By Timothy Lutts
Millions of years ago, billons of tiny plants and animals died and settled on the bottoms of ancient oceans, creating a thick layer of organic material. Sediment later covered this material, putting heat and pressure on it and transforming it into oil and gas.
And there it stayed, for a very long time … until January 10, 1910, when a drilling derrick at Spindletop Hill near Beaumont, Texas, produced an enormous gusher of crude oil, signaling the start of the American oil industry.
Within a year, there were more than 285 active wells at Spindletop and an estimated 500 oil and land companies operating in the area, including some that are major players today: Humble -- now Exxon (XOM) -- the Texas Company -- Texaco -- and Magnolia Petroleum Company -- Mobil.
(Imagine if you had been a buy-and-hold investor in one of them!)
And petroleum powered the world over the next century, enabling a vast multitude of machines to serve our needs and wants.
But the petroleum age is beginning to fade. The earth’s oil reserves are slowly becoming more difficult and expensive to exploit, and we know the environmental costs of their use.
At the same time, alternative energy sources, from nuclear power to renewable solar and wind power are becoming increasingly practical. Young companies are springing up in all these industries, and I’m enjoying watching them grow rapidly, while speculating on what might happen if I hold some of them for the very long term. Might some of them become the next Exxon, Texaco and Mobil?
Which brings me to this issue’s recommendation.
It’s Polypore (PPO), a stock I last mentioned here in August.
Located in Charlotte, North Carolina, the company makes high-tech polymer-based membranes for two markets.
The first, accounting for about one-fourth of the company’s business, is the medical market, where the membranes are instrumental in hemodialysis, blood oxygenation, ultrapure water filtration, degasification and other specialty applications. This business brought in $38.4 million in the third quarter of 2010, and it’s growing slowly.
The second market, accounting for about three-fourths of revenues-$133.3 million in the third quarter-and the majority of the growth, is the energy storage business.
Part one of this involves supplying membranes for traditional lead-acid batteries, where the biggest growth is now in China.
But the fastest-growing and most exciting part of the business involves supplying membranes for the lithium batteries used in electronics, including Apple’s (APPL) iPad, and numerous new automobiles-both pure-electric and hybrid-that have lithium batteries.
That business grew 46% in the third quarter, to $34.1 million, and continued rapid growth is expected.
I recommended the stock here in August, when it was trading at 28, and it’s done very well since. It’s now trading at 44.
But I didn’t find the stock. That honor goes to Brendan Coffey, editor of Cabot Green Investor, who recommended it in June, when it was trading at 22.
If you bought it back then, congratulations. I hope you still own it. And if you didn’t buy it, you might consider buying some now. The stock has been building a base on top of 40 for more than a month, and its 50-day moving average is now at 38, promising support as the stock prepares for a breakout to new highs.