John Petersen

How Apple's Market Share Will Propel Stock to $500, Part 1

The problem with comparing Apple and Windows is that Apple sells a seamlessly integrated bundle that includes both the OS and a very high-end box while all Microsoft cares about is the OS. As a result, every point in market share is a much bigger gain for Apple. Jobs' strategy to reduce the price just enough to move the decision point a little farther to the left bell curve is pure genius. If a single company could garner a 10% share of both the OS market and the hardware market, it could well justify a half-trillion market cap.

Alternative Energy Storage: Cheap Will Beat Cool

Scott93147, there is huge interest in the Furukawa Ultrabattery and the Axion PbC battery from automotive OEMs that need a better battery solution for micro hybrid, or stop-start, vehicles. Stop-start technology is the simplest and cheapest hybrid technology, but it improves fuel economy and tailpipe emissions by 8% to 10% by eliminating idling. When you step on the brake pedal and the car slows below roughly 5 mph, the engine turns itself off. When you release the brake pedal it restarts. There may also be some recuperative braking depending on the system. The only requirements are a slightly larger starter and a battery that's strong enough to restart the engine hundreds of thousands of times and take a heavier than normal charging load. The OEMs have tried standard lead-acid and it's not up to the task. The Ultrabattery and PbC battery are.

The ARRA battery grants announcement included $32.5 million for East Penn to manufacture the Ultrabattery and $34.3 for Exide to manufacture the Axion PbC. As I understand it both applications were supported by a number of first tier of automotive OEMs who are under extreme pressure to meet EU new emission standards and revised US CAFE standards over the next couple of years.

For everything you ever wanted to know about micro hybrids read the following:

seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...
seekingalpha.com/artic...

Alternative Energy Storage: Cheap Will Beat Cool

Don, your analogy to the Derby is actually quite apt. Assume for a moment that Beacon Power and Ener1 are racing for the same prize, a $2 billion market capitalization. Ener1 would go off as a 3:1 shot and Beacon would go off at 20:1. If we put Axion into the same race it would go off at 50:1. The big payoffs do not come from companies that already have objectively high market capitalizations. They come from companies that have objectively low market capitalizations.

Alternative Energy Storage: Cheap Will Beat Cool

User, I've never claimed that Axion's market capitalization is based on historical earnings, but there is an big difference between a company that is emerging from the development stage and carrying a >$50 million market capitalization based on fundamentally cheap chemistry and others at the same stage of development that are carrying market capitalizations of $100 to $700 million based on fundamentally expensive chemistry.

Alternative Energy Storage: Cheap Will Beat Cool

SAFT is a wonderful company but it only trades on the Pink Sheets in the US. Since the principal market for SAFT is Euronext Paris and it can be very hard to find comparable performance figures and make all the currency conversion adjustments, I generally omit SAFT from my list.

The JCI-SAFT joint venture you mentioned will provide batteries for the new S Class Mercedes hybrids. So it's clearly worth watching if you are willing to do the extra diligence work.

Alternative Energy Storage: Cheap Will Beat Cool

Its, heat storage for solar is very interesting for large quantities of power over several hours. But it's not dispatchable in seconds which is the key to maintaining grid stability. Batteries are never going to compete in the multiple hours of storage for mass quantities of power because heat storage, compressed air and pumped hydro are so much cheaper. But there is a big future in the 0 seconds to 15 minutes range.

Alternative Energy Storage: Cheap Will Beat Cool

CSHG's Form 10-K says that its three main products are cobalt carbonate (CoCO3), cobaltosic oxide (Co3O4) and lithium cobalt oxide (LiCoO2) that are manufactured in its ±260,000 sq. ft. of production facilities. It has only recently acquired an interest in an African mine.

CSHG sells the bulk of its processed materials to a small number of Chinese battery producers, but has other potential customers offshore.

The stock is currently trading at slightly less than book value and has a P/E ratio of about 3.

I don't know enough about their business to offer advice, but nothing jumped out that would terrify me, other than the economic downturn that will likely reduce sales and profitability over the short term.

On balance, I think that an investment in a materials producer that sells materials to several li-ion battery producers offers more diversity than an investment in a single battery producer. It also avoids a number of potential products liability issues that are more severe at the battery producer than they are at the materials processing level.

Alternative Energy Storage: Cheap Will Beat Cool

Neweast, for starters I might suggest batteryuniversity.com. It provides a good general overview of how the principal battery technologies work. Beyond that, there is a wealth of information available as you use your favorite search engine to dig deeper into technology issues.

Alternative Energy Storage: Cheap Will Beat Cool

Mercifully I haven't had a wash-out like that since '87 and don't foresee one any time soon.

Alternative Energy Storage: Cheap Will Beat Cool

The nice thing about commitment, particularly at my level of commitment, is that all you can do is take the Sam Walton view of things: "I still own it all so I haven't lost anything."

Alternative Energy Storage: Cheap Will Beat Cool

You'll never hear me say a bad thing about Apple. But it took them over ten years and a return of Steve Jobs to take the best technology to a point where it out-performed the cheaper technology.

Alternative Energy Storage: Cheap Will Beat Cool

I just found a Wall Street Journal piece that mentions ZBB (part of my Cheap Chemistry group) quite favorably:

online.wsj.com/article...

Alternative Energy Storage: Cheap Will Beat Cool

I suppose time will tell Rick. Tom Granville said they were going to make the first shipments on the $6.4 million contract this month and Axion was hoping for a couple million a month in toll-manufacturing revenue by the middle of next year. If fabrication equipment development stays on track, the revenue from 10,000 to 20,000 PbC batteries per month could easily double that figure. For what it's worth, my tables always show fully diluted share numbers giving pro forma effect to preferred stock conversions.

I think more progress is necessary, but I don't think the market will let the stock stay at current levels once the revenue starts ramping up.

Alternative Energy Storage: Cheap Will Beat Cool

Target reductions are a bit higher but I think 40% is pretty accurate right now.

Alternative Energy Storage: Cheap Will Beat Cool

I'm seeing a lot of new commenter today. For those who have not been following this series but want to know more about the energy storage sector, a quick visit to my author page will give you links back to the entire series.

Thanks for the kind comments so far.