Investing In The Rise Of Natural Gas Vehicles

Includes: CLNE, WPRT
by: Investment U

by Mike Kapsch

Living in South Florida has its perks, and my absolute favorite is that I'm just an hour away from basking in the Florida Keys. In fact, just a couple of weeks ago, my wife and I drove down and spent the weekend at Bahia Honda State Park (approximately 35 miles north of Key West). The weather, the water, the camping, almost everything about it was perfect.

But even in paradise there was one thing I had trouble getting over. Gas prices down there are truly outrageous. We paid $4.25 per gallon to fill up our car in Marathon Key. I even overheard boaters complain about how they paid over $5 per gallon at some of the local marinas. I think it's safe to say most Americans sense these prices are heading inland no matter how much we don't want them to. History shows they've risen steadily since the mid-1970s.

Wouldn't it be incredible, though, if there was a way to pay closer to $1 for a gallon of gas instead of the high prices we do today? Of course it would. And we can. But we must get serious about taking advantage of alternative fuel sources like natural gas.

The Case for More Natural Gas Vehicles

According to Popular Mechanics, "Nationwide, natural gas ranges from 79 cents to $1.50 for a gasoline gallon equivalent (GGE) of fuel." Let's say your car has a 15-gallon fuel tank. If you were to fill it up once a week at $1 per gallon with compressed natural gas (CNG), you would save over $2,000 per year with gas prices averaging $3.75 per gallon around the country. Savings like these are getting impossible to ignore. And car companies are increasingly taking action.

GM (NYSE: GM) announced the 2013 GMC Sierra and Chevy Silverado will have a bi-fuel option that can switch between running on compressed natural gas and gasoline.

Ford (NYSE: F) and Chrysler also said they'll be ramping up production on their bi-fuel trucks over the coming years.

Even car rental company Hertz (NYSE: HTZ) just stated it will begin renting CNG Honda Civics and CNG GMC Yukons at its Will Rogers World Airport location in Oklahoma City early next month.

In Europe, with gas prices close to $10 per gallon, the trend is catching on even faster. Just a few days ago, Fiat (Milan: F.MI), Italy's largest auto manufacturer, emphasized it's bypassing electric cars and will focus on CNG as its "go-to" alternative fuel for at least the rest of this decade. A little over a week ago, Volvo Trucks unveiled plans to launch a 13-liter natural gas engine schedule to hit the North American market in 2014.

Of course, the biggest problem around the world for natural gas-powered vehicles is the lack of infrastructure.

Playing the Trend

In the United States, there are only 1,000 CNG refueling stations. And most of them aren't even available to the public. In Europe, that number is closer to the 2,000 mark. This is obviously where we'll need to see the most growth in order to make natural gas-powered vehicles a viable alternative to cars that strictly run on gasoline.

That's why, for investors, the best place to cash in on the natural gas vehicle market today isn't in the car companies themselves. It's in firms that are building refueling stations like Clean Energy Fuels Corp. (Nasdaq: CLNE) and cheaply converting gasoline engines to run on natural gas like Westport Innovations (Nasdaq: WPRT).

Earlier this year, Dave Fessler gave his Peak Energy Strategist subscribers the chance for a 77% gain on Westport. Since hitting its peak in April, the stock has been battered down heavily with the majority of natural gas stocks… (Thank goodness for trailing stops.)

Meanwhile, Clean Energy Fuels Corp. has been up as much as 174% in the past year. This is proof that even though the natural gas market is currently hitting the skids, there are still ways to cash in on the low prices and poor sentiment. Just ask Alexander Green…

Disclosure: Investment U expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees and agents of Investment U (and affiliated companies) must wait 24 hours after an initial trade recommendation is published on online - or 72 hours after a direct mail publication is sent - before acting on that recommendation.