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Monday, May 29, 2006

[Alternative Energy] Ethonal Stocks

I was watching one of my favorite show The Amazing Race, a reality show featuring contestants racing countries from contries performing unique tasks and the episode with racers in Brazil are told to do a interesting task - turning suger cane into fuel. Not only that the suger cane fuel they made were to be dump into the oil tank of the cars they drove. Wow, what a magic.. but wait!! You probably may wonder, if such thing exist in Brazil, why not in US, the should-be technology advanced nation. Well, guess what, we probably have something not exactly the same but with similar idea.

Yes, we are still probably the leading nation in technology, even in alternative energy technology. But without the mass supply of suger canes, the green energy companies turn instead to something we have a lot in the central state such as Iowa - the corns. So instead of performing the alchemy on suger canes, Green Corporate America turns corns into biofuels or what we known as ethanol fuel.

The recent surge in gasoline price have turn investors attention to alternative energy fuel such as hydrogen. However many says ethanol is probably the most ready green fuel. In addition with President Bush's signing of the comprehensive energy bill which would increase the production of ethanol from 4 to 7.5 billion US gallon, this is probably a good time to take a look at the ethanol related stocks.

Here are the companies working on ethonal fuel:
  • Archer-Daniels-Midland Co. (ADM): the Decatur, IL, based company is the leading agricultural processors of soybeans, corn wheat and cocoa. The company then turns these crops into oil, sweetners, chocolate, ethanol and biodiesel. ADM is probably so far the nation's largest ethanol producer, claiming it has one fourth of the U.S. ethanol capacity. Currently the company has 5% revenue coming from ethanol and is hoping to lift annual product about 50% into 1.5 billion gallons. The company is $27.95 billion in market cap and generates $36.47 billion of revenue and $1.1 billion of net income annually. The stock has been doing well for the past 52 weeks rising from $20 per share last June to $42.71 per share last Friday, gaining more than 100% in a year.
  • Andersons Inc (ANDE): the Maumee, Ohio based company engages in diversified agricultural business in grain & ethanol, turf, plant nutrient, rail and retail. In September 2005 the company invested $13.1 in The Andersons Albion Ethanol which is in the process of building a 55 million gallon-per-year ethanol production facility. In addition the company also invested $2.0 in anther company who's also constructing ethanol plant in Rensselaer, Indiana. Another major ethanol investment came in February of 2006 with $21 million in The Andersons Clymer's Ethanol which is building a 110 million gallon-per-year ethanol production facility. The company has $766.97 million in market cap and generates $1.32 billion in revenue and $28.89 million in net income. The stock has been doing well in 2006, rising from $43 in January to $100.93 on Friday, almost 150% in just six month.
  • Pacific Ethanol Inc. (PEIX): the Fresno, CA based renewable fuel company is currently building or planning to build five ethanol plant in the west coast. Due to the high demand of ethanol in California, the company currently rely on shipping ethanol from the Midweat and is currently constructing ethanol plant in Madera County, CA. The ethanol hype has helped the stock performance for this year, rising from $11 in January to as high as $44 in May, gaining 300% in four month. The softening margin of ethanol and new share dilution have drove the stock down recently to $29.5 on Friday. However with gas price still high, this is still a good company to own for the long term.


Blogger Christopher Gragsone said...

Also, don't forget that agricultural companies will also see more revenue as ethanol usage increases. As stated in this Business Week article.
"Producing ethanol could get more efficient soon as new technologies help farmers get more corn per acre of land and allow ethanol producers to get more of the fuel from the same amount of corn. The companies developing new corn technologies include chemical giant Dupont (NYSE:DD) and Monsanto (NYSE:MON), which sells genetically modified seeds as well as chemicals for protecting crops."

Christopher Gragsone, a writer for Capital Gains. A financial blog focused on stock analysis for the working investor. Our aim is to provide research that is clear and to the point. Eliminating the guess work and arming the working investor with confidence in his trading.

4:19 PM  

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