3SOF

Alternative energy stocks rally
Record gasoline prices send sector sharply higher
By Ciara Linnane, MarketWatch
Last Update: 4:06 PM ET Aug. 30, 2005     

NEW YORK (MarketWatch) - Shares of alternative energy companies rallied Tuesday as gasoline futures surged to record levels amid concerns about the damage to petroleum facilities caused by Hurricane Katrina.


Unleaded-gasoline futures for October delivery climbed as much as 20.1% on the New York Mercantile Exchange to a fresh closing high of $2.4745 a gallon as traders continued to assess reports from facilities in the Gulf of Mexico.

Supply concerns also boosted crude futures to a record $70.85 a barrel during the session, before it closed off that peak at $69.81, up 3.9% on the day. Natural gas rallied 5% and closed at $11.659 per million British thermal units.

"There is clear desperation among physical players actually looking for wet barrels of gasoline, and their desperation is leading to eye-popping premiums above gasoline futures," said Tom Kloza, chief oil analyst at Oil Price Information Service.

"The panic is greater than anything I have seen since the Iranian Revolution.

At the retail level, the average price for a gallon of regular unleaded stood at $2.604 Tuesday, according to AAA's Daily Fuel Gauge Report. That's slightly below the record $2.614 on Aug. 22, but 39% above the $1.874 of a year ago.

Analysts said prices will continue to set records as more information trickles in - but even that process could take weeks.

"Oil and natural-gas prices will remain high given the magnitude of the near-term impact and the potential for long-term damages, plus the potential for additional, unexpected supply disruptions in such a low spare capacity environment," said Brian Gibbons at CreditSights.

Against this background, shares of alternative energy companies surged. The sector is popular with speculative investors, who are betting the technology being developed today will have more widespread commercial acceptance in the future. For now, however, most of the companies are loss-making.

Capstone Turbine (CPST: news, chart, profile) , which makes power generators, was a key advancer, rising for the fourth-consecutive session. The stock added 9.8% on Monday on expectations of lengthy power outages in the hurricane's wake and an upgrade from First Albany.

Capstone closed up 11.7% at $5.14.

Other gainers included hydrogen storage systems company Millennium Cell (MCEL: news, chart, profile) , which ended up 11.3% at $2.57; FuelCell Energy (FCEL: news, chart, profile) , up 8% at $10.30, Plug Power (PLUG: news, chart, profile) , which added 8.3% to $6.77, and Mechanical Technology (MKTY: news, chart, profile) , up 13.1% at $3.45.

Ballard Power Systems (BLDP: news, chart, profile) powered up 16.2% to $5.23.

The company's shareholders on Monday approved the sale of its 50.1% stake in Ballard Power Systems AG to Ford and DaimlerChrysler.

Once the deal closes, Daimler and Ford will provide Ballard with up to $59 in development funding for the next generation of vehicular fuel cell and electric drive train technology.

"The company's balance sheet should improve as a result of this transaction," said BMO Nesbitt Burns analyst Brian Piccioni, who rates the shares market perform.

Elsewhere, Energy Conversion Devices (ENER: news, chart, profile) , a company which specializes in solar, hybrid-electric and fuel cell technologies for a range of applications, finished up 6% at $34.41.

UQM Technologies (UQM: news, chart, profile) , which is also developing electric power systems for battery electric, hybrid electric and fuel cell electric vehicles, was up 4.5% at $3.87.

Valence Technology (VLNC: news, chart, profile) , which says it offers the industry's first commercial large-format lithium-ion rechargeable batteries, was up 0.3% at $2.96.

Katrina Sparks Power Play

By Lawrence Carrel  Published: August 30, 2005




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Capstone Turbine Corp.(CPST)

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Share price as of Monday's close: $4.60
Share price now: $5.14
Change: 11.7%
Volume: 4.3 million shares, daily average 2.2 million shares
Last time this low: Jan. 11, 2002
52-week high: $4.84
52-week low: 89 cents
Forward P/E before news: n/a
Forward P/E after news: n/a

--------------------------------------------------------------------------------

THE DEVASTATING BLOW delivered by Katrina to the nation's oil and gas operations has investors buying providers of alternative energy for a second day in a row.
Shares of Capstone Turbine (CPST) climbed 12% to a three-year high of $5.14 Tuesday on speculation that the maker of electricity- and heat-producing microturbines will benefit from the disaster along the Gulf Coast. Not only do the Chatsworth, Calif., company's power generators serve as backup systems, an attractive prospect in the blacked-out region, but they also run cleaner and burn fuel more efficiently than traditional energy sources. Capstone's stock rose 10% Monday.

"The issue I see is that the higher the price of oil gets, the more folks begin to think alternative energy sources like Capstone's microturbines will be cost-effective," says David Kurzman, managing partner of Kurzman Partners, a New York hedge fund. (Neither Kurzman nor his hedge fund own shares of Capstone Turbine.)

Oil futures jumped $3.65 to $70.85 a barrel on Tuesday, an intraday record on the New York Mercantile Exchange. By the close, the benchmark October light sweet crude futures gained $2.61 to an unprecedented settlement of $69.81. Heating oil and gasoline futures also rose to record levels. The Bush Administration said it would consider releasing oil from the country's strategic petroleum reserves to offset the lost production caused by the hurricane. Officials in Louisiana and Mississippi warned that it could take weeks to get rigs, pipelines and refineries back up to full speed. Damage caused by wind, waves and flooding is still being assessed.

Capstone specializes in microturbines for commercial markets. The systems can be used as backups to traditional power grids or serve as a primary source of heat or electricity for remote facilities. While the microturbines require natural gas, diesel, kerosene, propane or even flare gases produced by landfills to run, they make better use of the fuel sources and give off fewer emissions. Even before Katrina, Capstone's technology was garnering attention from Wall Street as new orders came in and federal legislation made microturbines more attractive financially.

"Three things are driving the stock: rising oil prices, Congress's recently passed energy plan and the one-time boost due to Katrina, the last of which will probably dissipate pretty quickly," says Kurzman.

A week after closing at a 52-week low of 92 cents on June 8, Capstone received orders to supply and service 2.4 megawatts of its 60-kilowatt microturbine systems for customers in New York and New Jersey. In early July, the company announced a follow-on order from Russia for a total of 1.7 megawatts of both 60- and 30-kilowatt microturbines. Then, on July 29, Congress passed a bill providing economic benefits to companies investing in clean-energy technologies. Specifically, the legislation gives a 10% tax incentive for businesses to purchase microturbine generators. Capstone's stock has has rocketed 459% from its June 8 low.

"It offers users of advanced microturbine energy systems direct payments from the U.S. Department of Energy for every kilowatt-hour they generate," said Capstone Chief Executive John Tucker at the time the bill was passed. "This policy, and others in the energy bill, will create significant additional economic advantages for customers who invest in microturbines, beyond the everyday savings and energy reliability inherent in microturbine technology." Capstone didn't return phone calls seeking comment on Tuesday.

A few days later, the Mexican government gave Capstone an order for more than 1.5 megawatts of propane-fueled microturbine systems. Plans call for the installation of the generation systems at three government office buildings in Mexico City.

"While the shares have appreciated meaningfully, we believe further upside potential remains," wrote First Albany analyst Sanjay Shrestha on Monday in a note upgrading Capstone's stock to Buy from Neutral. "Management's clear focus on providing an economic value proposition with higher product reliability, targeted end markets and enhanced distribution channels should lead to meaningful growth over the next several years." (Shrestha doesn't own shares of Capstone Turbine; First Albany doesn't have an investment-banking relationship with the company.)

Based on Energy Department projections, Shrestha wrote that installed capacity for distributed power generation in the U.S. could double to six gigawatts by 2010. That could translate into annual revenue of $425 million for Capstone over this time frame.

"We believe this growth trajectory is also well supported by the large distributed generation market potential in just major metropolitan areas," wrote Shrestha, adding that, "the New York market could alone represents a 10-gigawatt opportunity."

In the meantime, Capstone is losing a lot of money. For its fiscal year ended March 31, Capstone reported a net loss of $39.4 million, or 47 cents a share, vs. $47.7 million, or 58 cents, for the previous year. Revenue increased 35% to $17.0 million. For the first fiscal quarter ended June 30, the company lost $10.9 million, or 13 cents a share, compared with $10.5 million, or 13 cents, in the same period last year. While revenue leapt 29% year-over-year to $3.8 million, sequentially sales fell 30% from $5.4 million in the fiscal fourth quarter. Capstone has $50 million in cash, but no positive cash flow and a cash-burn rate of about $10 million a quarter. For the current fiscal year ending in March, the company is projected to lose 50 cents a share.

"It looks like Capstone will burn through all its cash in five quarters. That means it has a year and a half left unless it makes some money," says Peter Cohan, president of Peter S. Cohan & Associates, a management-consulting and venture-capital firm in Marlborough, Mass. "Meanwhile, it's trading at a price-to-sales ratio of 22, which is 10 to 15 times greater than the industry ratio. People think events like a hurricane will transform a money-losing company into a gold mine, but at some point the hype has to turn into financial reality, and it doesn't look like that will happen in the next year." (Cohan doesn't own shares of Capstone Turbine; Peter S. Cohan & Associates doesn't have a business relationship with the company.)

Quote:
"I think this is more hype than reality, and I'm uneasy with the valuation at these levels," says Kurzman, the hedge-fund manager who is also a former alternative-energy analyst. "The microturbines are good technology, but I'm not convinced they are cost-effective. And it doesn't appear that Capstone offers anything substantially better than other types of back-up power. To its credit, Capstone has garnered some contracts recently, but there is nothing in the energy bill that will benefit them directly. Meanwhile, you have a $430 million market cap for a company burning cash and that hasn't generated any gross profits yet."

Great job on both the technicals and fundamentals, setravis.  Applause.

Your chart with the two trendlines got me wondering if this one will end in a Bump and Run Reversal (BARR) after the rally finishes, especially if the analyst is right about their burn rate:

QuoteMeanwhile, you have a $430 million market cap for a company burning cash and that hasn't generated any gross profits yet."

Here's a link to the Bump and Run Reversal pattern and it's characteristics, if you're interested:

http://www.stockcharts.com/education/ChartAnalysis/barr.html

Quote from: Melf Elf on August 31, 2005, 08:02:51 AM
Great job on both the technicals and fundamentals, setravis. Applause.

Your chart with the two trendlines got me wondering if this one will end in a Bump and Run Reversal (BARR) after the rally finishes, especially if the analyst is right about their burn rate:

Thanks for the good grade given to me Melf Elf.
You do bring up a good point about the (BARR) Bump and Run Reversal.
Something to think about.

Holding up.....

One of the nicest looking pennants you'll see. I think CPST has one more breakout left in her.

How sweet it is.....

Just made new 52 week HIGH ! NICE !

Guru Picks
Gurus Plug Into Alternative Energy
Matt Rand; data provided by Marketocracy, 09.08.05, 6:00 AM ET
   

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Though oil prices have relented slightly (down to the mid-$60s per barrel) from their late-summer run up to more than $70 per barrel last week, the best-performing investors at Marketocracy feel that energy is a pretty safe bet going forward. Last week, two of their top buys were Louisiana oil and gas stocks Stone Energy and Energy Partners. They put even more money ($106,155) than their combined investment in those two companies into a fuel-cell stock.

Both Louisiana oil and gas companies were new positions last week for the gurus. Both have evacuated their headquarters because of Hurricane Katrina's ravages, with New Orleans-based Energy Partners (nyse: EPL - news - people ) taking up temporary residence in Houston. Both, however, have said that after an initial assessment of damage, they've determined that their properties and equipment are salvageable.

Energy Partners said the damage to its facilities ranged from next to nothing in some facilities to major damage to the buildings (but not the equipment) at its East Shelf facility. Stone said that its damage was minor and it could be producing again in a couple of weeks.


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Of course, that doesn't speak to the distribution issues the companies may face, or the logistics of housing employees in the area. These are definitely companies who've taken a punch. But Stone was operating with 40% margins, and is valued, at $52.49, at 1.5 times its pre-Katrina book value. If its claims of little damage are true, that strong ratio will stay put. Energy Partners might have a little more trouble getting repairs made, with only $5.7 million in cash and already $222 million in debt. But it has underperformed the exchange tradedEnergy Select SPDR (amex: XLE - news - people ) by more than 10% in the last three months, missing out on the energy sector's recent run. If the company can resume production quickly, they may be poised to outperform the sector.

In alternative energy, there have been big winners this summer. Fuel-cell companies like Capstone Turbine (nasdaq: CPST - news - people ), Distributed Energy (nasdaq: DESC - news - people ) and Beacon Power (nasdaq: BCON - news - people ) have all added to the riches of their shareholders. Capstone Turbine, for example, has quintupled since June. Mississauga, Ontario-based Hydrogenics (nasdaq: HYGS - news - people )has not been invited to the party, however. In fact, it's lost about 30% as the others have prospered, falling from its mid-March high of $5.38 to its recent close of $3.75.

Hydrogenics' second-quarter revenue of $6.3 million was down 44% from the first quarter, but up 75.9% over the second quarter of last year. That comes out to a $9.5 million net loss, or 10 cents per share. But the company did have a lot of orders and finished the quarter with a $19.1 million backlog. That backlog means that Hydrogenics was only able to deliver on a quarter of its existing backlog plus new orders throughout the second quarter. The company could be profitable if it were able to deliver as much power as its customers want. Gurus started a large position in the stock, indicating that they think production capabilities will catch up to customer demand. It's never a bad thing to have customers.


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Even larger than their investment in Hydrogenics was the M100's buy of $138,541 worth of Chinese wireless company Linktone (nasdaq: LTON - news - people ). The company, which sells wireless services like ringtones and messaging, trades for $8.88, is basically flat on 2005, after dipping to $6 in May and fighting back up. Though Wall Street institutions only hold 12.9% of shares, Wall Street analysts are predicting annual growth over the next five years of 40%, putting the company's price-to-earnings-growth ratio at a paltry 0.4. Gurus bought up 15,601 shares at that PEG ratio.

Rounding out the top buys was relatively low-tech energy company James River Coal (nasdaq: JRCC - news - people ). The Richmond, Va.-based company mines coal in Kentucky and trades for $50.42 per share.

On the sell side, the M100 dumped all of their shares of an assortment of companies. One was the New York-based pharmaceutical Bristol-Myers Squibb (nyse: BMY - news - people ). Shares had been trading at around $25 all summer, but recently slid 4% down to the $24 level.

Another sell-off was Chattanooga, Tenn.-based insurance company UnumProvident (nyse: UNM - news - people ). Gurus were able to take profit on the shares, which have slowly and steadily climbed about 20% since springtime, to a recent close of $19.24. Even there, it's still trading at just 0.7 times book value.


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Gurus also unloaded shares of three acquisition targets. They sold their shares of May Department Stores (nyse: MAY - news - people ), which runs Filene's Basement and Lord & Taylor, after Federated Department Stores' (nyse: FD - news - people ) $11 billion acquisition of the company closed on Aug. 30. The stock has been trading at about $40 since the deal was announced earlier in the year.

Marketocracy's best stock selectors also sold shares of Old Greenwich, Conn.-based petroleum refiner Premcor (nyse: PCO - news - people ), which was acquired by Valero Energy (nyse: VLO - news - people ). The M100 bought the shares in mid-May, when the stock was in the mid-$60 range and sold last week, when it topped $80, for a 25% gain. The stock has since slipped back to $73.29.

In addition, they sold all of their shares of Louisville, Colo.-based Storage Technology (nyse: STK - news - people ), a data storage company that was acquired by Sun Microsystems (nasdaq: SUNW - news - people ) for $4.1 billion. It's been trading near $36 since the deal was announced earlier in the summer. The acquisitions of all three companies closed last week.

Guru Buys:

Linktone (nasdaq: LTON - news - people )
Hydrogenics (nasdaq: HYGS - news - people )
Stone Energy (nyse: SGY - news - people )
James River Coal (nasdaq: JRCC - news - people )
Energy Partners (nyse: EPL - news - people )

Guru Sells:

Bristol-Myers Squibb (nyse: BMY - news - people )
UnumProvident (nyse: UNM - news - people )
May Department Stores (nyse: MAY - news - people )
Premcor (nyse: PCO - news - people )
Storage Technology (nyse: STK - news - people )

Capstone Turbine files for $150 mln mixed shelf
Thu Sep 8, 2005 06:23 AM ET
WASHINGTON, Sept 8 (Reuters) - Capstone Turbine Corp. (CPST.O: Quote, Profile, Research) , a producer of low-emission microturbines, filed with regulators on Thursday to periodically sell up to $150 million in common and preferred stock and debt securities.
The Chatsworth, California-based company said in a filing with the U.S. Securities and Exchange Commission that it would use the proceeds for general corporate purposes, including working capital, capital expenditures, acquisitions and repurchases or redemptions of securities.

Under a shelf registration, a company may sell securities in one or more separate offerings, with the size, price and terms determined at the time of sale.


© Reuters 2005. All Rights Reserved.

What is the latest target on this one and the game plan?

This stock is unreal. I thought the shelf filing would finish it off, but it goes up 13%. I believe even First Albany only had a $6 target for it and that was for 1 year.

its going to be an exciting day fellas.. lots of volume pre-market. 

more upside or time to short? opinions?

It is time we part company....Sold CPST!!! Time for me to take profits
I have loved the ride....