Tuesday, December 16, 2008

Following Green Bread Crumbs

Ordinarily it would not be a good idea to pick up “green” bread crumbs. However, the Crystal Equity Research has left some good clues along the way for solid names to pick up as the market makes it way toward a bottom and finds its legs again.

Crystal Equity Research followed Fuel Tech, Inc. (FTEK: Nasdaq) for a year and left the name as the stock reached a valuation peak in the low 30s. The company is chock full of patented technology and know-how to increase fuel efficiency and reduce pollutants from coal-burning power plants. It counts most of the electric utilities in the U.S. as its customers and has made solid progress in penetrating the markets in Europe, China and India.

The stock is now trading near $10.00 per share, implying a trailing PE ratio of 27 times. A strong balance sheet with plenty of cash and no debt makes the multiple a bit easier to pay in the current market. We also note that a recent acquisition is likely to make the forward valuation more compelling.

Fuel Tech holds a position in Clean Diesel Technologies, Inc. (CDTI: Nasdaq), on which Crystal Equity Research has a current buy rating. Clean Diesel licenses technology from Fuel Tech, applying it to reducing nasty emissions from diesel and gasoline engines used in off- and on-road vehicle engines.

Most expect even more rigorous enforcement of pollution abatement standards in the U.S. with the installation of the Obama administration. Europe, Japan, China and India are all well along in cracking down on pollutants, particularly those that contribute to the green house effect that trimmed two trillion tons of ice off the polar cap.

These two stocks are down, but the companies are not out. They present a compelling opportunity for investors with vision and a long-term investor horizon.


The author of the Small Cap Copy web log who is the principal of Crystal Equity Research has a beneficial interest in CDTI. Crystal Equity Research has a buy rating on CDTI.

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