FuelCell Energy (FCEL) fell 13% (and counting) yesterday on news that its loss widened in the third quarter (see earnings call transcript). But FuelCell’s stock is suffering, not from bad quarterly results, but from the deflation of a "fashionable investment" bubble.
In the last year, alternative energy has been a popular investment sector to say the least. And while solar and wind energy companies have already proved they can turn a profit with their products, even if they must rely on the tax incentives of kind-eyed governments to do it, fuel cell manufacturers haven’t seen such great results.
But that didn’t stop investors from piling into fuel cell companies with abandon in the hopes that other investors would be just as stupid about their stock decisions and send the stocks of unprofitable companies higher. And it worked.
In late December, FuelCell hit a high of $13.14. And it hit another high of $10.30 in early June, as oil prices catapulted toward daily record highs.
But now oil prices are back down. Investors are feeling foolish for buying into a fad, and they’re using any excuse to sell out of the stock.
If they had been paying attention the first time they bought shares, FCEL investors would have noticed that FuelCell has never been profitable. The company has posted a loss every year since 2003, according to its annual reports. And no one should be investing in the company until it actually starts making some money out of its earth-changing new technology.
If you profited from the alternative investing fad, congratulations. If you didn’t, sell your shares and get out now before even more "fashionable" money exits the stock.
Maybe you’re a true believer, and you really think fuel cells will someday replace coal- and oil-generated electricity. That’s great, but as a true believer, you should have the patience to wait until better results from the company signal a good buy in point.