The first company, Amcon Distributing, is a leading wholesale distributor of consumer products including beverages, candy, tobacco, groceries, food service, frozen and chilled foods, and health and beauty care products. The Company also operates health and natural product retail stores.

Inside every iPod, iPhone and Apple laptop is a lithium ion battery. The lithium ion battery has become smaller, more energy efficient and longer lasting, effectively replacing the previous generation of Nickel Metal Hydride batteries. CBAK, ABAT, HPJ and CMTP.OB are all competitors in this market and are currently enjoying high margins as demand for products such as those made by Apple continues to soar. Apple’s strong results provide a great barometer for what to expect from upcoming earnings reports by these battery makers, all of whom should enjoy a strong pick-up in revenue.

Here is a list of 32 stocks which traded higher Friday on unusually higher volume. I have added all 32 of these stocks to my watch list (and invite you to as well), but chose only a couple to write about in detail in this post. This post requires the knowledge of stock options. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, click here.

The table below shows the company, ticker, Friday's per share % increase, and Friday's volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.

I've been blogging about pure-play energy storage device manufacturers since July 2008. By mid-November I'd assembled a short list of thirteen pure-play public companies that accounted for almost 25% of the $30 billion global battery market. Frankly I was shocked to learn that major battery manufacturers like Exide (XIDE) and Enersys (ENS) that report billions in annual sales carried tiny market capitalizations when compared with far riskier technology development companies like Ener1 (HEV) and Valence Technology (VLNC) that would be little more than rounding errors on the big boys' financial statements.

As I focused on the obvious valuation disparities, it became clear that the market was paying huge premiums for companies that are developing cool energy storage devices and heavily discounting companies that manufacture objectively cheap energy storage devices. My belief at the time was that the cool companies were likely lose ground while the cheap companies were likely to gain ground. My original peer group comparison table follows (click on the image for a larger view).

Last Friday I published "Battery Investing for Beginners" as an introductory piece for investors who don't know much about the energy storage sector but are interested in learning more because of the hugely successful initial public offering by A123 Systems (AONE). Since the article was well received and there seems to be a good deal of reader interest, I've decided to continue the theme with a series of articles where I'll try to build a contextual framework for the industry and show where various types of energy storage devices and their manufacturers fit into that framework. Since I don't want to spend too much time replowing old ground, I'll rely on hyperlinks to my earlier blogs and third party source documents.

I'm a lawyer, not a journalist. My undergraduate degree was in accounting with a solid base of hard science. I've spent the last 30 years working in securities law where most of my work involved small natural resource or technology development companies. I'm not an engineer or scientist, but my chosen field of practice requires me to understand the science well enough to explain it. My foundation in the energy storage sector dates to 2003 when I took on a client named Axion Power International (AXPW.OB) that was organized to develop a novel energy storage device that's half lead-acid battery and half supercapacitor.

In evaluating this IPO, I am a very biased investor because I refuse to invest in money losing companies. When a company is being well received by investors because its “losses are declining,” I don’t feel too bad about not being part of the IPO party. A123 does have an impressive client list including Chrysler and Black & Decker. However A123 has only generated $168 million in revenues since being founded in 2001. On revenues of $168 million, the company has lost $146 million since its founding. I repeat, on revenues of $168 million since 2001, the Company has lost $146 million.

The next couple months are shaping up as a time of extraordinary change in the energy storage sector. Events that will drive the change include:

• Press reports indicate that the Department of Energy will be ready to announce it's preliminary decisions on the allocation of $2 billion in ARRA battery manufacturing grants sometime this week;
• We've seen numerous reports on automaker's plans to begin manufacturing PHEVs and EVs in limited volumes for testing and demonstration purposes;
• New tailpipe emission standards in Europe and accelerated CAFE standards in the U.S. will effectively compel the widespread adoption and rapid roll-out of stop-start and mild hybrid technologies by all major automakers;
• Advanced Battery (ABAT) acquired manufacturing facilities for electric two-wheeled (E2W) vehicles and is diversifying its operations with a sharper focus on the Chinese market;
• Beacon Power (BCON) received a conditional commitment for a $43 million DOE loan guarantee that will be used to complete a 20 MW flywheel energy storage project in New York; and
• A123 Systems filed another amendment to its SEC registration statement, which indicates that they're still on track for an IPO sometime in September.

So now seems like a good time to update the relative performance of the individual energy storage stocks I've been writing about for the last year.

I didn't learn about normal bell shaped curves in kindergarten but I developed a pretty solid understanding of the concept by the second or third grade because at report-card time A's were worth a quarter, B's were worth a dime and C's had no value at all. By the time I reached college I was chasing the right hand tail of the bell curve on my own initiative. Law school and the competitive nature of my profession merely pushed my drive for the right hand tail up a notch.

Old habits die hard, so I still tend to chase that right hand tail of the bell curve in almost everything I do. The only real exception is investing where 30 years of experience has taught me that the most successful companies are the ones that sell products to the 95% of the population that don't command $200,000 salaries. There are companies like LVMH that have a great business catering to the elite, but they're not in the same league as Target (TGT) and Wal-Mart (WMT).

After devoting several months to articles on arcane technical and economic issues that normal investors should not have to endure, I declared a cease fire last week and advised readers that I was done with technology and planned to focus on more interesting topics like the future of the energy storage sector and making money from energy storage investments. I've spent enough time discussing trees. Now I want to evaluate the forest and show investors how to position their portfolios for the coming of cleantech, the sixth industrial revolution. I hope old friends and new readers alike will find the change refreshing. I know I will. I began blogging in July of last year and have concentrated on manufactured energy storage devices and the companies that make them. In a series of 55 articles to date, my fundamental premise has been that:

• Manufactured energy storage devices are just plain boring;
• Energy storage stocks have historically traded at "rust belt" valuations;
• As we enter the cleantech age, the market will discover that energy storage is a core enabling technology for many classes of alternative energy; and
• As the market adjusts to the new realities, valuations in the energy storage sector are likely to soar.

Since July, market interest has developed faster than I expected and it's beginning to look like my predictions of rising tides and investment tsunamis may have undershot the mark. Just on Friday, Energy & Capital ran a headline story that screamed "Advanced Energy Storage: It's Worth Billions." Others like it appear regularly. This is a great time for astute investors who are seeking alpha, but the window of opportunity is closing.

For several months I’ve been writing about manufactured energy storage devices and the companies that develop and manufacture them. My basic theme has been that these devices are fundamental enabling technologies for cleantech, the sixth industrial revolution.

I’ve repeatedly said that profound economic changes were rapidly evolving and that energy storage would be a major investment theme for decades to come, but even my unbridled optimism could not keep pace with the realities. While most investors have been focusing on obvious problems like bad mortgages, tight credit and recessions, immense changes in the energy sector have gone almost unnoticed. As a result, most investors do not understand that the energy storage sector of today does not even bear a passing resemblance to the one I started writing about last summer.

Valuation Metrics for Alternative Energy Storage Stocks

Over the last six months I’ve written thirty-two Seeking Alpha articles on energy storage, an industrial sector that is developing basic enabling technologies for cleantech, the sixth industrial revolution. My initial plan was to evaluate the relative long-term investment potential of a short list of pure-play energy storage companies by focusing on the performance, costs and benefits of their technologies. While I expected to run out of ideas within a couple of months, readers kept asking incisive and probing questions that deserved detailed answers, so I continued the series and delved deeper into the relative values of the energy storage companies on my list. My core philosophy comes from the work of value investor Benjamin Graham who said, “In the short run, the market acts like a voting machine, but in the long run it acts like a weighing machine.”

Last summer, I questioned whether global lithium supplies would be adequate to satisfy exponential growth in the Li-ion battery sector. I raised the question because of a 2006 report, “The Trouble with Lithium” written by William Tahil of Meridian International Research, which concluded that world lithium reserves were not sufficient to sustain EV manufacturing using Li-ion batteries and suggested that Zinc-Air and NaNiCl batteries might be better choices. Commenters responded by citing a 2008 report, “Lithium Abundance – World Lithium Reserve” and a follow-on report “An Abundance of Lithium” written by R. Keith Evans, both of which appear to have been commissioned by someone in the Li-ion battery industry in an effort to first question Tahil’s findings and then portray him an ignorant conspiracy theorist who should be ignored. To quote Shakespeare, “Methinks the lady doth protest too much.”

Since this was obviously a hot button issue and I didn’t have enough facts to argue with people who might be better informed, it seemed prudent to back off on the lithium supply question until I knew more. On January 7th, a new Seeking Alpha article, “Jack Lifton: The Technology Metals Age” was brought to my attention by Paul Killinger, a fellow Seeking Alpha author. Since the Lifton interview confirmed one of my worst suspicions about global lithium supplies, I’m going to reopen the lithium supply issue and take a closer look.

Last August I published a short list of pure play energy storage stocks and promised to track them over time. Since then I’ve modified the list to add two companies [i] and delete three others [ii], but the core remains stable. Tradition holds that New Year’s Day is a wonderful time to reflect on the past and plan for the future. While 2008 is not a year that most investors will remember with fondness, I will honor tradition by returning to my list, summarizing market performance since August, noting current market capitalization values and offering my unvarnished opinions about likely performance in 2009. My December 31, 2008 review and outlook list follows.

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Benjamin Franklin once wrote, “A penny saved is two pence dear;” a self-evident truth that is half of the driving force behind cleantech, the sixth industrial revolution. The other half is our innate desire for reliability and stability, particularly when it comes to transportation and the power grid. Larger issues like energy independence, political policy, technology and global warming make for stimulating conversation, but when it comes to individual decisions, the things that really matter are saving money, getting to work on time and keeping the heat and lights on.

It’s impossible to pick up the Sunday edition of a major newspaper without seeing several reports on the latest cleantech projects and innovations because all cleantech sectors are progressing rapidly and the rate of change is likely to accelerate as the cleantech revolution becomes more pervasive. Notwithstanding their widely accepted economic and environmental advantages, cleantech solutions are inherently variable. Without energy storage to smooth out the peaks and valleys in wind and solar power, maximize the savings from hybrid electric vehicles (HEVs) and reduce the end-user cost of other cleantech solutions, the rate of change will slow and we’ll all be poorer for it. Since energy storage is the only way to make cleantech reliable and stable, and cost-effective energy storage can make cleantech investments more profitable, informed consensus holds that energy storage is an enabling technology for the cleantech revolution. As such, it is certain to be a major investment trend for decades to come. I think the first rising waters of this investment tsunami have already hit the beach.

I’m a lawyer and accountant who agreed to work as securities counsel for an R&D stage battery company named Axion Power International, Inc. (AXPW.OB) about five years ago. The engagement turned out to be more complex than expected and I ended up spending the next four years developing a profound understanding of the technical and competitive landscape in the energy storage sector, first as legal counsel, then as a board member and finally as board chairman. I resigned from Axion’s board in January 2007 and about a year ago I was able to upgrade Axion to a larger law firm and refocus my attention on other clients in the oil and gas, biodiesel, electrical generation and nuclear power industries. My only ongoing relationship is as a stockholder.

After a six-month cooling off period, I decided it might be worthwhile to share what I’d learned about energy storage in a series of Seeking Alpha articles. I'm not an engineer or electro-chemist, but I've spent enough time working in the energy field to understand the investment potential of energy storage without losing sight of the complex technical and economic risks. I’m not a disinterested observer by any stretch of the imagination. Instead I describe myself as an optimistic technology-loving geek with a deep streak of questioning skepticism that comes from 30 years of hands-on experience working as counsel for emerging energy and technology companies.

Last Thursday I briefly touched on several highpoints from a recent report by Merrill Lynch cleantech strategist Steven Milunovich, The Sixth Revolution: The Coming of Cleantech. In my closing, I suggested that if the report’s analysis is accurate and energy storage becomes a key enabling technology for the cleantech revolution, then it won’t be long before governments begin treating battery manufacturing companies as strategic national assets and adopting regulations, industrial policies and tariffs that are designed to favor their home country’s business interests. That observation started the mental snowball rolling downhill and I’ve spent several days pondering the question “Exactly where will all those batteries come from?” My preliminary analysis is more than a little disturbing.

Oil is a basic commodity that is consumer ready after minimal refining. The oil business can be quite profitable for resource owners, producers, refiners, distributors and employees who move petroleum products from the wellhead to the gas pump, but ancillary economic benefits to producing states are modest. Rechargeable batteries, on the other hand, are durable goods that are mainly used as components in other high-value manufactured products. This means that every battery produced creates a host of ancillary economic opportunities for the producing state.

In a recent thematic report, The Sixth Revolution: The Coming of Cleantech, Merrill Lynch cleantech strategist Steven Milunovich identified cleantech as the sixth technological revolution since 1771 and warned that “investors must pay attention because cleantech could revolutionize much of the economy, including the utility, oil and gas and auto industries.” The six historical inflection points identified by Milunovich were:

Alternative Energy Storage and Cheap Oil

Oil prices have fallen off a cliff recently and everybody’s breathing a sigh of relief as prices tumble at the gas pump. Late last week I read on Bloomberg that Francisco Blanch, a commodity strategist at Merrill Lynch, is forecasting a market bottom in the $25 range and a 2009 average price in the $50 range. The relief is welcome but I have enough experience in the oil business to know that we’re merely experiencing that pleasant calm that comes when the eye of a hurricane passes overhead. This is no time to go out and buy a gas-guzzler!

I’m a Mac user and have been for over 19 years. More accurately, I’m a serial early adopter of new technology. I bought Sharp’s first portable calculator in 1971; bought word processing, laser printing, videotape, compact disks and satellite TV in the early ‘80s; bought a cell phone and established an Internet domain in the early ‘90s; and had established a paperless office and a global practice by the late ‘90s. If it was new and cutting edge, I had to have it first regardless of the cost. So far, the only technical temptations I’ve been able to resist are an iPhone, because I don’t want that much connectivity, and an EV, because I don’t believe the available products are good enough. But I can pretty much guarantee that I’ll have an EV within a couple years, or as soon as somebody comes up with a reasonable solution that fits my relatively modest transportation needs.

I am not what most people would classify as a regular guy. But I have to admit that my perverse insistence on being an early adopter of the latest and best in cutting edge technology has more often than not led to product purchases and investment choices that ranged from disastrous to merely suboptimal.

Since July I’ve been writing a series of Seeking Alpha articles on the energy storage sector because I believe it is poorly understood but likely to be the next major investment trend. From August 15^th through October 31^st, the Dow fell by 19.9% but the energy storage stocks I’ve been following tanked by an average of 38.8%, which gives me a dismal track record as a short-term stock market prognosticator. The following table summarizes the gory details.

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