Stephen Leeb: Fired up Over Fuel Cells

09/05/2002 12:00 am EST

Focus:

Stephen Leeb

Founder and Research Chairman, Leeb Group

A regular feature of the highly-popular and respected newsletter, Personal Finance, is its high-stakes investing section, in which editor Stephen Leeb focuses on speculative stocks with above-average risks. Included among these high-stakes picks are several companies poised to benefit from the emerging market for fuel-cell technology as a long-term alternative fuel source.

“American’s energy crisis is far from behind us and one group that has held firm in the nearly unrelenting bear market is energy stocks. While the poor market may have exposed economic sore spots such as the consumer debt burden and overcapacity in the tech sector, it’s also made it clear that energy prices are in a long-term up-trend and that investments leveraged to this up-trend should remain very strong relative performers.

Most of the US’ power needs are satisfied by traditional fossil fuels – namely oil and natural gas – and with domestic stocks of these commodities dwindling, most of the new drilling and exploration sites are in remote parts of the world. The answer to this problem is alternative energies and among the most promising possibilities are fuel cells.

Fuel cells don’t work without catalysts and the only effective catalyst found to date are platinum group metals. London–based Johnson Matthey (IMPLX OTC) has been involved in the metals business for more than 100 years and is a world leader in marketing and refining platinum products. The company also manufactures catalysts and pollution control devices. Buy Johnson Matthey below $30.

Stillwater (SWC ASE) is the US’ largest domestic platinum mining operations. Obviously, a domestic course of platinum for fuel cells is a must if the US is to achieve true energy independence. Stillwater is the prime beneficiary of this trend. Buy Stillwater below $9.

Perhaps our riskiest play in the alternative fuel sector, but one that could hand us outsized gains, is high-stakes pick FuelCell Energy (FCEL OTC). The company has made several successful fuel-cell prototypes and is joining with major automakers and the US government to develop new technologies. FuelCell has secured recent orders with such corporate clients as Daimler-Chrysler, with increasing revenues offset by research and development costs. This is a small-cap company that’s very much in the developmental stage, but for those who can afford the risks, FuelCell is an outstanding speculative opportunity. This stock is a great way to get in on the ground floor of a technology that’s set to be a big grower for as far as the eye can see. Buy below $9."

In addition to the stocks above - which are speculative, high-stakes picks, Leeb also offers two additional ways to benefit from fuel-cell technology:

Ballard Power (BLDP OTC) is a more established fuel cell maker with a long list of high-profile partners. The financial picture for Ballard is very similar to FuelCell’s with heavy research costs cutting into current profits. But with a bevy of well-established industrial interests backing the company, Ballard is a dynamic play for those who can stomach the volatility.

Perhaps the most hedged way to play fuel cells, however, is with IdaCorp (IDA NYSE). This is a holding company involved primarily in electricity generation and distribution, but it developed proton-exchange-member fuel cells through its IdaTech subsidiary. IdaCorp’s stock has fallen with the energy sector, but the company's outlook is positive, and the stock has been gaining traction in recent weeks.”

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