Update on 10 Alt Energy Speculations for 2008

A year ago, I brought you 10 Alternative Energy Stocks I thought were worth speculating on for 2008. I revisited these in June, when a balanced portfolio of the 10 was "up 11.4% for the year, compared to the S&P 500 which is down 4.2% and the NASDAQ Clean Edge US Index, which is down approximately 14.3%."

Speculative picks tend to do better than the market as a whole in bull markets, and worse in bear markets, so given the steep drop in markets since then, I would normally expect these more speculative picks to fare worse. This is borne out in the fact that the more speculative the pick, the worse the stock performed. (I put these picks in rough order of riskiness, with the riskier ones given lower numbers. The exception to this rule was #9, Lighting Science (LSCG.OB), which probably would have been #3 except that I wanted to talk about it and the other LED stock Cree in the same article.)

For the morbidly curious, an equal-weighted portfolio of these 10 was down 55% as of the close on December 24th. For comparison, the S&P 500 was down 42% over the same period, while the NASDAQ Clean Edge Index was down 67%.

More interesting to readers is probably my current opinion about these companies. After the Lehman (LEHMQ.PK) bankruptcy, I sold part or all of nearly all these, but still hold some, often in conjunction with covered calls. Below, I give quick updates on the companies I'm still following.

#10: Cree, Inc. (CREE)

Dec 27, 2007: $23.50; Dec 24, 2008: $15.01; -36%

Cree is a leader in light-emitting diodes (LEDs), a technology which is just now coming of age. With no debt, a strong current ratio, and selling only slightly above book value, I no longer class Cree as a "speculative" bet, and the company should be able to use the harsh financial climate to improve its position in the LED industry.

#9: Lighting Science Group (LSCG.OB)

Dec 27, 2007: $6.40 (split-adjusted), Dec 24, 2008: $0.40; -94%

I sold my holdings of Lighting Science in September when the extent of the financial crisis became clear to me. This company is too early stage to make it to profitability without outside funding, which would dilute current shareholders.

Here's an October article where I went into more detail on both Cree and Lighting Science.

#8: Maxwell Technologies (MXWL)

Dec 27, 2007: $8.10, Dec 24, 2008: $5.93; -27%

Although I think ultracapacitors may have a role to play in electric vehicles, Maxwell is not currently profitable, and has only slightly more than a year's worth of cash on hand. I sold most of my stake in the company since the crisis began, although I am waiting for better prices to sell the rest.

#7 Electro Energy, Inc. (EEEI)

Dec 30, 2007: $0.68, Dec 24, 2008: $0.18; -74%

I no longer follow this company, and sold all my holdings in September and October. I discussed my reasons for selling Electro Energy here.

#6 Capstone Microturbine (CPST)

Dec 30, 2007: $1.62, Dec 24, 2008: $1.11; -31%

Although Capstone is closer to profitability than Maxwell, the company can only survive about a year without raising more money. The company has a chance of getting a boost from Obama's planned stimulus package, since its microturbines are often used in Combined Heat and Power [CHP] systems. These systems may be installed as part of energy efficiency retrofits of Federal Buildings. Because of this, I am waiting to see the form the stimulus takes, and if any speculation picks up about how Capstone may benefit.

#5 FuelCell Energy Inc. (FCEL)

Dec 30, 2007: $10.30, Dec 24, 2008: $3.65, -74%

Like Capstone, FuelCell might benefit from CHP in Federal Buildings. Unlike Capstone, even that would be unlikely to bring the company anywhere near profitability. I am short some cash covered puts in the company, but do not intend to sell more if they expire unexercised, and will probably sell the stock if it is assigned to me.

#4 Composite Technology Corp. (CPTC.OB)

Dec 30, 2007: $1.37, Dec 24, 2008: $0.26; -81%

Composite also has a fairly long way to go before achieving profitability, and has slightly over a year's worth of cash with which to do it. However, readers know that I have long been enthusiastic about the company's ACCC cable for electricity transmission. This enthusiasm led me to only sell part of my holdings in response to the crisis. As with Capstone, I'm waiting to see what the stimulus package will do for transmission before deciding what to do with my remaining holdings.

#3 Nevada Geothermal Power (NGLPF.OB)

Dec 31, 2007: $1.29, Dec 24, 2008: $0.30; -77%

Although Nevada Geothermal is currently unprofitable, their Blue Mountain geothermal project has sufficient financing to take it to production, which the company expects near the end of 2009. As the expectation of revenue draws nearer, I expect the stock price to appreciate.

#2 Finavera Renewables (FNVRF.PK)

Dec 31, 2007: $0.3371, Dec 24, 2008: $0.0238; -93%

I sold my stake in this most speculative of my long picks early in the year, as the darkening financial climate convinced me that a speculative frenzy for ocean power stocks was unlikely to emerge. I no longer follow the company,

#1 SHORT First Solar (FSLR)

Dec 31, 2007: $267, Dec 24, 2008: $133.73; -50%

I took my profits on this in June. I don't usually follow solar companies, because I feel that they are generally too widely followed for me to add much value. I don't have any particular expectation of how First Solar will fare next year.

DISCLOSURE: Tom Konrad and/or his clients have long positions in CREE, MXWL, CPST, FCEL, CPTC, and NGLPF.

Comments

[hummer:]

You cite as # 4 Nev. Geothermal Power.

I don't get your logic and given my knowledge of geothermal, if this is an indication of your picks, then validity to be given to your research and due diligence is not much.

How can you suggest or invest in Nev Geothermal Power over Raser Technologies given the fact that RZ is about to turn on its first 10 MGW plant and has over 2000 confirmed geothermal MGW's?

For its Thermo location, an independent tester confirmed 280 MGW at Thermo for sure and it's wells to wheels platform seems as though it has tons more potential.

Management is good.

They have demonstrated an ability to raise capital, even in this down and tough market.

2009 looks good and 2010 appears to be huge with it given its plans for plant production e.g. 6 months construction per plant with 8-10 to be done in a year.

Please explain as your logic defies reason how you favor Nev. Geo v. Raser? RZ

Thanks.

Candidly, I think you missed the boat.

2008 Dec 29 08:27 AM

[wind4me:]

why not pick the #1 Distributed Power builder and Wind company in China in A Power Energy???? APWR is cash positive, makes money hands over fist an country of China just passed legislation to pay MORE subsidies for Distributed Power Stations in China ???? APWR is my PICK for #1 Stock for 2009 given the China 586 Billion infrastructure stimulus and more subsidies for DPS's!
www.Wind4me.com

2008 Dec 29 11:50 AM

[John Lounsbury:]

Thanks for this update. I have some opinions to add:

CREE - I think this company has a bright future.

MXWL, EEEI and CPST - All have great prospects in the development of a smart grid and distributed enegy generation management, but I agree that the time to pick any one or combination of these is not now. They may all be winners or failures, but, if so, they will be replaced by competitors not in this list. I think investors have many months (or even a few years) to sort this out.

FSLR - I, too, am ambivalent about First Solar at this time. I have made money shorting FSLR, but I'm not considering any position here at this time.

Korn - I appreciate your comment RZ - I will follow up.

wind4me - Thanks for the heads ip on APWR. I will start following that too.

Finally, Tom, I have a small position in Vestas (wind turbines) and wonder if that is on your tracking radar.

2008 Dec 29 03:19 PM

[John Lounsbury:]

Bad typo" I wrote: "They may all be winners or failures, but, if so, they will be replaced by competitors not in this list."

Please correct to read: "They may all be winners or failures, but, if failures, they will be replaced by competitors not in this list."

2008 Dec 29 03:21 PM

[CPST1:]

Capstone Turbine files shelf registration with SEC to issue up to $150 million in shares


CHATSWORTH, Calif. (AP) -- Capstone Turbine Corp. said Wednesday it filed a shelf registration statement with the U.S. Securities and Exchange Commission to sell up to $150 million of its securities from time to time.
The mixed shelf includes common stock, common stock warrants, preferred stock, debt securities, rights to purchase or a combination of securities.

Capstone Turbine Corp., based in Chatsworth, Calif., makes low-emission microturbine systems.

It said it does not plan specific financing, but will use the stock offering for "future financial flexibility."

Capstone reported 173.8 million shares outstanding as of Nov. 30.

2008 Dec 30 06:31 PM

[JLBR:]

You apparently don't follow Beacon Power, the grid-level flywheel company, which is now starting to bring in revenues from its grid regulation services, with 5-MW in 1Q09 and 20-MW shortly after. BCON's technology is ideally suited to that application, which is a $1 billion plus market that it pretty much has to itself. And talk about clean! Flywheels consume or produce no chemicals or emissions, recycle energy already produced, need little maintenance for 20 years, and can be put underground with trees on top. Besides, MW-level storage and a stable grid are prerequisites for serious electrical generation on utility level by renewables. BCON holds the key to that potential. Flywheels may sound old fashioned, but when they spin at mach-2, they're very high tech. Surely this one belongs on your list! And I'd really like to see someone else following it intelligently!

2008 Dec 31 07:22 PM

[JLBR:]

Tom,
You apparently don't follow Beacon Power, the utility-grade flywheel company that's finally starting its grid regulation service, a $1 Billion plus market that it basically has to itself. Surely this one belongs on your list! Storage and stability on the grid are pre-requisites to serious electrical generation by renewabes, and BCON holds the key to that potential. No super-batteries or ultracapacitors are close to ready yet, but flywheels have been found ideally suited for the task anyway. And talk about clean! Flywheels use or produce no hazardous chemicals or emissions, recycle energy already produced that otherwise would be wasted, need no maintenance for 20 years, can be put underground with trees on top, and can be installed in months. It's the beginning of the the massive grid upgrade DOE speaks of but no one seems to be doing anything about. I sure would like to see someone else following this company intelligently! Please take a serious look.

2008 Dec 31 07:36 PM

[Tom Konrad:]

JLBR: I do follow Beacon (and own some of the stock,) but did not follow it a year ago, when I put together the list. If I publish a lsit for 2009, it might make it in.

2008 Dec 31 10:42 PM

[Tom Konrad:]

Korn: For you and others who have problems with this list (see JLBR above), recall that it was 10 speculartions for *2008* many of the reasons you cite for picking other stocks are things which occurred in 2008.

2008 Dec 31 10:46 PM

[FWallace:]

Tom
I thought SATC was one of your '2008 picks?
Would be interested to hear your opinion at this point in time?
Thanks

Jan 06 01:54 PM

[stockdoc123:]

www.ted.com/index.php/...

Apr 22 10:05 AM

[longtermstocks:]

BCON, SATC, CPST, Fcel, MAG

Apr 22 10:08 PM