For a few months, I have intended to write an update on lithium ion battery company Ener1, Inc. (HEV) since I took exception with an analyst’s dismissal of the company in late July of this year. The stock remained firm since then, and I was thinking it was a bullish sign. HEV reported earnings last week (see earnings report here and earnings call transcript here), and the CEO’s post-earnings interview on CNBC gave me that final nudge to write some more thoughts.
CEO Charles Gassenheimer said some remarkable things, essentially claiming he leads a can’t-lose green energy business that is supported by high oil and gasoline prices. Moreover, the business can curry political favor with Democrats and Republicans with a turbo boost from the Federal Reserve’s attempts to re-introduce the economy to inflation. Here is what he had to say (partially paraphrased – you can also watch the 4-minute video posted below):
One of the nice things about being in this space [green energy], and Indiana – which is our home state for our plants…Indiana is one of the best examples of bi-partisanship with [Democratic] Senator Bayh and [Republican] Senator Lugar. They’ve reached across the aisle on this issue. Republicans see it as an energy security issue. Democrats see it as a carbon emissions issue. At the end of the day, one of the things we like about this issue is that one of the first places President Obama and Senator McConnell can work together is on energy policy…
…I have a basic business explanation…look at the cost of putting oil in the pump…First of all, the Federal Reserve is allowing for inflation to
reinflate asset prices, like houses, because that is the way the economy will recover. So commodities like oil will continue to move higher even without a recovering economy. So you will be feeling the pain at the pump. It can only help us. We’re delivering 2 cents a mile mobility versus 8-10 cents per mile in the U.S [using gasoline]. With a carbon tax on gas in Europe and Asia, you’re paying 15 cents per mile.
I’m only talking about the business rationale and the tax incentives just jumpstart this.
I think Gassenheimer is extrapolating too much of the bliss in Indiana to Washington D.C. However, if his political assessment is correct, alternative and conventional energy could be great investment and trading plays across the board over the next year and beyond. All of us should shudder to consider that the Fed’s latest program of quantitative easing could generate inflation without a recovery coming along with the bargain. (Of course, some of us argue the inflation has already arrived).
HEV’s stock soared right through this interview even though headline earnings and revenues were lower than analyst expectations. HEV ended the day up 15%. The stock has since retraced most of those gains, but I am eyeballing a potential entry for a speculative play starting from here to the support converging at the 50-day and 200-day moving averages (as usual, any new longs are conditioned on how the market’s extreme overbought conditions play out).
Be careful out there.
Disclosure: No positions