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Why the PUMA is a Great Idea

|Includes:Valence Technology, Inc. (VLNCQ)

This morning I've been reading a rash of reports on the new Personal Urban Mobility and Accessibility vehicle (PUMA) that was unveiled yesterday by GM and Segway. While I'm generally harsh on proposals for vehicles with plugs because I question their fundamental economics, the PUMA looks like it could be a winner. It also looks like it would be a blast to drive.

My big problem with plug-ins has always been the prospect of using batteries to move a couple hundred pounds of passengers and a couple thousand pounds of vehicle at highway speeds. With a curb weight of 300 pounds and space for two passengers who don't mind close quarters, the PUMA blows the economic arguments out of the water, as would any solution with a passenger to vehicle weight ratio of one.

I truly hope the PUMA advances rapidly from prototype to product and garners widespread consumer acceptance.

For several years now, Segway's battery supplier has been Valence Technology (VLNC). They manufacture a high-end Li-ion battery (lithium-iron-phosphate chemistry) that has drawn rave performance reviews from end-users who've commented on my articles. If Segway is as pleased with the Valence batteries as the end-users I hear from, there is no reason to believe that a competitor will be able to undercut a long-standing business relationship and edge Valence to the sidelines.

If the PUMA is even moderately successful, it could be a company-maker for Valence.

My personal opinion is that Valence's stock is a bit on the expensive side. With it's history of operating losses and weak financial condition, I have a hard time justifying a market capitalization of $240 million. But on the other hand the reason for investing in technology driven companies is the potential that a single event might move a stock from overvalued to undervalued in the blink of an eye, and even I have to admit that it's a more attractive stock today than it was yesterday.

I don't own Valence or plan to buy it, but I think the PUMA could prove to be very good news.

Stocks: VLNCQ