Mark Cuban’s new blog, Sharesleuth.com, recently wrote an outstanding article on Xethanol (XNL). It is a must read if you haven’t already. You probably already know by now that the stock tanked on the day the article was published. Mark Cuban also admitted to shorting Xethanol based on the news that his blog uncovered. We will leave the ethical discussion on this for another day.
Anyways, I have been tracking Xethanol since about December of last year during its days on the OTCBB. However, I was skeptical about Xethanol back then and am still skeptical about it now (Although, when I think about it, I should have just bought Xethanol when it was about $2 stock in December). I did buy Pacific Ethanol (NASDAQ:PEIX) back then and that worked out pretty nicely for me. I sold my PEIX shared a few months ago and currently don’t have any ethanol stocks in my portfolio.
If you look at my previous article, you will see that I attended a luncheon by Xethanol in Atlanta where they discussed their plans of expanding in the South-East and specifically Georgia. I have provided a summary of the presentation and I would recommend everyone to read it. I didn’t provide any personal analysis on the company in that article, only the summary of the presentation. So why didn’t I buy any shares of Xethanol after meeting with the management team and listening to their presentation?
The reason is that I thought the stock was overpriced as the company still only had plans on the drawing board. There is still no new plant in the south-east or anywhere else for that matter except the ones they have in Iowa. They have a good business plan and strategy of locating plants near big cities on the east coast that will produce Ethanol from waste products. They even have a deal with PRAJ technology from making cellulosic ethanol in its new plants. By the way, Vinod Khosla, has an investment in PRAJ technology as well. More on that to follow soon.
Anyways, if you look at all the press releases from early December you can see that Xethanol has really taken advantage of the ethanol boom. I am going to wait into buying Xethanol once they open a Cellulosic plant outside of the midwest. (That is if the stock price is reasonable at that time). If I invest in an ethanol company again it will have to be cellulosic ethanol producer and not corn based producer. There might be some short term trading opportunities in companies such as PEIX but I prefer cellulosic ethanol.
I do want to add that there might be some upside at this price point for Xethanol. If you are a trader you might want to give it a shot. As a long term investor you might want to wait until you see Xethanol producing cellulosic ethanol from one its planned east coast plants.
XNL 1-yr chart: