I put my money where my mouth is and I have one definite stock in my "coffee can" portfolio to just sit, watch and wait. That is: Solazyme (NASDAQ:SZYM).
This company is doing some terrific things with algae to actually create various types of pure oils. Rather than just being a traditional biofuel company (which is the way Solazyme has been trading in recent months), this company, however, offers a lot more to investors.
First, the company holds some terrific patents on its technology with more patents being approved each year. That holding of patents is a great business model if the patents are solid and the technology really adds value. In this case they do as Solazyme is at the cutting edge of creating pure oils from algae which helps the environment and produces products that are better than what are currently on the market otherwise. The scaling up of this new technology is the real key, and Solarzyme is very focused on that issue. They have been developing some very promising relationships with major players like: Dow Chemical (NYSE:DOW), Archer Daniels (NYSE:ADM), Bunge Global (NYSE:BG), and many others.
Solazyme has actually three markets that can benefit from their technology. Most traders on Wall Street don't get it, and the stock trades like it is a basic, standard biofuel company that moves along with agricultural prices or the price and outlook for oil. But that approach toward value is very short-sighted because that is not all that Solazyme is truly about.
Here is what a recent press release from Propel Fuels said about Solazyme:
Solazyme's technology platform converts plant sugars into oils by feeding the sugars to microalgae in standard industrial fermentation equipment. The algae consume the sugars and convert them into oils rapidly and efficiently. While it takes millennia to make petroleum, Solazyme's process takes merely a few days. Testing undertaken by the National Renewable Energy Laboratory (NREL) shows that, in a 20% blend, SoladieselBD significantly outperforms ultra-low sulfur diesel in total hydrocarbons (THC), carbon monoxide (CO) and particulate matter tailpipe emissions. This includes an approximate 30% reduction in particulates, a 20% reduction in CO and an approximate 10% reduction in THC.
That is just the diesel part of the business for Solazyme. There are additional, even more substantial markets for Solazyme: personal hygiene, aka, skin-care products.
Solazyme has discovered that their products are very healthy for the body, particularly for the skin. They have developed a skin-care line called Algenist. This is a full line of high-end skin-care rejuvenation products that actually work. Being a man, I don't use many skin-care products, BUT I have tried one of theirs (Algenist Restructuring Serum), and I was so impressed that I have continued to use it every day now. What can I say? Results matter. At $90 a bottle, it is worth it to me to actually look years younger because that makes me happier, and then I start to feel younger. Solazyme has established some of the best, most important retail places to sell their products, too. These are places like Sephora, Amazon.com and QVC that really reach into the consumer markets nicely.
Then, there is another part of the Solazyme business that is just like having "a pair of aces in the hole" if you ask me. That is FOOD. Yep, food. Solazyme has realized that many of the fatty oils that are used in cooking and in food processing may be harmful to the body or at least not optimal for personal health. It just turns out that algae-derivative products and oils are much healthier and lower in fats and cholesterol. Who knew? Solarzyme did. They have partnered with Roquette in France.
Here is an excerpt from a paragraph regarding nutrition on the solazyme website:
Solazyme has developed algae-based food ingredients including oils and powders that enhance the nutritional profile and functionality of food products, while reducing costs for consumer packaged goods (CPG) companies.
When used in full or as partial replacement for ingredients such as eggs, butter and vegetable oil, our products offer superior health benefits, including reduced calories, saturated fat and cholesterol, and functional benefits such as enhanced taste and texture for low-fat formulations, while also providing lower cost handling and processing requirements.
In 2010, Solazyme and Roquette, the global starch and starch-derivatives company headquartered in France, formed Solazyme Roquette Nutritionals, a joint venture bringing to market an entirely new line of microalgae-based food ingredients.
Solazyme is also in the chemicals side of the business, too, creating partnerships with companies such as Unilever (NYSE:UN) to provide algae-based oil ingredients to be used in soaps and other personal-care products. Solazyme's products and technology are part of the change that is taking place on this planet right now in this generation. I think they are in the right place at the right time with a lot of leverage.
Personally, I think Solazyme has terrific upside potential, especially if you buy at these levels. This one is perfect timing for today. Several other professional institutions who follow the stock have price targets on this stock of $23 - $27. I actually think that this stock can and will go higher and fill my "coffee can" while I wait.