The Perils of Green Energy Investing

by: Hedgephone

The news that Solyndra filed for bankruptcy after receiving a $500 milion dollar loan gaurantee from the Obama administration's stimulus program made me think back on some of the other failed US Government solar investments of years past and I wanted to share my experiences with these stocks.

After taking you down memory lane via the 3 ghost of Christmas Past for the "Green Jobs" intitiatives I will discuss two businesses which are not funded by the government but are putting American energy independence on the map without billions or even millions of tax payer dollars being placed on the roulette wheel.

A cautionary note: it pays to have stop loss orders in place along the way, as I describe to you the investor version of Hades as illustrated by the following 3 stocks.

Chart forEnergy Conversion Devices, Inc. (NASDAQ:<a href='' title='Energy Conversion Devices, Inc.'>ENER</a>)

ENER -- Energy Conversion Devices is kind of like a Mini-Madoff in its own right. The company was trading at over $85 a share just four short years ago. Today, the company is sloshing around the $.64 level, though it was up 3.72% on Wednesday. ENER, which "someone" dubbed "Eneron" on the Yahoo message boards back in 2007 when they were shorting it in the high $70's and $80's, was given millions of tax payer dollars and the insiders managed to cash out of hundreds of millions in common stock sales back when ENER was a Wall Street (and a Jim Cramer) favorite. To be sure, ENER brutalized the short sellers for months and our own President George W. Bush actually visited the company during the financial crisis, supposedly to herald the growth of alternative energy in America, etc. I was completely baffled by all of this, however, as ENER was my largest position, which happened to be a short position, and was being pumped by Jim Cramer and George W. Bush himself! I wonder if anyone will be visiting ENER in the future now that it's a $34MM company instead of a multi-billion dollar pump.

ESLR -- Like ENER, Evergreen Solar is another failed "US Solar" firm that simply was run for the management and for stock options and the enrichment of insiders versus the enrichment of ESLR shareholders (and stakeholders). ESLR is now trading on the pink sheets for all of thirteen cents per share and the company is bankrupt. How many millions of US Taxpayer Dollars went down this money hole?

KFX-OLD -- Next time you here someone tell you a stock that has invented "L-Fuel" just put in a short order on the stock because it's likely a scam like KFX energy's "K Fuel." KFX is an old SCAMEX name that I watched implode from a price of around $15 to a number that barely prints. Many of the board of directors at KFX were high profile executives at other companies. It's suspicious that these executives would not have pushed for a large stock issuance when the name was at its peak and gradual liquidation at a later date if they were facing such a difficult operating environment versus torching the shareholders alive in the common stock.


NEE -- Next Era Energy seems to be an alternative energy company that doesn't need speculative arms-length crony transactions with Uncle Sam to make hay -- the company trades for around 11X earnings and the stock is a relative bargain compared to the overall stock market. The company has operated at a profit for years, yet this firm never received the billions that companies like Solyndra and others received from the Government.

CMI -- Cummins is another company that could become even more green then their diesel engines are today, as the business will be used in the manufacturing of natural gas engines. Natural gas has the potential to reduce our dependence on foreign oil and also pollutes much less than unleaded-based vehicles -- natural gas is a clean burning fuel and that fact alone should make the transition towards domestic natural gas utilization a top priority. CMI common stock is trading at just 9X forward earnings estimates and the stock is riding high on relatively robust vehicle sales.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.