Levott's Blog

Any and every stock mentioned in this blog is not a recommended buy, or sell for that matter. You need to do your own research and evaluate risk tolerance – Levott does not give individualized investment advice.

July 1st, 2010

Clean And Natural Play For Pickens

Clean Energy Fuels (CLNE) goal is to get natural gas vehicles in Canada and the US on the roads and highways which would be supplied by their refueling stations. They already have over 200 locations that are up and running in almost half of the states and provinces in our beautiful countries (we are closing in on the Fourth of July and Canada Day, so why not throw in a nice comment about our great countries). If you do recognize the companies name it is probably because of Boone Pickens involvement in it. He is on the CLNE Board of Directors and has been pushing natural gas of late. He basically has been pushing anything energy related as long as it is not foreign oil.

There are plenty of arguments both for and against this stock, so it is without a doubt a speculative play and volatility will be high. However, that is nothing new for anyone playing the clean energy stocks. I will go through some of the arguments.

All in favor say “aye”

• The oil spill has helped natural gas and the fact that President Obama has finally starting to mention natural gas, as an alternative fuel, is music to the ears of CLNE. Natural gas now has a platform to work from and will be mentioned in gasoline alternative vehicle discussions.
• The energy climate bill, which looked dead in the water a month and a half ago, should get some wind at its sails with the issues in the gulf. The bill could bring more tax breaks or credits to companies like CLNE. This could be down the road a bit, but they already have some favorable legislation working for them.
• This kind of company could be a great acquisition by one of the big oil or natural gas companies. If natural gas vehicles start looking like a thing of the near future, then why not get a big head start by picking up CLNE. Again, this appears to be down the road a ways but certainly a possibility.

Those opposed say “no”

• The losses just continue to mount for CLNE despite favorable existing legislation and they are not expected to be profitable in 2010 either.
• There is quite a bit of speculation already built into this stock. It was $4 back in November of 2008 and under $8 about a year ago. It currently is sitting around $16.50.
• According to a Barron’s article by Bill Alpert titled “T. Boone Picken’s Gassy Stock”, Boone and management will be diluting shareholders by almost 30% when expiring options must be cashed in before 2012.

June 24th, 2010

Checking The Weather

In the April issue of our newsletter, we talked about EnerNOC (ENOC) and how weather could play a part in their earnings. They provide demand response and energy management solutions to customers. You can find an archived copy on our welcome page after you log into Levott’s web site. It is located on the lower right hand side of the page.

Here is what we did and it is by no means scientific. It also will not foretell how ENOC earnings will look, but it could at least give us a slight edge in what the electricity demand will look like. We looked at the coverage map for ENOC’s main 2 customers, which account for just over 80% of their revenue. Then, we pulled out four of the largest cities in this coverage area and compared the average temperature to the actual temperature. The higher the temperature the higher those electricity bills will be with the AC on and that is good news for ENOC. We could have added more cites, but we will stick to four for now and they are Boston, Chicago, Washington DC and Philadelphia. The month of June is not over yet, so we took the projected high vs. the average for the remaining June days. Also keep in mind the real critical data on the weather will be in the summer months.

All four cities had a well above average April, but only 5 total days above 85 degrees for all 4 cities combined. The thinking was that around 85 degrees most people would be turning that AC on. There were only 5 days above that 85 degree mark, so April really should be thrown out. Advantage – Nil.

May was well above average for 3 of the 4 cities, Chicago was slightly below average. Washington DC was +92 total degrees above normal for the month, which is almost 3 degrees per day above normal. They had 8 days above 85 and 15 days between 75 - 84. Philadelphia rolled in +140 compared to normal, which is just over +4.5 degrees per day. They recorded 6 days above 85 and 14 days between 75 - 84. Boston’s actual was +164 and that is almost +5.3 degrees above normal. Although they only had 2 days above 85 and 8 days between 75 - 84. Advantage – ENOC.

June appears to be a hot one for 2 of the 4, Chicago should be slightly cooler and Boston slightly higher. Washington DC ought to be around +4.7 degrees per day with 24 days above 85. Philadelphia should be around +5.3 degrees per day with 20 days above 85. Advantage – ENOC.

The final score in the weather vs. ENOC match is 2-0-1 in favor of ENOC. In honor of the World Cup, we will move ENOC on to the knockout stage. The next round will be played in July, August and September. We will have our Levott forecast in September’s issue. If nothing else, you at least know how the weather has been in Chicago, Boston, Philadelphia and DC this spring. I’m sure Al Roker would be proud.

May 26th, 2010

Drill Baby Drill

The oil rig explosion in the Gulf of Mexico a few weeks back was truly a tragedy. Its influence on how Americans will consume energy in the near and long term is not close to being known yet, but it will play a big role. You can put the brakes on “drill baby drill” for some time now. The US could still move forward with more drilling off our shores but the time table has definitely been expanded. If you saw the ‘60 Minutes’ episode a couple weeks back, it certainly didn’t cast the oil industry in the kindest light with how BP, Transocean and Halliburton handled things leading up to and after the spill.

It was always going to be a tough sell to drill offshore in California with the mindset of the majority on the left coast, but you can put that last nail in the coffin with this spill because it will not happen. It doesn’t matter if its deep water drilling or shallow, Californians won’t let any additional drilling begin if they have any say in it. Governor Schwarzenegger has already come out and said his support for offshore drilling has ended.

The oil spill has given both democrats and republicans something else to argue about when it comes to energy consumption. Obviously neither party is for oil spills, but how we get new energy implemented into our country will be a topic of discussion. They both will use the spill to their advantage in whatever way they can.

This will help the alternative energy companies in their effort to get people off oil and time will tell which ones will benefit the most. The energy climate bill could help give us an idea of who will benefit but nobody really knows what is in it. Also, Lindsey Graham has now pulled support for it, so it looks like it is back to the drawing board.

We don’t know the direction of our energy future yet, but solar, wind, nuclear, hydro, geothermal and a few others got a checkmark in their favor when the oil spill occurred. We will be watching to see which alternative energy options look to be taking the lead and hopefully capitalize on it.

May 3rd, 2010

Lithium-Ion Holds Profit Potential

Rockwood (ROC) is a name I mentioned a couple weeks back as being a play on lithium-ion batteries for electric cars. They reported some very impressive numbers in their earnings release last week and the stock was rewarded. It hit a 52 week high that day and as I’m typing this is threatening to break it again. The stock is well above the 21, 50 and 200 day moving averages so I’d be looking for a better entry, if you are interested in the stock.

They mentioned on the earnings call that lithium-ion batteries for consumer electronics played a big role in the revenue increase this quarter. This makes sense from what we have been hearing from other companies when it comes to consumer spending over this last quarter. They don’t expect this to slow down over the next quarter either.

The lithium-ion for electric cars did not show up this last quarter, which means it could play a big role in the 2nd or 3rd quarter of this year. This could be an ongoing and escalating increase in demand for lithium if the electric car is a hit. It is just too early to tell, until we start getting some of these cars into the consumer’s hands late in the second half of this year.

Rockwood does have some worries hanging around it though with the uncertainty of Europe’s economies. ROC gets just over 50 percent of its revenue from Europe and if issues persist in Greece, Portugal, Spain, Italy and the rest, it could mean trouble for this stock. They did mention that most of the revenues from Europe are not coming from the southern countries and that is where most of the worry is.

Rockwood certainly is a company that can benefit from people starting to reduce their carbon footprint around the globe.

April 23rd, 2010

Win Win

Itron (ITRI) creates products that can make both utility companies and their users happy. One of these products that inspire joy in all is a smart meter for utility companies and it could be a big winner for Itron.

Utility companies want the smart meters so they can more effectively manage their energy, especially during peak hours. There are environmental concerns, stiffer regulations and government incentives pushing them toward these smart meters. I actually received a letter from my electric company indicating they would be replacing my meter with a new smart meter within the next couple of weeks. The consumer can also benefit by being able to monitor their energy consumption and save money by changing habits based on what the smart meter is telling them.

Itron was founded in 1977, so they have certainly been around a while and already have relationships with utility companies. This is a big advantage when utilities start looking for upgrades. Itron’s revenue was down last year as were a lot of companies due to the economy, plus they were hurt by a strong dollar. Their 2009 revenue breaks down like this: North America 36% and International 64%. They also do not have any one customer that is responsible for more than 10% of their revenue.

The utilities do need to play catch up this year as the world economy starts to get back on its feet. This has to be good news for both the North American and International operations. Itron has said they think North American sales will jump 25% to 35% this year and several customers could increase orders thanks to some stimulus cash. Their revenue in 2009 breaks down like this: 40% electricity, 30% gas and 30% water. You could make similar arguments for their gas and water meters as well.

Some of this optimism is already baked into the stock. It is close to a 52 week high and is above the 200, 50 and 21 day moving averages, so waiting for a pullback is probably a good idea. It certainly is a stock on our radar though.

April 22nd, 2010

Middle Man Be Gone

Electric cars will start hitting the streets in bigger numbers come this fall, so it is about time to start talking about lithium batteries. There are several companies out there that make lithium batteries and rather than try and find the ones that will perform well; we will focus on lithium itself. All of these battery companies need the lithium for not only cars but cell phones and many portable consumer devices, so we will cut out the middle man and go straight to the companies that pull lithium out of the ground.

Barron’s has said well over ½ of the world’s lithium output comes from mines in Chile and Argentina run by these three companies: Sociedad Quimica y Minera de Chile (SQM), Rockwood Holdings (ROC) and FMC (FMC). This certainly makes picking stocks easier if you really only have three main players. There certainly are other players, but they are either smaller China companies or pink sheet stocks.

SQM – This Company received 45% of its revenue in 2009 by specialty plant nutrients (fertilizer) so this will be the main driver of this stock. Lithium accounted for 8% of 2009’s revenue, but should increase as long as the price of lithium doesn’t drop at a good clip. It accounted for 15% of revenue back in 2007, but the worldwide economic slowdown put the brakes on consumer product consumption. You would think if the economy is turning around and consumers start spending again that commodity prices will increase. This would help both fertilizer and lithium production.

FMC – The story and outlook are the same as above, but this stock just hit a 52-week high today (4/20) at $64.95 and is well above the 200, 50 and 21 day moving averages. We would be waiting for a pullback on this one if you are interested in it.

ROC - We will use a direct quote out of the ROC 10-K filing here, “We believe the global lithium market consists of three major producers and a number of other small producers mainly from China. We believe that we are the global market leader in the lithium market. While we offer a diverse range of products from raw materials to specialty lithium compounds, FMC Corporation offers mainly specialty lithium compounds, and Sociedad Quimica y Minera de Chile S.A. (“SQM”) offers a more limited product line focused on basic lithium compounds. Competition in this market is based on product quality, reliability of products and customer service.” They certainly appear to be saying if lithium is your play, they are the company you are looking for. They too however are sitting very close to a 52-week high, so finding a good entry point would be key here.

These are your Three Musketeers in lithium mining, so if you want to cut out the middle man take a look these stocks. As we mentioned earlier, Lithium is not just an electric car battery play but a play on many portable consumer products like the cell phone. These electric car batteries however would use a lot more lithium, so watch how electric cars like the Volt do upon their release.

April 21st, 2010

In Like A Lion Or Out Like A Lamb

One of the stocks in our Clean and Green 8 is EnerNOC (ENOC), which provides demand response and energy management solutions to its customers. This could be a great industry to be in with the switch over to more renewable energy. We always like to look at both the positive and negative sides to a stock before we buy it, so we will do the same with EnerNOC.

We will give the bad news first and there is danger lurking around the chicken coop, so proceed with caution. ENOC got 81% of their revenue in 2009 from 2 customers. PJM Interconnection alone accounted for 52% and ISO-New England, Inc. accounted for 29%. So they certainly have a lot of eggs in two baskets. They also have not posted a year of positive earnings yet.

Now it is time for the good news. Analysts do expect ENOC to have earnings per share in the black for 2010. The consensus for the year is +.31 cents per share, with the high being +.40 and the low +.25. They are due to report first quarter results on May 5th and the consensus on that number is a loss of .69 cents. Draper Fisher Jurvetson is a very successful venture capital firm that has a 12.5% stake in this company, so I think that speaks well for ENOC.

The revenue did jump 80% from 2008 to 2009 and most of it was due to PJM increasing their MW under management. In fact, here is the ramp up in revenue that PJM has been responsible for. They accounted for 2.5 million in 2007, 30 million in 2008 and 98.4 million in 2009. It is clear that ENOC’s success is very closely tied to PJM at the moment and PJM expectations for 2010 were stronger than many analysts anticipated.

Mother Nature also has something to say about ENOC’s revenues. They are closely tied to the summer months when electricity is flying out the door and companies need more help with their energy management. Last year was a mild summer for most of the country, so it is fair to say that demand for electricity was light compared to a normal summer yet ENOC’s revenue still rose 80% from the prior year. If we get a hot or even a more normal summer this year, then the revenues could really take off.

The weather report is nice but it would help if we knew what part of the country we are talking about. We know from the 10K that 81% of the revenue comes from PJM and ISO-New England, so I’ll be watching the weather in their part of the country to try and get an edge. PJM is located in 13 states (DE, IL, IN, KY, MD, MI, NJ, NC, OH, PA, TN, VA and WV), including District of Columbia, and we know where ISO-New England is. We will be paying a little more attention to the weather on the northeastern part of the US.

EnerNOC is without a doubt, a risky selection, but it is one we like. We do want to disclose that we already own a small position in this stock. We will be watching those weather reports to see if we can gain an edge and perhaps increase our position.

March 17th, 2010

Smart Grid

The smart meter devises are starting to roll out now and there will be some big winners in this area. Here are a couple articles I found today on these devises and the smart grid in general.

Will people care about the smart grid?

Intel getting plugged in to the smart grid.

March 9th, 2010

Guard Those Green Stocks

It positively is a wise idea to watch your green stocks like a newborn. You wouldn’t leave your new born child in a room unmanaged for any length of time and that is the case with green stocks as well. You need to be watching them like a hawk, but how do you setup defenses for these volatile moves? I will mention just a few ways you could play it and the holes in those same strategies.

The stop loss is one way to play it. You could setup a trailing stop or just set an amount or percentage that you want to sell the stock at. This can work and for some green stocks it may do the trick. The problem with stop losses is with the violent swings in these stocks in just one day, you can get stopped right out of a gain. It is not unusual for green stocks to open down 3 percent and by the end of the day be up 3 percent. That is a 6 percent swing in just one day and if your stop loss got triggered on the open in this scenario, you are not going to be too happy with what could have been.

You could also setup triggers to sell a stock once it gets above a certain level. The problem is similar to the above scenario in that you could sell a stock at a 10% gain, only to watch it gain another 10% while you are on the sidelines. It certainly would feel better locking in a gain than locking in a loss, but you still could have had more by holding on.

A protective put could be purchased to place a floor on your losses and you can participate in the upside without losing the stock. It does however cost money to buy puts and with volatile moves these green stocks have, it can be very expense to buy that insurance.

These are just 3 ways to try and help protect yourself against large losses, but knowing the pitfalls to each circumstance is important too. You have to look at what will makes you sleep better at night and what kind of risk you are willing to take on when owning stocks that can move a great deal. This is something you should think about before you get into a stock. The clean energy field is new and needs to be watched like a newborn to be successful at it.

March 8th, 2010

Green Energy News I Found Today

Counting outsourced greenhouse gas emissions is not easy, but these two gave it a shot.

Duke Energy (DUK) is looking to use biomass products for some Carolina plants.

IBM is opening an energy lab in China.

Yingli Green Energy Holding (YGE) didn’t have a great day after reporting earnings today.

San Diego likes their solar industry commercial sector.

Texas sets new wind power record, can wind be big in Texas?

March 4th, 2010

ENOC Looks Good And Green

EnerNOC (ENOC) is a company that is not only in Levott’s Clean and Green 8, but in my personal portfolio as well. It also was mentioned in a Barron’s article last weekend as being a potential winner on the smart grid build out. This company does have a couple great venture capital firms behind them in Draper Fisher Jurvetson (who I mentioned in a previous post as being one to follow) and Foundation Capital. I love having successful venture firms backing companies I’m interested in.

ENOC helps electric power grid operators and utilities become more efficient in their energy management. You would think with stimulus money coming into this industry in the billions for greener solutions to our energy needs, it would be a perfect beneficiary. They are also expanding into Europe and although Europe isn’t looking to pretty right now, it will help ENOC in the long run.

This stock is currently sitting below the 21, 50 and 200 day moving averages, so it could be a great time to get into this company. It is for sure a risky play, but one I think will pay off both in the short and long run.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

March 3rd, 2010

Green Articles

Department of Energy is offering a $100 million for innovative energy projects in these 3 areas of technology: grid storage, power converters and cooling systems for buildings.

Detroit is finally trying to make energy-efficient engines and they have an opening here with Toyota falling on their face here recently. They need to take advantage of it.

Dow Chemical is opening a plant in Midland, Michigan, as the site to make the Dow Powerhouse solar shingles, I mentioned this product in my blog and in our newsletter a couple days back. Also talked about were 3 other solar plants opening in the US.

Another subject I talked about in our recent newsletter was the Google PowerMeter and here is a little more information on it.

March 2nd, 2010

GE, Wind Power and Stocks on the Move

GE’s Jeffrey Immelt talking about how the US is lagging in clean energy.

Wind power is really making a dent in the natural gas armor in Texas according to some. Here is an article about local natural gas players thinking wind producers are getting to many benefits.

FTEK and RINO enjoyed a great day with some big moves on high volume. RINO is in our Clean and Green 8.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

March 1st, 2010

Needle in a Haystack

Trying to find the next Apple, Microsoft or even Berkshire Hathaway is not any easy task and it truly can be like trying to find the old needle in a haystack. It doesn’t mean you can’t try and getting a few helping hands can do nothing but help. Especially, if your enlisted help has a great magnifying glass and a proven track record of finding those needles.

You obviously do not want to devote very much money to these kind of companies because of the high risk of loss. A healthier use of your time is spending it looking at solid growth or value companies that you want to invest in. However, it would be great fun to brag at a cocktail party or two about your great investing skills that landed you the big one.

Where do you start when trying to find these smaller or startup companies to invest in? I start with the venture capital firms with a proven record of finding these needles in the haystack. You can go to Kleiner Perkins Caufield & Byers, Sequoia Capital, Draper Fisher Jurvetson, Polaris Venture Partners and other’s web sites to find out who they are backing. Then read the stories behind some of these startups and start researching the ones you like. Some firms do not list who they are investing in, but plenty of the great ones do.

Happy hunting and don’t get too many helpers out there in the haystack with magnifying glasses because you stand a good chance of getting burned.

March 1st, 2010

Sometimes Knowing is Half the Battle, or 5 to 15 Percent

Do you know how much money you burn a month keeping your computer up and running while you are away, leaving a light on when it doesn’t need to be or doing half loads of laundry? I know I don’t monitor this and for me, personally buying a devise to find out what one outlet is doing over time is a waste of time.

However, it is getting easier to monitor your entire home with just one devise. One is called TED - The Energy Detective, and could be purchased by yours truly in the near future. It is an easy to use and real time monitor of your energy usage, at least according to them. I’ve research this a little and I have no reason to think it doesn’t work as they claim. Google is actually promoting the product and of course with the help of some of Google’s software (Google PowerMeter), you can monitor your usage online when you are way from home. The prices on several different TED models range from 200 to 450 bucks, which is pretty cheap when you think about your potential savings.

I have seen several statistics that say just being aware of what it costs to run appliances each time can save you 5 to 15 percent. It wouldn’t take too many electric bills, of saving 5 to 15 percent, to pay for the TED. I’m sure the TED isn’t the only home monitor of this kind, but it is the only one in the US that you can track online with Google.

It certainly is something to think about if you want to save a little money and do just a little part in reducing our carbon emission. If I do buy the TED, I’ll keep you posted on how it works.

February 26th, 2010

Ethanol Anyone

One of the companies that we really wanted to put into our Clean and Green 8 was Green Plains Renewable Energy (GPRE) and they are headquartered in my old home town of Omaha, NE. They currently are the 4th largest ethanol producer in North America. The problem was they reported outstanding numbers last Monday (Feb 22nd) and the stock skyrocketed. I think it would be safe to say this stock will be making an appearance in our Clean and Green 8 once it drops down a little closer to the 50 and 21 day moving average.

We could be getting an opening based off some news that came out last week as well. GPRE plans on offering up to 5 million of their common stock and will be using the proceeds for “general corporate purposes” and the speculation is they could be buying facilities. This will dilute shares outstanding by almost 20% and could bring the stock down over the coming weeks. Regardless of what happens here, we will be looking for an opening over the coming weeks or months.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

February 25th, 2010

Solar Without The Sore Eye

There are a couple major drawbacks to installing solar panels on your home. The first and probably most important one is they are expensive. There are companies and even local governments out there trying to ease the burden of solar’s upfront cost. I will tackle this subject in another issue and hit the more subtle drawback to installing solar panels this time.

There are plenty of people out there in this crazy world that just flat out don’t like the looks of solar panels being installed on their roof. This is the place we call home and we have to look at it every day, so if you don’t like what you see, it is a legitimate problem.

Well, the Dow Chemical Company (DOW) has developed Powerhouse solar shingles. These are installed like a standard asphalt shingle with no specialized skills or knowledge of solar array installations required. This alone brings down the cost of installation and alleviates the eye sore issue.

These new shingles are due out in mid-2010, but will not be more widely available until 2011. It will be something to watch in the near future and could help start to get DOW back in the $40 range. I would say they are killing a bird and a half with one stone. The installation price will still be high, but getting more manageable so that’s your half a bird. The full birdie comes down with look, or the lack there of, in this case.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

February 24th, 2010

Fanning Their Profits

Wind energy, much like wind itself, is on and off again with investors. This makes it very difficult to have it in your portfolio for long periods of time. The on/off switch is usually manipulated by the price of oil. Oil really needs start moving to the century mark per barrel to get wind stocks, and a lot of other alternative energy stocks, moving higher. However, there are some less risky ways to play wind energy.

General Electric (GE) and Siemens AG (SI) both make wind turbines and even though oil has been below $100 for some time, they are both still getting orders for their turbines. This will hardly move the needle on their quarterly reports, but does position them to increase revenue if oil surges higher and stays higher.

Siemens actually was awarded 6 new contracts in September of 2009 totaling $900 million and will be opening a wind turbine equipment factory in Kansas later this year that will employ around 400 people. GE certainly didn’t want to be outdone so they were awarded a $1.4 billion wind farm contract in December for an Oregon wind farm.

As you can see, GE and Siemens think wind energy is here to stay for a while. Once the world economies start to come out of their funk, the price of oil is sure to go higher with demand in China, India, Brazil, Russia and the US, increasing as people get back to work. These two giants could be setting themselves up for a windfall of profits just down the road.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

January 12th, 2010

An Unofficial International ETF

If you are looking for a little exposure to Latin America, Europe and wouldn’t mind participating in a little piece of the mobile smart phone craze, then you might want to take a look at Telefonica (TEF). The company is based in Madrid, Spain and has footprints in Latin America and Europe. They are in the telecommunications industry with both fixed and mobile services. Another bonus is the fact that they pay a great dividend at well over four and a half percent.

It hit a 52-week high a little over a month ago at $89.62, but it slipped back down to the 50 day moving average not to long after that. It recently was hit with some bad news out of Venezuela, when Hugo Chavez weakened the Bolivar. This move slashed profits from companies outside Venezuela with ties to it, which included Telefonica. However, TEF confirmed it would still meet its 2010 guidance. The Venezuela news moved the stock well below both the 50 and 21 day moving averages for the stock, so it could be a great time to pick up some shares. In fact, earlier today, I picked up some TEF for myself at $80.25.

We all know the mobile smart phone rage is far from over and this is one way to play that with a little international flare. It certainly doesn’t have the diversification of an international ETF, but I’m going to play it like one with a nice little dividend to boot.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

December 9th, 2009

Put Together A Plan, Rain or Shine

The short term outlook for the stock market (next 3 months) is a little shaky in my eyes. We might be okay going into year’s end because December is usually a good month for stocks, but the last couple years have been anything but normal. I’m just a little cautious and won’t hesitate to sell stocks to protect profits or flat out get out of a loser.

Regardless of what happens over the next couple months, you should always have a plan on what to do if stocks move higher or move lower. You can’t foresee everything but putting some kind of plan together is a great idea to stay on top of your stocks. You won’t always pick the right stocks but having a plan will help eliminate big mistakes. Once you find a plan that works for you, STICK TO IT.

November 23rd, 2009

Pulling Microsoft Out Of The Ditch

Microsoft has been stuck in the mud for a decade but could they be getting a little pop over the next year or so? It has been a pretty good bet to sell Microsoft anytime it gets to around $30 and buy it when it is in the low to mid $20s. You can consult a chart to see what I’m talking about. It is sitting at that $30 level right now, so it is time to sell it? You certainly could back up the selling side of this trade with its decade of disappointment.

I however want to look at the other side of this trade and unfortunately a trade that has been talked about quite a bit of late. Anyone that has been listening to the chatter of late about Microsoft’s new operating system, Windows 7, has heard that it is getting good reviews. Microsoft has even said when comparing similar time frames of its previous operating systems, 7 is crushing its predecessors. This was certainly not the case with Vista so the argument could be made that people who avoided Vista will now upgrade to Windows 7. The theory would be great in decent economic times, but we are far from that and some professionals are saying we could be looking at a double dip recession.

Obviously nobody knows what will happen with our economy, but one thing is for sure. Tech spending has been down the last couple years as companies have had to get leaner. Even consumer tech spending has taken a hit and people have been looking for a little stability before upgrading PCs or software for it. If the economy can hold together over the next 3 to 6 months and there looks to be some light at the end of the tunnel, you will be witnessing a perfect storm (for the good).

Consumers and most companies will be a couple years behind in upgrades and you would have a new operating system that has good reviews behind it sitting on the shelves for them to pickup. This is not only good news for Microsoft but a lot of the Technology sector in general. It is just that Microsoft comes with a lot less risk and could in fact have just as much upside as a lot of the riskier plays. It is not a stretch to say previous Microsoft holders, both professional and individual, have been reluctant to get back into a stock that has spent the better part of a decade doing nothing. If they can break out of its doldrums perhaps there would be a rush to hold a company with mountains of cash and an upgrade cycle staring it right in the face.

The 18 wheeler is just sitting in that ditch ready to deliver pockets full of cash to all who want it, but they need the economy to fire up that tow truck to pull them out.

This is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

November 17th, 2009

So Far, So Good

Tuesday’s trading day is far from over as I’m typing but so far the market is holding up after another huge up Monday. It would be a great sign in the near term to see the market hold its gains or lose just a small percentage today. The SP500 struggled a little bit to get over the 1100 market and now that it broke though it, perhaps she can run a bit more before running out of steam. As I mentioned in my previous write-up, the market has been stair stepping up since July so it would be nice to see that continue a while longer. We will probably get a retreat at some point but I’ll keep following the trend until it breaks.

November 9th, 2009

No Monday Blues for Stocks

Stocks had a wonderful day today as the major indexes climbed around 2% for the day. I kind of had a feeling we’d get a nice pop today after the bad employment numbers on Friday couldn’t bring this market down. The light volume Friday and concern about people reading about +10% unemployment figure this weekend and thinking they might need to lighten up on stocks brought some question marks into my thinking. It didn’t matter thought because stocks were higher from the start and just kept going.

The big winners of the day were NYSE Financials up 3.36% and the Gold Bugs Index up 3.97% as I’m typing this. We could ride this wave all the way through the end of the year, but I am still keeping a higher than normal cash balance. This market is far from settled, so being cautious is a prudent thing.

November 4th, 2009

To Lithium or Not to Lithium

I have mentioned Ener1 (HEV) in a previous post and have done a little more research on it and like this as a risky holding. I do already own shares of this stock and plan to hold for at least a year to see how the electric car via lithium batteries plays out. I am not recommending you buy this stock because I don’t give individual investment advice.

The division of Ener1 that intrigues me the most is EnerDel, which is based in Indiana. They research, develop and produce lithium-ion batteries. They are the first and only US domestic manufacturer of commercial scale automotive grade lithium batteries and when stimulus money starts flying out the door, I’d think this American company would benefit from it. They have applied for a $480 million dollar loan under the Advanced Technology Vehicle Manufacturing Incentive Program (ATVM) to increase their lithium battery production. This is still pending so far from a done deal, but would help them tremendously.

Indiana Senator Evan Bayh has to be in EnerDel’s corner because they provide jobs to the people of his state. Senator Bayh was actually on hand to cut the ribbon when EnerDel opened their lithium-ion batteries plant back in May of this year. What interest me are the three committees that Senator Bayh is on: Armed Services, Energy & Natural Resources and Select Committee on Intelligence.

You see EnerDel does work with the government and has been awarded 3 contracts from the Department of Defense over the last two years. It surely doesn’t hurt to have a senator on these three committees in your corner when government contracts and loans are being handed out. Senator Bayh of course would want more jobs to be created in his state, which makes voters happy. Now I’m not suggesting anything improper at all here just pointing out that the connection certainly doesn’t hurt EnerDel.

There have been four car companies and one parts supplier approved for loans under the ATVM so far and they are Ford, Nissan, Tesla, Fisker and Tenneco. The fact that Fisker Automotive was approved for this loan at the tune of $529 million has to give EnerDel at least a little more hope that their $480 million will be awarded to them. Fisker has an electric car called the Karma coming to market around May of 2010. EnerDel has a letter of intent to possibly supply the lithium-ion batteries for this car. There is another company with a Fisker letter of intent to possibly supply them with batteries and that is a private Canadian company called Advanced Lithium Power (ALP). ALP has some strong ties to Fisker too, which is not great news for EnerDel.

Fisker Automotive was created by two separate companies Fisker Coachbuild LLC and Quantum Technologies, which is a public company (QTWW). Quantum Technologies Board of Directors includes Alan Niedzwiecki (CEO/President) and Dale Rasmussen (Chairman of the Board). These two also serve on the board of the Advanced Lithium Power and in fact Quantum owns around a 20% stake of ALP. That is not all that is on the board at ALP, Henrik Fisker the CEO and founder of Fisker Automotive is on as well. So as you can see it is far from a slam dunk that Fisker will use EnerDel for its lithium-ion batteries.

Okay, I know what you are saying; this appears to be a layup for ALP not EnerDel. Well not so fast my friend, Fisker caught some bad press for actually using US tax payer money to build the Karma in Finland and not the US. They do plan on building the Nina, which is a family sedan electric vehicle due out in 2012, in Wilmington Delaware at a plant they just bought, but they did catch some grief for Finland making the Karma. If they were to select the Canadian company ALP for the lithium-ion batteries, then they may get some of the same backlash. It would look much better, in the American’s eyes, if EnerDel was used for the Karma.

Ener1 is also involved in electric cars themselves, not just batteries, in that they own around a 30% stake of Th!nk, which is a Norwegian company. You have both Charles Gassenheimer (Chairman and CEO of Ener1) and Ken Baker (Director on Ener1’s board) on Th!nk’s Board of Directors.

Here comes some stretches but interesting nonetheless. Kleiner Perkins Caufield & Byer (KPCB) is a well known venture capital firm that helped kick start some very profitable companies like Amazon, AOL, Compaq, Electronic Arts, Google, Intuit, Macromedia, Netscape and Sun Microsystems. They have Al Gore as a partner. One of the managing partners of KPCB is Ray Lane. Ray has sponsored several investments for them and two companies currently under his belt are Fisker Automotive and Th!nk. One would hypothesize that Ray would be familiar with Charles Gassenheimer and Ken Baker since they are both on the board at Th!nk and of course Ener1. I’m not saying Ray has any influence over business decisions at Fisker Automotive or Th!nk, but it does tie Fisker and Ener1 together via Ray Lane and Th!nk.

I have one last piece of speculative news that could help Ener1’s future. They have teamed up with Nissan to have Argonne National Laboratory test their lithium-ion batteries. The extent of the relationship is not really known and perhaps there is no relationship between the two companies besides the fact that they are splitting the cost. However, if Nissan was going to use Ener1’s lithium batteries in some way, then the possibility is at least there for them to land a big contract.

Without question this is a speculative play to say the least, but one I find worthy of taking a look at. They are the only mass lithium-ion battery producer in the US and that should help them when the stimulus money starts flowing. The US needs to get off our oil dependency and electric cars would help that cause.

Once again this is not a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized investment advice.

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