I am retired and take educated guesses on all things financial.

November 21, 2007

November 22, 2007: Alternative energy, a few good stocks

It is becoming more apparent that coal will have to play a vital role in our energy future here and elsewhere in the world. The environmental lobby, again behaving like infants using old technology and poor data as their mantra, continues to excoriate coal. The reality is that many companies - and one in particular - are working diligently on carbon residue reduction and elimination during the coal burn process which would render coal-fired energy plants "green" by any reasonable measure.

The number one company in the carbon recapture field is Kinder Morgan Energy Partners (KMP). KMP is the only MLP that has a large amount of CO2 experience, which is highly specialized and not easily replicated. KMP will likely be the partner of choice for CCS projects and thus will capture the monies for this necessary procedure. KMP is a superbly run MLP that is best of breed in several endeavors of energy transmission, diffusion and alternative energy applications based upon years of experience. Dividends are tax-advantaged.

Top picks in the palm oil play are Synergy Drive, KLKepong and IOI (see previous posts for ticker symbols).

Biofuel will need a 4% product expansion to meet world bio fuel demands and a 2.5% growth in production to meet human food needs. There will be conflict here between the importance of grain for fuel or grain for human consumption. The use of animal parts and non-edible oils and fats may be the answer. Nova Biofuels (NBF) may be well positioned as a takeover target or dynamic growth stock from its paltry $2.40/share price to leverage their proprietary process in this field.

A top pick in the agriculture business is Indofood Agri (IFAR). Its huge and growing palm oil production will actually benefit from agricultural inflation.

In wind power, FPL Group (FPL) is putting into service 8,000MW of new wind service by 2012. And carbon offset credits may benefit FPL by as much as $3.00/share by 2010.

Hitachi Metals (5486 -Tokyo)is the winner by producing Hercunite, a heat-resistant steel which is needed for non-motor applications (motor magnets) in hybrid cars.

In solar, Sunpower (SPWR) is an increasingly interesting stocks. It was recently raised from a target price of $110 to $165/share by a respected CSFB analyst.

Another solid solar play is Applied Materials (AMAT) due to unexpectedly large sales that show no sign of abating.

Brazil is blessed. With a huge natural resource base, Petrobras last week discovered another 8 billion barrel (minimum) oil field off its coastline. And this country already runs its vehicles on ethanol, so the export potential is huge. Brazil will join OPEC and become a top ten oil producer within five years.

And we are running out of oil? Green to Brazil is not biodiesel, but the color of money. Who can blame them?

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