Iowa is the Saudi Arabia of ethanol.
Rockville, MD (PRWEB) August 16, 2006 -–
According to Louis Navellier, Editor of Blue Chip Growth Letter, investors are making a mistake by defining “energy stocks” too narrowly.
In his recently-released report, “The Global Energy Crisis: Winners & Losers for the Second Half of 2006,” Navellier states, “There is plenty of diversification to be found in energy. Oil and the supporting drillers and refiners are just a start. Everybody knows about natural gas and nuclear energy, but few investors are aware of coal… let alone railroads.”
For example, Burlington Northern Santa Fe (BNI) should benefit from high oil prices in several ways. Burlington Northern is the second-largest railroad in the U.S., with a system covering 32,000 miles.
First of all, railroads are the transport of choice for both coal and the raw materials for ethanol.
Second, as gasoline and diesel prices rise, railroads become more cost-efficient and in demand. Carload freight recently jumped 5.3% after a big surge a year ago. And shipments of container units — in other words, general merchandise — rose 13.8%. A shortage of truckers, combined with higher trucking rates, spells a railroad bonanza.
For pure ethanol plays, Navellier recommends mammoth agricultural companies such as Monsanto (MON) because “Iowa is the Saudi Arabia of ethanol.” Monsanto’s chemically engineered corn produces higher yields and more starch for a greater output of ethanol.
Ethanol, the grain alcohol that went into gasohol in the 1970s, is now a much more efficient fuel source thanks to a number of biotech breakthroughs:
- ethanol costs less than gasoline to produce
- runs cleaner than gasoline
- comes from America’s heartland—not the Middle East
Today more than five million cars have already been fitted with flex-fuel engines that can run on ethanol. In fact, any car with a yellow gas cap is a flex-fuel (ethanol-ready) vehicle.
According to government reports, by the year 2030, ethanol will fuel 30% of America’s vehicles.
Nuclear power is another revival from the 1970s oil crises, when gasoline topping 50¢ a gallon caused public outcries.
Navellier’s favorite nuclear power play is Cameco (CCJ), which mines the yellowcake used to make uranium.
The company accounts for about 20% of the Western world’s uranium output and owns some of the best-known uranium mining sites: the McArthur River, Cigar Lake, and Rabbit Lake in Canada; plus two facilities in Wyoming and Nebraska. It also has interests in the Kyrgyz Republic and Mongolia.
It is projected to convert 5 million kilograms of uranium a year into uranium hexafluoride, or UF6, a compound that is used to create enriched uranium for nuclear reactors and weapons.
The report, “The Global Energy Crisis: Winners & Losers for the Second Half of 2006,” discusses oil as well as alternative energies. But Navellier recommends oil service companies over traditional oil companies.
For example, Halliburton (HAL), which recently split 2-for-1 and announced sales up 26% and earnings up 51%. Unfortunately, that was $0.01 below analysts’ estimates so they punished the stock, which may make it a better buy.
Oil refiner Valero Energy (VLO) refines low-cost residual oil and heavy crude into cleaner-burning, higher margin products, including reformulated gasoline and low-sulfur diesel fuel. It operates refineries in California, Colorado, Louisiana, New Jersey, Oklahoma, Texas, Canada and Aruba.
Twenty years ago, there were 282 refineries. Today, there are just 149. Refiners make their best profits when supplies are tight, and it doesn’t get much tighter than this.
Learn more about Louis Navellier’s recommendations online now in his new free energy report ““The Global Energy Crisis: Winners & Losers for the Second Half of 2006.” Individual investors may follow this link now and download a free copy of this report: http://investorplace.com/order/?pc=6TF196
About Blue Chip Growth
Blue Chip Growth helps subscribers beat the returns of the S&P 500 utilizing blue chip stocks. This advisory service covers the top 600 to 700 stocks (by market capitalization) including all the S&P 500 stocks. Recommendations in Blue Chip Growth have beaten the S&P 500 for seven of the last eight years.