Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
past six months advanced biofuel producers have raised $450 million in new
capital.The industry has finally gained
traction after shifting focus from strictly cellulosic ethanol technologies to
a mix of biochemical and renewable fuels.Few if any of the advanced biofuel companies ‘climbed up out of the red,’
but we suspect the investors who had a chance to participate in these deals thought
they had got a whiff of profits.Indeed,
Gevo, Inc. (GEVO:Nasdaq) promised to
achieve breakeven at its Luverne, Minnesota plant this year as the ethanol and
isobutanol producer was raising capital for renovations and capacity expansion.The stock still languishes below a dollar per
we take the view that so-called smart money participated in these transactions
and that the capital infusion will have a catalytic effect on operations, then the
public advanced biofuel companies could be strong growth stocks. I looked at each of the public biofuel
developers-PEIX, MEIL, GEVO, AMRS, REGI and KIOR-that
have raised capital in the last six months to see which one looks like a strong buy.
of them have earned a dime in profits for shareholders, so we are unable to make a
comparison using a valuation metric such as price to earnings or price to cash
flow.In terms of price-to-sales, Pacific Ethanol
Renewable Energy Group
the most interesting, with stocks that trade at 0.40 times sales.
a relatively low valuation metric might not be the most compelling factor.A short interest has built up in shares of Kior, Inc. (KIOR:Nasdaq), a developer of
cellulosic gasoline and diesel, that is near a quarter of the company’s float.The stock is trades for pennies per share in modest
volumes, largely because by all accounts it is on its last leg so to
speak.KiOR raised $10 million earlier
this year, but still needs more capital to stay in business. Reportedly,
management miss a loan payment and long-time investor Vinod Khosla seems to
have lost interest.However, a last
minute infusion of capital or a sale of the company to a strategic investor would
likely drive the stock higher from the current price level.
Amyris, Inc. (AMRS:Nasdaq) has also won the
disrespect of short-sellers who are not impressed with the company’s specialty
chemicals and biofene business model.Just
over a quarter of AMRS has been sold short.Near the end of June AMRS shares formed a so-called ‘low pole warning,’
suggesting the stock could sink lower.However, the stock almost immediately began trading new momentum and
traded dramatically higher in the last week, as the company announced the
availability of a new loan facility to support development of farnesene technologies.A short-squeeze could change things.I believe a majorty of shares was shorted at
prices between $3.50 and $4.20.Thus any
development that might push the shares above $4.20 would likely put some fear
into the hearts of short-sellers.The
stock has tested the $4.20 price level twice in recent weeks and failed both
times, so it might be worthwhile to watch AMRS closely.
only stock left on our short-list of advanced biofuel developers is that of Methes Energies
International Ltd. (MEIL:Nasdaq).
The company raised $5.0 million in new capital through the sale of common stock
in May this year.The shares were sold
at $2.00 per share, leaving everyone who participated in the offering under
water as the stock has steadily downward ever since the deal was priced.The company has announced a string of
accomplishments over the past couple of months and appears to be on the cusp of
delivering its first shipments of biodiesel valued t $6.0 million.Investors have not been impressed, but it is
possible they are missing an important turn.
my view, the odds a bit better with any of these stocks than lotto…and a few a
priced better than a lottery ticket!
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies