed there currently is an imbalance, and therefore shift political and investor attention and resources away from the search for alternatives. This is every alt energy company's CEO's greatest fear, as there is no doubt that expensive oil has increased their access to, and lowered their cost of, capital. It has also provided some of the political justification for the generous subsidies alt energy has enjoyed in many jurisdictions. So the question begs asking: given the lengths to which certain governments have gone to promote alt energy, would a sharp drop in the price of oil be as much of a shock to the system today as it may have been five years ago? I think not, although alt energy stocks would take a serious beating for a time.

April 23, 2008

Break Due to CFA Study

Readers have probably noticed my less than consistent posting for the last couple of weeks.  I'm afraid that this is only going to get worse for the next month and a half... I'm currently studying for the third CFA® Exam, and I have much more to do than I had hoped I would at this point.   I may or may not post again before the exam (June 7th,) and if I do it will probably be short.  Charles has agreed to pick up most of the slack in May, as he did last week.

To those of you who have emailed me looking for advice or networking, I'm never very good responding to email (When it comes to advice, I try to respond to comments on the blog rather than email... people who want free advice should be willing to share.)  If I have not gotten back to anyone, it's not personal.

NREL Presentation

A couple months ago, I agreed (against my better judgment) to do an investing presentation as part of an event at the National Renewable Energy Laboratory.  So if you have a burning question (and live near Golden), I plan to leave a good amount of time for Q&A.  The event will be May 10 from 9am to 1pm, "Consumer Power for the 21st Century."  Details are available on NREL's Events page.  I'll present a version of my Investing in Renewable Energy presentation, with updates for current market conditions and some of my more recent thinking on peak oil.  Also presenting will be Wade O. Troxell, Ph.D, on smart grid applications.  Since smart grid is one of my favorite investing themes, I'll be interested to hear what he has to say.

DISCLAIMER: Although the CFA® charter is a well respected designation, you have to wonder about the sanity of someone who voluntarily decides to go through the process, and even enjoys it.  Therefore, everything Tom Konrad says or writes should be taken with a grain of salt: He's obviously nuts (and probably sleep-deprived, to boot.)

April 20, 2008

Stocks We Love to Hate

Investing in clean energy is both an economic and a moral decision.  From an economic perspective, I believe that constrained supplies of fossil fuels (not just Peak Oil, but also Peak Coal and Natural Gas) are leading to a permanent rise in the value of all forms of energy.  From a moral perspective, I know that we and the vast majority of our children are limited to this one planet for generations to come, so we should abuse it as little as possible, so, of all the possible forms of energy to invest in, clean energy (Renewable and Energy Efficiency) is my moral choices.

A Short Walk Down Wall Street

The investing decision does not have to stop there.  In addition to buying stocks we like, we can also sell (short) the stocks we hate.  There's a lot of truth in the caricature that environmentalists are much clearer about what we don't like (cars, mining, coal, pollution) than what we do.  For instance, "organic" is typically defined by the processes which are not used (chemical fertilizers, GMOs, pesticides) rather than those that are.  Smart Growth means "avoiding urban sprawl."  Those of us worried about global climate change want to reduce Greenhouse Gas Emissions.

I may be exaggerating, I also believe there is more than a (sustainable, local, organic) grain of truth in the caricature of the environmentalist as the wild-eyed environmentalist who chains himself to a tree (or runs around naked) in an attempt to stop some blight on the face of the planet.  

Why not embrace the stereotype in our investing?  When even wind turbines can kill birds (if less so than skyscrapers and pollution from coal plants) and solar panels are awfully expensive, it can be hard to agree on the companies or technologies that are truly "green" and which ones are just greenwashing.  Many well-meaning people make the case that we need nuclear power and/or "Clean Coal" to fight global warming, but it's hard to get behind a power source that involves finding someplace underground to store hazardous waste for centuries or millennia at great expense.

If we can't agree on what we like, at least we can agree on what we hate.  So why not short the companies which do the things we hate?

That's a rhetorical question.  Shorting is extremely risky, and should only be done with a careful eye to risk management.  That said, I'm generally bearish on the outlook of the stock market, so in addition to giving some simple rules to help people decide to sell what they already own, here are some ideas for those of you with courage of your convictions wanting to strike a blow for what you believe in.

#5: Meat

It has been claimed that the biggest step you can take to reduce your carbon footprint is to eat less meat.  Some of these claims may be exaggerated, but it's certainly true that the way we currently raise and transport meat, it's extremely energy intensive (not to mention unhealthy for both the animals and ourselves.)

SHORT IDEA: The rush to ethanol (caused by peak oil) is most likely to harm the economics of pork and poultry, so the vegan investor might consider shorting meat products companies such as Tyson Foods (NYSE:TSN), despite their partnership with Conoco-Phillips for Green Diesel.  

#4: Globalization

As well as eating vegetarian, ethical eaters also look at the energy necessary to get their food onto the table, as well as the energy costs of transporting all those Chinese-made gee-gaws.  While the distance of transport is an extremely  poor proxy for the energy needed to get the item there (containerized shipping is so efficient that we're likely to burn more fuel driving to the grocery store and back than we're likely to save by buying local foods while we're there), growing herbs in your own garden is likely to be much more energy efficient than flying them in from South America... especially if it saves you a drive to the grocery store for a singe ingredient.

SHORT IDEAS: Investors might consider shorting country ETFs of highly energy intensive economies with little local energy resources.  China is the first country which comes to mind for me, although the thought of shorting China scares me almost as much as global warming.  A safer anti-globalization short might be airlines (although they seem to be declaring bankruptcy so fast that we may have missed the plane on this one.   Truckers are also feeling the pinch of high gas prices, so if you, like me, feel that there's more where that came from, take a look at long-haul truckers.

#3: Urban Sprawl

Urban sprawl is the unwanted child of our ill conceived love affair with the car, and keeping the brat happy is one of the major factors keeping us together.  The biggest investment many of us will make is a home, so living near where you work is probably more important than your financial investments.  But that doesn't mean you can't strike a blow against sprawl with your brokerage account. 

SHORT IDEAS: Housing developers who slap 'em up cheap in the suburbs and exurbs, and the road construction industry.

#2: Coal & Oil Cos.

I personally loathe the coal industry.  Devastation caused by mining adds injury to the insult of massive carbon emissions.  Some oil companies have been making moves towards biofuels, but it's small potatoes compared to their main business.  Nevertheless, I'd stay away from shorting these two industries no matter how much you hate them... the same rising energy prices that will benefit clean energy will benefit the old fossil fuels.  Although both will have considerably less to sell as time goes on, they should be able to command premium prices.  

Although I can see a scenario where massive carbon regulation actually depresses the price of coal, I don't expect lower coal prices anytime soon.

SHORT IDEA: Don't do it.

#1: Sport Utility Vehicles

I'm convinced that the personal car will never be green.  The most forward thinking car companies, like Toyota, realize this, and are already starting to plan for a day when the personal car is obsolete (at least according to a presentation I saw at a recent conference.)  But it's likely to be too little, too late, especially for companies which seem to believe that an SUV that burns ethanol and gets 22 MPG is the height of greenery.  They may even have to go head-to-head with Wal-Mart.  This is the one short idea here I feel strongly enough about to actually dabble in.  I just took small short positions (actually far out-of the money January 2010 short calls) in Ford (NYSE:F) and General Motors (NYSE:GM.)  Admittedly, these companies have many other problems besides peak oil and global warming, but those are well known, and likely to already be factored in to the stock prices.

SHORT IDEA: If you've ever been tempted to vandalize an SUV, here's a legal option.

DISCLOSURE: Tom Konrad has short positions in F, GM.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

 

April 19, 2008

The Week In Cleantech (Apr. 13 - Apr. 19) - Buffett Encore

This week, IMF officials voiced strong concerns over current biofuels policies in the US and Europe. On Friday, the head of the IMF claimed that biofuels posed nothing short of a moral problem for the West, and that he would support a moratorium on biofuels made from foodstuffs. Also on Friday, the IMF's Chief Economist called biofuels "a new form of protectionism" that is "now front and center in global geopolitics." For anyone who's been reading the news over the past month, you can't help but agree with this assessment. With food prices now rising in real terms for the first time in 30 years, humanity faces something it has never experienced in its history: global tightness in food supplies. Under such a scenario, producer nations shut their borders to export to shield their populations from steep agflation, wealthy closed economies like Venezuela or Russia fix prices for foodstuffs and subsidize the difference, and the poorest of the poor get zip. For as long as I have written for this site, I have always claimed that this would be the single largest problem facing corn ethanol in the US - much more so than industry-specific concerns like oversupply. While the current administration can be expected to dig its heels in on this issue, pressure over the past two years has only been increasing and I am doubtful that, in the current context global food shortages and the lack of evidence that ethanol does anything at all to reduce foreign oil dependency, the US and European biofulel industries can expect enduring support from their politicians. The deal they have been getting is much too good to be true, and I expect reality will set in sooner rather than later.

On Tuesday, Ted Nace at Grist told us about the education of Warren Buffett. Interesting piece on how MidAmerican, a Berkshire Hathaway company, abandoned plans to build a number of coal plants. While Buffett typically adopts a hands-off approach with his managers, he does get involved in important capital spending decisions, so you can rest assured he had a say in this. Now for anyone who has been following what's been happening with coal power in the US, it's not exactly true to this decision went unnoticed at the time. Moreover, while Buffett does not have a track record of making high-profile pronouncements on the environment, MidAmerican has built a significant portfolio of wind generation assets and, again, you can bet the Oracle had a hand in making this happen. Were these decisions made because Buffett has suddenly turned environmentalist? Not a chance! Am I happy that the greatest visionary in US capitalism is seeing green in green? You bet!!

On Tuesday, the WJS's Environmental Capital about the latest large oil producer to throw the peak production towel. The May edition of Bloomberg Markets also featured an interesting article discussing declining production at Pemex, the Mexican oil giant (unfortunately this article isn't available free of charge). In both cases, it probably doesn't help that federal authorities have done everything in their power to discourage foreign investment. Nevertheless, given the opacity surrounding the state of global oil reserves generally, these tidbits of info can't help but lend further credence to the peak oil theory.

On Thursday, Chris Baltimore at Reuters told us about a certain billionaire Texas oil man who is making big bets on wind. Projects of this magnitude will do wonders for the economics of the sector by helping prices come down. I also like the idea of a north-south wind corridor and an east-west solar corridor. I'm not sure, however, that natural gas will ever power a significant portion of cars. It would appear illogical to me to switch out of a non-renewable fuel source at great costs to replace it with another.

On Thursday, Jim Fraser at the Energy Blog informed us that Trina Solar had canceled a $1 billion polysilicon plant. The reason? The poly supply shortage is easing and Trina can sourse all that it needs in the market place. Polysillicon has been the main enemy of margins in the solar PV industry over the past couple of years. Could it be time to start looking at some of the solar stocks that were particularly exposed to this?

April 13, 2008

Lunch With Warren Buffett

Tom couldn't attend to his usual Monday column this week so he asked me to step in. My own investing has been partially on hold over the past couple of months as I have been watching developments in the markets, so I figured I would open the week with something a little lighter albeit not entirely unrelated to alt energy and cleantech investing.

Deflating Valuations = Happy Value Investors

One of the good things about the current state of equity markets for alt energy investors is that several great company's stocks that had been trading at rich multiples for most of 2007 are now priced more reasonably. In fact, for value investors, markets such as these present wonderful opportunities to get in at acceptable levels on good stocks.

At its core, the value investing approach purports that, when buying a company's equity, you should only ever pay for one of two things: (a) the replacement value of the firm's assets (including intangibles like technology and client relationships) or (b) what is affectionately referred to as "the moat", meaning some form of strategic edge that competitors cannot replicate.

With regards to replacement value of the firm's assets, this effectively means that if a stock is trading much above its book value per share plus certain adjustments (say higher than 1.4x), value investors won't find it too interesting. This metric represents what it would cost a competitor to exactly replicate the business, and so adjustments to the balance sheet include intangible items like patents and customer relations. On the second point, the moat can be thought of as a market position that is nearly untouchable for one reason or another. For example, First Solar's (NASDAQ:FSLR) trailing PE of 132x can be partially explained by the company's unchallenged manufacturing and cost leadership in the thin film PV space - investors perceive a moat and implicit in this high multiple is a belief that earnings won't come under attack from competition any time soon.

Needless to say, certain alt energy sectors such as solar PV have seen PE ratios deflate appreciably since the fall of 2007. PE ratios of 15x and under are the ideal range for value investors and, while many alt e stocks still have PEs far above that, certain good opportunities have certainly emerged in the past few months.

Now I don't want to delve too far into this just yet as I intend on doing a full value analysis of a stock I'm considering buying in a few week's time. But for those who don't know a lot about the value investing philosophy, I would recommend familiarizing yourself with it. It can be a powerful, and, if you truly follow it, disciplined approach to investing that has had a very respectable track record over the past four decades, thanks in large part to...

Warren Buffett

Mr. Buffett, the world's richest man and the most famous disciple of value investing's inventor Benjamin Graham, generally needs no introduction.

A few of my classmates and I had the extreme pleasure and honor of traveling to Omaha, Nebraska, to spend the morning and lunchtime with Mr. Buffett a couple of weeks ago. It was a truly once-in-a-lifetime experience. While I admire the work and talent of many people, I don't often come across individuals that I find inspirational on a personal level. Warren Buffett's thinking on many issues related to investing and business has definitely influenced my own, and it turns out that his approach to life in general makes a lot of sense to me. His most memorable advice to us: "The number one thing you should look for in a spouse is not humor or smarts, but low expectations." I've tried to convince my wife of this since to no avail.

So, as a prelude to a post dedicated to the value investing approach to security analysis in a few weeks' time, I figured I would share a few thoughts and pictures with our readers on the man who has had the most impact on the field of value investing, and, truthfully, on investing in general.

Some Pics


This sign in medium-sized letters next to an innocuous-looking door is about the only thing in the building telling you where you actually are


Lunchtime at Piccolo's Steakhouse. Mr. Buffett loves a good steak for lunch and a rootbeer float for desert


Mr. Buffett and myself after lunch


April 10, 2008

Money and Reduced Emissions Don't Sell Energy Efficiency, but Comfort and Health Do

    As an expert witness in an energy efficiency ("Demand Side Management" or DSM in utility-speak) docket before the Colorado Public Utilities Commission, I have been making the case that non-energy benefits of energy efficiency measures such as the increased safety and comfort of an efficiently operating home need to be included in evaluating the cost-effectiveness of energy efficiency programs.  There has been much resistance to the inclusion of these benefits, mainly because they can be difficult to quantify.  Yet we omit them at our peril.

Why Energy Efficiency and Health Matter

    Last summer, I explored why the economic benefits of energy efficiency measures had little relation to their actual market acceptance.  I concluded that businesses need strategies beyond touting financial savings to overcome barriers to acceptance.  One strategy I highlighted was making energy efficiency measures an emblem of social status (something I believe is behind the success of the Toyota Prius.)

    In this docket, I have been working with the Energy Efficiency Business Coalition, which brings together manufacturers, distributors, and Retail providers of energy efficiency products and services in order to support energy efficiency-friendly legislation and regulation.  For those who sell to the retail public, their primary messages have little to do with either financial rewards or social status.  Their marketing emphasizes the increased health, safety, and comfort of energy efficient homes.

    A home with properly sealed ducts will not only use much less energy, but it will not pull toxins from the garage or crawlspace into the living area of the home.  Properly functioning furnaces and water heaters save energy, but they also do not emit carbon monoxide.  A well insulated house lacks hot and cold spots, allowing the occupants to be comfortable everywhere in the home.  

    All of these facts are effective marketing tools for energy efficiency.  They're so effective, that a Google search for "insulation comfort" returns 597,000 hits, of which the first six are companies with something to sell.  In contrast, a search for "insulation savings" returns a slightly lower 540,000 hits, but of the first 10, only one (#6) has anything to sell.  The rest are information sites from government, nonprofits, or for DIY'ers.  

Survival of The Fittest (In Competitive Markets Only)

    Those businesses which stay in business by successfully selling insulation do so by selling the comfort benefits, not the energy savings.  The energy savings are instead pushed by organizations (such as government) which will remain in business regardless of who buys what they are selling.  

    I find it quite telling that Xcel Energy (NYSE:XEL), the utility we have been dealing with in the DSM docket, markets their energy efficiency programs almost entirely on financial savings.  But then, Xcel is not going to go out of business if they don't sell as much energy efficiency as possible: their main business is selling energy, not energy savings.  I don't mean this as a condemnation of Xcel; the company is quite progressive, as public utilities go.

    Because public utilities are regulated, it falls on the regulator to ensure that the utilities incentive includes those factors which will actually increase the adoption of energy efficiency.  Normal businesses have found that the factors to emphasize are non energy benefits such as comfort, health, and safety.  These factors are out of favor in regulatory circles, because they are difficult to value in dollars and cents.  

    Difficult to value does not mean without value.  People buy things they value, and when it comes to home energy efficiency, they are buying health and comfort, with a dash of energy savings... not the other way around.  DSM programs which take this into account are likely to be much more successful than those which do not.

    Regulators take note.

DISCLOSURE: Tom Konrad and/or his clients have positions in all the stocks mentioned here: XEL.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

 

April 06, 2008

New Flyer: A Clean Way to Play Extreme Peak Oil Scenarios

Tom Konrad

I'm more than a little obsessed with finding investments which will increase with the price of oil, but not contribute to global warming.  This is quite tricky, because most forms of renewable energy produce electricity, which we cannot use in our current fleet of cars.  Biofuels ( even cellulosic) can be used in cars, but are limited by supply of feedstock, and by the environmental degradation that growing and collecting biofuel feedstocks can cause.  Not to mention the impact on food prices (despite the fact that this may help poor farmers even as it hurts poor city-dwellers.)

A Drastic Peak Oil Scenario

When the supply of oil cannot grow to meet increasing demand, the price must increase to keep demand in check.  However, the fastest growing consumers of oil are countries where the government subsidizes oil as an attempt to avoid civil unrest or political discontent.  That means that demand destruction in developed markets must make up the difference for markets where demand destruction will not occur due to the lack of price signals.

How elastic is gasoline demand in North America?  While there is some evidence that we are already responding to the long term rise of gas prices, demand is almost always much more elastic in the long term.  Most people are more willing to skip going out to eat once a month than they are to start riding the bus.  That means that a slow, gradual rise in the price of oil might be accommodated through a shift to more efficient vehicles, the construction of light rail systems, and people choosing to live more densely.  On the other hand, it will take a much more drastic oil price spike (say $10 per gallon within 3 years) to pry Americans' white knucklrideres from the steering wheels of their SUVs.

That is precisely what I expect to happen.

$10 Gas Would Mean...

People who have been cutting back on other things in order to keep up with the increasing cost of driving will not be able to afford a new Volt or Prius Plug-in Hybrid Electric Vehicle, or even my favorite, the Aptera.  For people forced out of their cars by pure economics, the only options will be those that cost no more than a few thousand dollars, or even no down-payment at all.

Of all the options, mass transit has the lowest up-front cost for the user, and the only option which can be expanded quickly is bus rapid transit.  Busses can typically be ordered and delivered within a year, the upfront cost is fairly low (the largest component cost of bus operation is the driver, not the cost of capital), and new routes can quickly be added by converting lanes of existing roads to dedicated bus lanes.

Long haul bus operations are already taking off in the United States.   Mass transit ridership reached a new 50 year high in 2006 (I have not been able to find 2007 numbers yet.)  Bus mass transit is additionally likely to be a response of municipalities to peak oil because 80% Federal funding for bus purchases to meet increased ridership or replace old busses has been available since 2005.

New FlyerWelcome to New Flyer!

New Flyer Industries (NFI-UN.TO, NFYIF.PK) is the largest supplier of heavy duty busses in North America (42% delivered market share in 2007, and a 50%+ market share in terms of new orders in the last year.)  They have a broad product offering, and including a wide variety of alternative fuel options, including LNG, CNG, Hybrid, and Electric options.  They even have an exclusive agreement with Ballard (NASD:BLDP) to develop Hydrogen Fuel Cell busses.

The Company has a strong position in the North American market, a market which has high barriers to entry due to the need for many US buyers to "Buy American" (New Flyer qualifies), and the fact that US fleet operators are interested in an established brand with good local service.  Since many American buyers only pay 20% of the capital cost (but all the service costs), service and maintenance is likely to be more important in the buying decision than the initial purchase price.  This should also help push purchasers towards cleaner running busses such as New Flyer's natural gas and hybrid versions, despite the increased capital costs.

Securities Details

New Flyer's available securities are Income Deposit Securities (IDS), an approximate 50-50 hybrid between high yielding (but not well secured) debt and equity.  Because of Canadian withholding (I have not been able to determine if this applies, but I suspect it does,) these may not be the best choice for US based tax-advantaged investors, but for Canadian and US-based taxable investors, these income deposit securities should be an excellent hedge against the rising price of gasoline.  Unlike most gas price hedges available, the income from the security can directly be used to buy gas without selling even part of your original position.  (Although it does have the slight disadvantage as a hedge because the mechanism is not direct, and higher gas prices may take 1-3 years to flow through to higher earnings at New Flyer.

On the subject of hedging, the company runs a very sophisticated financial operation. The unusual nature of the securities arises from their sophisticated use of the US tax code to allow deductibility of the interest part of the monthly distributions.  They have fully hedged their exposure to exchange rate changes between the Canadian and US dollar (something I wish another favorite, Carmanah Technologies (CMH.TO, CMHXF) had done in recent years.)  They are also taking advantage of the strong loonie (C$) to buy back some previously issued securities using excess cash and the proceeds of a new offering of additional IDS in Canada.  Because of the exchange rate terms of the class B and C shares they are redeeming, this will have an immediate positive impact on cash flow. 

Conclusion

From listening to the most recent conference call, I get the impression that management is very conservative, and has not built a rising oil price into their projections for market growth.  None of the analysts on the call asked about the effects of rising oil prices either.  In fact, management had expected the current strong market for bus orders to slack off towards the end of the year, and they were surprised that they see no signs of slackening growth.  

Since management and most analysts have not incorporated peak oil into their projections, we can expect unpleasant surprises at the pump to lead to pleasant surprises during earnings announcements.

Note

Since I wrote the above, one of my New Years Speculations, Capstone Microturbine (CPST), received an order for 150 turbines for use in a fleet of hybrid busses.   Although this is not a new application for their microturbines, it was one I had forgotten when looking for bus stocks.

DISCLOSURE: Tom Konrad and/or his clients have long positions in NFYIF, CMHXF, CPST.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.

April 05, 2008

The Week In Cleantech (Mar. 30 to Apr. 4) - Sawdust Futures, Anyone?

On Sunday, Aline van Duyn argued that businesses face clean water scarcity risks. Arguments about business risk and water scarcity, or about investing in water as the next hot commodity, come and go, but nothing ever seems to stick. This is probably because very few companies have yet managed to make big bucks from water problems. However, on the risk side, things could materialize sooner than some think. Question: what's put Canada on the map globally, attracted vast amounts of capital, has all oil majors in a stampede, and is (tacitly) key to America's plans for a safe and secure energy future? You got it, the Oil Sands.

On Tuesday, Green Wombat wondered whether it was too late for big solar to save the day. This is a huge deal and, in my opinion, a significant sign that solar thermal is coming of age (which I don't believe can be said of PV yet). But Wombat hits it on the nail when he says that bureaucratic and procedural hurdles, coupled with an uncertain policy environment, are slowing solar development down materially. My prediction (get ready for some real insight): don't expect those hurdles and uncertainties to disappear anytime soon.

On Tuesday, Neal Dikeman at Cleantech Blog wondered whether cellulosic ethanol would always be the bridesmaid. Interesting piece, especially in light of Neal's accurate predictions on the corn ethanol industry earlier. For my part, I have steered clear of all biofuels so far with my portfolio. When I look, I see big promises but no positive operating earnings for years to come in the case of cellulosic, or just a complete mess for corn ethanol driven mostly by wonky government policies. All in all, I yet have to encounter a good risk-adjusted value proposition in this space. Now don't get me wrong, there is a lot of smart money piling in, and I certainly get excited by the potential promises of cellulosic ethanol...I just have a hard time seeing where I can make money out of it.

On Thursday, Clarke Canfield at The Seattle Times told us about the latest commodity to be bubbling up: sawdust. While there isn't really an angle for most investors here, this is indicative of a broader secular trend of basic commodity scarcity, something the world has never really experienced for a prolonged period of time. While the sawdust story is amusing, tightness in commodity markets is not something to be taken lightly, as illustrated by recent unrest caused by global rice shortages.

On Friday, Jim Fraser at The Energy Blog informed us that Transalta Corp and Alstom were planning on building the first coal power plant CCS project in North America. Let us hope this one doesn't go the FutureGen way. This could also be an interesting proposition for Alstom. As in many other areas, a technological race is currently underway for end-of-pipe GHG management solutions, and emerging as a technology leader could mean access to booming markets for pollution control like China and India.

April 02, 2008

Current Picks: Busses and Energy Efficiency

Over the weekend, EnergyTechStocks published two articles based on an interview with me.

The first was about my conviction that Peak Oil induced rising gas prices is going to lead to a rush into mass transit building by cities, or investing in mode-shifting last September.  I've since written about opportunities in rail transit stocks, (P.TO, TRN, PRPX, and WAB), and more recently Hedging your peak oil risk with your lifestyle.  However, I have been frustrated until now that the only pure play bus stock I've been able to find is Firstgroup PLC (FGP.L, FGROF.PK), the British based owner of Greyhound and owner or operator of many other UK and North American transit services (both bus and rail.)  Back in September, Firstgroup seemed very expensive after a prolonged run-up, but it is now looking more reasonably valued.

Two weeks ago, however, I found a pure-play North American Bus stock, which I will be writing about this weekend.  I'm not ready to reveal the name, because I still have an account which has not yet bought the stock.  This is the company I was not ready to reveal in the EnergyTechStocks interview.

The second part of the interview referred to my conviction that lean economic times will benefit Energy Efficiency over other forms of clean energy.  I highlighted two of the stocks from the 10 Solid Clean Energy Companies to Buy in a Downturn series.

DISCLOSURE: Tom Konrad and/or his clients have long positions in TRN, PRPX, WAB.

DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.


« March 2008 | Main | May 2008 »

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