Portfolio "Fuel" ...

05/12/2006 12:00 am EST


Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

"With President Bush focusing on energy, we are looking at some alternative ‘fuel’ sources for your portfolio," says analyst Joseph Hargett, with Bernie Schaeffer’s Investment Research. Here, they look at an ethonal play and two picks on fuel cells.

"While the President is calling for an easing of environmental standards that have restricted the supply of gasoline in some markets, the fact is ethanol has officially replaced MTBE as the new environmentally friendly gasoline additive. As such, ethanol-related firms could be slated to become the new hot spot for your portfolio in the future.

"MGP Ingredients (MGPI NASDAQ), formerly Midwest Grain Products) buys wheat from local and regional farms and processes it into food ingredients. Furthermore, MGPI's Terratek line of starch- and protein-based polymers were developed to address the need for eco-friendly, bio-based goods, providing an excellent alternative to petroleum-based polymers. Pessimism is pretty high on the firm, helping earn it a Schaeffer's Equity Scorecard rating of 9.0 out of 10.

"Technically, MGPI is far from deserving of this wealth of bearish sentiment. Since March, the shares have rallied sharply along their ten-day and 20-day moving averages, tagging a series of fresh all-time highs in the process. While the stock has stalled in the 26 area, its ten-day trendline and recent bolstering from Washington could lend a hand toward sending MGPI on another upleg to its stellar run.

"Ballard Power Systems (BLDP NASDAQ) makes emission-free proton exchange membrane fuel cells and systems designed to be quiet, efficient alternatives to internal combustion engines. The stacked thin cells generate electricity by combining hydrogen fuel with oxygen, leaving only water and heat as by-products. Recapping the sentiment numbers, BLDP has garnered a Schaeffer's put/call open interest ratio (SOIR) of 0.41 in the 88th percentile, a short interest ratio of more than nine days to cover, and six "hold" or worse ratings from Wall Street.

"This is a wealth of pessimism for a stock that has been in rally mode since the beginning of the year. In fact, since January, BLDP has added more than 141% and tagged a new all-time high while riding the support of its ten-day and 20-day moving averages. Furthermore, amid the recent volatility on the Street, the shares have not breached support at the former of these supportive trendlines. As such, BLDP could be a top pick for your portfolio, especially given its perfect Schaeffer's Equity Scorecard rating of 10 out of 10.

"Medis Technologies (MDTL NASDAQ) has a direct liquid ethanol/methanol (DLE/M) fuel-cell technology that is being earmarked for use in cell phones and other portable electronic devices as a power pack that charges as the piece of equipment is being used. Its CellScan is a desktop cytometer that is used for early detection of diseases. MDTL plans to eventually spin the business relating to CellScan off as a separate company. The firm's products are developed in Israel through its wholly-owned subsidiary Medis El.

"MDTL has acquired an Equity Scorecard rating of 9.0 out of 10. Its short interest ratio stands at a whopping 35 days to cover, while the number of MDTL shares sold short accounts for nearly 40% of the stock's total float. Technically speaking, the security has rallied more than 124% since December 2005, enjoying the support of its ten-day and 20-day moving averages. Further, MDTL has also settled into a series of fresh all-time highs. It seems, however, that the stock has met with some resistance at the 30 level. But a solid breech of this region could send the shares skipping higher as pessimism begins to unwind."

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