by Tom Konrad, Ph.D., CFA

Rounding out the discussion of the stocks in my 10 Clean Energy Stocks for 2021 list are the two that don’t fit either of the themes I highlighted for 2021: Picks and Shovels or a Possible Yieldco Boom.  Both help with diversification, both in terms of their industry and geography.

MiX Telematics (MIXT) was retained from the Ten Clean Energy Stocks for 2020 list because I expect its prospects to improve rapidly as the world comes out of covid lockdowns.  The global vehicle telematics provider has a large number of its customers among mass transit, logistics, and multinational oil and gas vehicle fleets.  All these industries were disproportionately impacted by covid, and idled many vehicles.  When the owners bring the vehicles back into service, they will once again start paying on the subscriptions for those vehicles.I also believe that covid has led many businesses to take a new look at what parts of their operations can be handled online and remotely.  This should provide a lasting boost to the vehicle telematics industry in general.

Another holdover from the 2020 list is Spanish transmission utility Red Eléctrica (REE.MC, RDEIF, RDEIY).  European countries understand how a robust transmission grid is essential to transition the economy to renewable energy, and they support significant investment in their transmission networks because of this.  Red Eléctrica is an attractively valued European utility transmission utility without any natural gas networks or fossil generation.  Plus it has a nice dividend.

Both these picks get the majority of their revenues in currencies other than the dollar, which should provide an added boost to the stocks as I expect the dollar to continue to fall in 2021 because of America’s mishandling of the pandemic and the effects it will continue to have on our economy relative to most other countries.

Conclusion

While I am hopeful that the US economy will begin to recover in 2021, I worry that the buoyant stock market has already priced in this recovery and then some.  These high valuations and the damage the pandemic continues to do the US economy have me keeping plenty of cash on the sidelines and looking more to Europe than the US for investment opportunities.

Here are links to the other articles on the Ten Clean Energy Stocks for 2021:

• The list
• The Yieldcos: Covanta Holding (CVA), Green Plains Partners (GPP), Avangrid (AGR), and Brookfield Renewable Energy Partners (BEP)
• Picks and Shovels: Valeo, SA (FR.PA, VLEEF, VLEEY), Veolia (VIE.PA, VEOEF, VEOEY), Umicore, SA (UMI.BR, UMICF, UMICY), and Scorpio Bulkers, Inc. (SALT),

DISCLOSURE: Long MIXT, REDIF, CVA, GPP, AGR, BEP, VLEEF, VEOEF, UMICF, SALT.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post 10 Clean Energy Stocks for 2021: Diversification appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

Earnings Season Continues

Below are three more updates on second quarter earnings which I’ve been sharing with my Patreon supporters.  If you’d like to support my writing and see those thoughts in a more timely manner, consider becoming a patron. becoming a patron.

For everyone else, I’m reprinting those thoughts below.

Disclosure: Long NFYEF, CVA, GPP, GPRE.

DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results.  This article contains the current opinions of the author and such opinions are subject to change without notice.  This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

The post Earnings Roundup: Covanta, NFI Group, Green Plains Partners appeared first on Alternative Energy Stocks.

By Joe McCabe, P.E.

The insurance industry has lots of exposure to climate change. But as Warren Buffet has explained, not so much for companies that do annual policy adjustments, like Berkshire Hathaway. Their exposure is limited because the trends are baked into the premiums. But there is an opportunity for reducing insurance risk due to climate change, and it comes from the insurance industry itself. The business model is to have car insurance salespeople provide leads to virtual electric car charging services. This has perfect demographics because electric vehicle owners are very receptive to solar electricity. Who wouldn’t want a clean transportation solution with local job creation that can’t be offshored?

The concept for car insurance being linked to electric vehicles and the opportunity to sell electricity comes from the community solar business model. Community solar, or community solar gardens (CSG) is a virtual way for people to get solar electricity at their home or business for half the capital cost of putting the solar electricity at their facility. A large scale remote solar electric plant can be constructed for currently at least half the cost of a building integrated or local solar system. But that does not mean 50% savings… again, it depends on the regulatory model.  At least one utility in NY is compensating garden solar production at a lower rate than for net metering (check dsireusa.org for CSG policies nationwide).

When I proposed the first “Solar Shares” business model to the Sacramento Municipal Utility District in 2005 it was actually met with approval at the Board of Directors level. Then in 2008 United Power in northern Colorado produced their own version of customers buying remote PV modules. In 2010 Claire Levy, former legislator in the U.S. state of Colorado, authored the first approved CSG legislation in Colorado HB10-1342. Minnesota has an excellent track record of legislation supporting community solar with more states enacting such legislation each year.

Two issues with insurers selling solar come to mind.  First, there are significant hurdles due to the state specific nature of community solar regulations.  Community solar is only available in a few states, and not even statewide. In New York, for instance, the community solar farm has to be in the same load zone and on the same utility as the customer.  

Second, in some states community solar does not include RECs.  You get the financial benefits of solar but not the environmental benefits.  Communication around the program would have to be very local.

Car insurance companies, like Berkshire Hathaway’s (BRKA) Geico, know who owns the electric vehicles.  The data on who owns an EV is obtained from the car insurance salesperson and then is used to target market virtual car electricity pricing/service. Geico is unlikely sign up for this, but MidAmerican Energy, Pacificorp and BHE Renewables might be interested in customer data from Geico. These are all Berkshire Hathaway Companies that sell electricity to consumers, business and industry with BHE Renewables being the latest to embrace solar.

With CSG legislation sweeping the country, these car insurance salespeople can now help to market a vehicle-community-solar-garden electric supply contract to their customers. The concept of virtual net metering need not be limited to physical properties; it is well suited for an EV needing to be charge all around town. Blockchain technology can now track transactions for electricity produced, consumed and the financial ramifications in a secure trustworthy traceable fashion. Electricity produce at a low cost community solar garden (possibly installed on unused disturbed/compromised land) through blockchain technology transact electricity produced to electricity consumed at any EV charging station. Blockchain enables trust for the credits and debits ledger of the electrical financial transactions no matter where the electricity is consumed. Meters don’t have to be on buildings anymore.

In my opinion, car insurance salespeople are ideal to help build this scenario of community solar gardens producing electricity and electric vehicles consuming it, with secure trust worthy transactions through blockchain.  

I envision community solar garden companies to begin certifying blockchain transaction services with their own or someone else’s software as a service (SAS) products that track the energy and financial transactions. EV charging network companies like EVgo, Chargepoint, Plugshare and of course Tesla are all ripe to connect with community solar garden companies. Solar garden companies should recognized the 4x need EVs have in comparison to home electricity.   Policy is key to enabling this business model and getting society off oil and onto solar EVs for climate sake!

I Would like to thank all those who helped with this article including NREL, SMUD, Neighborhood Sun and AltEnergyStocks.com.

Joseph McCabe is an international renewable energy industry expert with 20 years in the business. He is a Solar Energy Society Fellow, a Professional Engineer, and is a recognized expert in developing new business models for the industry including Community Solar Gardens and Utility Owned Inverters. McCabe is a mechanical engineer, has a Masters Degree in Nuclear and Energy Engineering and a Masters Degree of Business Administration.

Joe is a Contributing Editor to AltEnergyStocks.com and can be reached at energy [no space] ideas at gmail dotcom.  Please contact Joe for permission to reprint.

DISCLAIMER: I have no positions with any companies mentioned in this article except Berkshire Hathaway.

The post Car Insurers Can Help Community Solar Find EV Customers appeared first on Alternative Energy Stocks.

I’m trying something different and doing quick updates on individual stocks in my 10 Clean Energy Stocks model portfolio as I have time to write.  The portfolio as a whole has been accelerating with the instant torque of an electric vehicle this year (details here.)  I thought I’d start with the company that’s newest to my readers,

Valeo SA (FR.PA, VLEEF)
12/31/18 Price: €25.21/$28.20.  Annual Dividend: €1.25. Expected 2019 dividend: €1.25.  03/4/19 price: €29.13/$33.00.  YTD gain: 15.5% Euro/ 12.8% USD.

I added this stock to the portfolio because it has great technology and and improving market share, but weak industry growth and overoptimistic management projections in 2018 led the stock to get massively beaten down.  Despite the horrible year, the company was still profitable and paid a healthy dividend, with a respectable 5% yield compared to its beaten down stock price.

This meets the profile of one of my favorite types of stocks: a profitable growth company that got a bit ahead of itself when times were good, and with a stock that suffered deeply as a consequence when growth investors abandoned the stock.

Some of my past picks of this type are Mix Telematics (MIXT), and General Cable (BGC).  Mix was a bet that took 3 years to pay off (It was in the list in 2015, 2016, and 2017, but it is now trading well above where I first entered the stock and readers who added to their positions in 2016 and early 2017 are looking at 400% gains.  Readers who bought General Cable when I added it to the list in 2015 also had to wait almost two years, but saw it double when the company was bought out at the end of 2017.  Although the payoffs took 2-3 years in both cases, investors were being paid to wait with 4-8% dividends in the meantime.

More recently Seaspan Worldwide Preferred shares (SSW-PG in 2017) and common shares (SSW in 2018) both paid off (33% and 24% respectively) over the same years in which I picked them.  In this year’s list, Green Plains Partners (GPP) and Covanta Holding (CVA) also fit that profile.  These first entered the portfolio in 2016 and 2017, respectively.  The stock prices are down 1% over three years and up 7% over two, but they have both been reliable dividend payers the whole time.

Valeo feels like a similarly safe bet.  It could recover this year, or take a few years, before investors get interested in it again.  Meanwhile, we’re being paid 5% on our purchase price to wait as long as it takes.

Valeo announced annual 2018 results on February 21st.  They hit their much-revised guidance (an easy task since they had most recently revised it in October, when most of the year’s revenue had already been booked.  The company is projecting modest growth in 2019 based on revenue from new products.  At least some of this growth seems very likely to materialize because the company says that it is based on “the start of production on new contracts, particularly in the camera, electrical and transmission systems, and lighting segments.”  Note that this is not the signing of new contracts, but contracts which have already been finalized and only have to start production.

If the auto market weakens further, some of this new production may be pushed back, but at the price we bought the stock, we can afford to wait.  If the predicted growth materializes, we will see the stock price appreciate, leading to possible significant gains.

Also worth noting is that the company maintained its €1.25 dividend.  While this is not the dividend growth the company has had in the past, it means we are being paid to wait for the eventual dividend increase, which I expect in the next 3 years.

A note about US OTC tickers for foreign stocks

A long time reader asked what was the right US ticker (VLEEF or VLEEY) for Valeo. The answer can be complicated for foreign stocks, so I will reprint my entire response here:

I prefer VLEEF. When you buy a pink sheet stock that ends in an “F” you are buying the actual foreign share in the over the counter market. Typically a middleman will buy the stock on the foreign exchange for you and charge a small mark-up for the service. Always buy with limit orders, or it could be a large mark-up. When you buy a foreign stock that ends in a “Y” you are buying an ADR (American Depository Receipt.) This is a US security backed by shares of the foreign company which are held in trust at a bank or similar institution. The institution charges an annual fee (usually deducted from your dividends) for this service. ADRs often have greater liquidity, but I don’t think pink sheet ADRs are worth it if you can buy the actual stock. Sometimes listed ADRs, which trade on real exchanges, are worth it. For example, MIXT is an ADR, and I use it because I have not found any other way to buy Mix Telematics in the US. But OTC, I always buy “BLAHF” rather than “BLAHY”.

Disclosure: Long VLEEF, MIXT, SSW-PG, SSW.

The post Valeo February Update (Ten Clean Energy Stocks) appeared first on Alternative Energy Stocks.

by Giles Kirkland

Even though many states seem to enter the “construction season” every spring, there’s still a significant backlog of vital repairs and improvements needed for state roads, interstates and bridges – around $420 billion worth as of 2017.

Not only are our roads falling apart, there are greater numbers of people in more vehicles on them. But what if, instead of simply following same repaving or rebuilding formula that never seems to catch up, municipalities get “smarter” with their fixes?

Smart cars use the newest technologies to save energy, improve safety, and assist in navigation. Missing from many of the current discussions, though, is what they will drive on: intelligent roadways with various connected sensors installed that do everything from sharing information about upcoming road conditions to automatically calling an ambulance if a car is detected going off the road.

Smart roads are the ultimate Internet of Things: some proposals include built-in solar cells that collect energy, relays to charge electric vehicles, or heat cells to keep roads thawed and safer all winter.

Investment potential

If you’re generally familiar with construction projects and costs, it’s a fair guess that smart roads aren’t going to come cheap. But if a municipality is planning to fix their roads anyway, it may as well incorporate technological improvements into their infrastructure upgrades.

This approach can potentially open the door to a blend of companies still in the start-up stage along with established public companies that have been involved in construction, engineering and road building for years. Public companies, especially those with experience working at different scales, can use the expected push for smart roads to secure contracts as well as grow revenue and hopefully improve stock performance.

It is predicted that by 2022, the global smart roads and bridges market can reach a compound growth annual rate of $2,660 million, which is a 24 percent increase from 2016. The greatest technical needs, and therefore the highest amount of potential for investors, will be in the area of sensors. This includes devices embedded in the roadway to detect pressure, temperature, speed, and more.

Tesla (TSLA) is leading the pack of public companies eager to explore the concept of smart roads further. Known for the innovative electric vehicles, the company are working on ways to map roads better to make sure their cars perform well.

Volkswagen (VWAPY), which trades on Germany’s stock exchange, has put significant money into energy-efficient cars, along with investing in technical improvements to the infrastructure of Jinan, China, which includes smart roadways.

Sellers of raw materials might stand to benefit, such as United States Steel (X), which has been producing steel for more than a century; Aecom (ACM), which provides design expertise; and public equipment and machinery firms such Caterpillar (CAT) or United Rentals (URI.)

Super start-ups

Business watchers looking ahead to future opportunities should keep an eye on the newer private companies. They may need equity if they want to continue to grow and bid on bigger projects.  

For example, Integrated Roadways based in Kansas City, Mo. is attracting a good deal of notice. The company has been replacing standard roadways with ‘smart slabs’ equipped with sensors that detect vehicles, warn of upcoming congestion or accidents, and recommend routes to drivers or self-driving cars. It is also working with Cisco Systems (CSCO) and other tech companies to install SmartPavement in Colorado. Many of these will be in rural areas where it’s difficult for phone signals to reach.

An Ohio company Smart Road Technology is designing a system of sensors and smart pods to deliver real-time information about road conditions. A fleet of drones can provide supplemental data as well. The potential usefulness of smart roadways may also attract companies specialized in technology (hardware, software, or support) which don’t necessarily know much about transportation.

Canada and the U.S. have the potential to be a big part of a possible smart road boom, due to the high quantity of roads and proximity to tech companies. But Europe and the United Kingdom also could be high growth areas and locations to launch pilot programs.

Conclusion

There are plenty of benefits included in the roadways of the future, from improved safety to greater sustainability of the infrastructure. Due to various political and budgetary reasons we should not expect to see these upgrades implemented very soon; however, it is worth being aware of the upcoming investment possibilities.

Giles Kirkland is an automotive expert, focused on researching green solutions for the transportation industry. You can find his articles on Twitter, Facebook and Oponeo.

The post Roadway Revolution: Meet the Smart Highways of the Future appeared first on Alternative Energy Stocks.

UQM Technologies (UQM:  NYSE) has agreed to be acquired by Danfoss Power Solutions for $1.71 per share in cash, providing a deal value near $100 million.  UQM leadership expects timely review by government authorities and has recommended approval of the deal by shareholders.  A date has not been set for the required shareholder vote.  Assuming all goes according to schedule, a deal closing is possible sometime in the second quarter 2019.

Electric propulsion and generation technologies are at the core of UQM’s solutions for manufacturing, transportation and power industries.  The substitution of electric motors for combustion engines has been driving demand for the UQM’s products.  Market opportunities have abounded for UQM and the world economy attempts to wean itself off environmentally damaging fossil fuels.  The company has reported steady increases in sales for the last five years, mushrooming to $10.9 million in the twelve months ending September 2018.

Some UQM shareholders may find inadequate the offer of $1.71 per share. During a conference call held with shareholders to discuss the Danfoss offer, UQM management cited competitive concerns as the primary reason behind the decision to accept the offer.  Demand conditions are excellent but the team sounded a practical caution on the challenges of capturing market share for a small company strong on technology and light on market access.

As rosy as the market opportunity might look, UQM’s management team know they are in a game for big boys and girls.  The market for motors, generators and compressors has matured to the point it is dominated by large manufacturers.  Customers are accustomed to choosing from extended product lines and receiving attention from worldwide networks of sales and service personnel.   Let’s not forget the confidence-building impression the plump balance sheet of a large company can make on customers ordering mission critical equipment.  UQM may have exceptional technology needed for adopting fuel cell technology or hybrid electric power systems, but it lacks the girth of its better established competitors.

The UQM-Danfoss tie-up is also not the first strategic move in the industry. In July 2017, automotive components supplier BorgWarner (BWA:  NYSE)snapped up one of UQM’s competitors, Sevcon, for $200 million.  Sevcon’s propulsion solutions encompassed conventional combustion systems as well as electric and hybrid systems.  A supplier of components to OEMs, Meritor, Inc. (MTOR:  NYSE), made a strategic investment in TransPower to gain access to Transpower’s electrification technologies for large commercial vehicles.  Deals are being made and those that are left out could find competition with the new combinations composed of ‘small company technology’ and ‘large company market reach’ more and more challenging.

UQM Technologies reported a net loss of $6.8 million on the $10.9 million in revenue for the last reported twelve months.  Cash usage during that period was $5.4 million, making it clear the company still needs outside financial support to keep the doors open and lights on.  Marketing and sales campaigns require investment, not to mention the working capital to fulfill orders.  The reality of the company’s situation is that to get a bite of the evolving electric propulsion and power generation market, UQM would require some sort of dilutive capital raise.  A strategic deal provides an interesting alternative to a financing, but retaining control might have also cost UQM shareholders dearly in the form of commissions or shared profits.

In comparison to the alternatives, at $1.71 per share UQM holders may be getting something close to fair value. The analysis may make some sense, but it does not take the sting out of the fact that after bearing the risks of an unprofitable company, UQM holders are getting shut out of the company’s future.  Danfoss Power Solutions, a part of privately held Danfoss Group, is swallowing up UQM Technologies in an all-cash deal.

The deal is likely to be successful, delivering strong sales for Danfoss. UQM’s fuel cell compressor system and all its other products will take a place in the Danfoss portfolio of hydraulic and electronic systems that are mostly marketed to off-highway vehicle markets.  Adding the UQM technology will give Danfoss a better position with manufacturers of electric buses and trucks.

The deal will also help Danfoss burnish its reputation as a ‘green’ company.  The company’s 2017 Sustainability Report provides a view on Danfoss goals to operate responsibly, an image which has to help in conversations with electric bus and truck manufacturers who needs to reduce carbon and increase energy efficiency in their supply chains.

So there it is. UQM holders are most likely than not to get a check for $1.71 per share.  We note that for most it might be a celebration.  Over the last eighteen years, the greatest volume is at prices near below $1.00.   Looking at trades in the most recent five years, we observe that the majority were at prices below $0.60.  However, in the last twelve months things have looked rosier for UQM Technologies and we find significant historic trading volumes at the $1.00 price level and $1.35.  Even for those who may have grabbed some shares at the 52-week high price of $1.66, Danfoss is offering a nickel gain.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 1/22/19 as “Shareholders Cry Foul as UQM Agrees to Buyout.” 

The post Shareholders Cry Foul as UQM Agrees to Buyout appeared first on Alternative Energy Stocks.

When will electric vehicles cost the same or less than gas cars? If you are buying a used vehicle, the answer is “Today.”

If you are considering buying a used car, cost is clearly important to you.  That’s why you should seriously consider a used electric vehicle (EVs). Lists of cars that lose their value fastest (a good thing if you are a used car buyer) are full of electric vehicles and luxury vehicles.  The first generation of electric vehicles including GM’s (GM) Chevy Volt and the Nissan (NSANY) Leaf regularly appear on lists of cars that depreciate quickly. Less well known early EV like the 2012-2014 Toyota (TM) RAV4 EV and the Ford (F) Fusion Energi can also be had for a fraction of their new vehicle price.

Low prices for used EVs come despite the fact that they are much less expensive to own than used gas vehicles. Not only does electricity cost approximately half as much as gasoline per mile driven, but EVs don’t require oil changes, need less frequent brake pad replacement (because much braking is done with the electric motor) and don’t require emission testing (or repairs if they fail), and there is no transmission.

The flip side of buying a first generation EV is limited driving range, and a used EV will have less range even than they had when new. You can expect your used EV to have between 5 percent and 20 percent less range than it did when new.  The early Nissan Leaf is one that can see significant battery degradation, especially if it was driven a lot in hot climates. The Leaf lacks a battery temperature management system, which does a lot to protect the batteries in most other EVs. 

How to Choose

If have a one car household and live rural or frequently take long trips, the limited range of pure EVs means that you will probably want a Plug-In Hybrid EV (PHEV) like the Volt.  These cars have limited electric-only range (38 miles in the case of the Volt), after which a gas engine kicks in.

If you have access to another car for longer trips, a low cost EV with limited range will allow you to do most of your driving for pennies per mile.  Choosing one is relatively easy because there are only a few common models. A Smart EV can often be found for as little as $5000, but had only 58 miles of electric range when new (expect 50 to 55 miles depending on how old the one you find is.)  The ubiquitous Leaf can be had for as little as $9000 and will give you about 70 miles of range. People who need more range should consider a used Volt plug-in hybrid. A used Volt can be had for about $15,000, and gives the opportunity to drive on electric power for something like 35 miles after battery degradation, but also has a gas generator for longer trips.

A number of other, more obscure EVs were built in limited quantities from 2011 to 2016, such as the 2012-14 RAV4 electric. I highly recommend Facebook groups and other online groups dedicated to particular models both for learning the ins and outs of a car you might be interested in, and for finding used EVs without the dealer mark-up.

Inexpensive Home Charging

All EVs and PHEVs come with a “Level 1” charger that plugs into an ordinary 120V outlet and will add about 5 miles of range per hour of charging. With this, a Volt will be fully charged in 7 hours, a Smart in 11, and a Leaf in 15.  The level 1 charger that comes with the Volt is also capable of Level 2 charging at double this rate if it is plugged in to 240V outlet like one for a dryer using an adapter costing $20 to $50.

For owners of EVs other than the Volt, inexpensive ($200 to $300), portable level 2 chargers that plug into various types of 240 volt outlets are available online. If you have such an outlet near your parking space already (perhaps for a clothes dryer in a garage) you can find one by searching for “Level 2 EV charger NEMA 6-20” if your outlet is a NEMA 6-20R.  You can identify your receptacle by comparing to a NEMA configuration chart.  Only if you do have to add a 240 volt outlet in your garage or next to your driveway does preparing for Level 2 charging have to be expensive.
If you only plan to drive your EV 50 miles or less a day, you can probably make do with Level 1.

How to buy

If you are buying one of the less common first generation EVs, you probably will not find it close by. Fortunately, having a car shipped to you is a lot simpler and less expensive than it sounds. While the buyer is usually responsible for the cost of delivery, if you buy from a dealer, they can arrange for the car to be shipped to you.  Ebay Motors has links to third party shippers that will give you quotes for delivery along with its listings, and Carvana has its own delivery service. While you can expect to pay $500 to $1,500 for delivery, you will usually save more than that on the purchase price by buying online, and delivery charges are not subject to sales tax.

Conclusion

Buyers of new EVs can make the argument that the money they save on gas and maintenance pays for the extra up-front cost quickly.  Electricity will cost 3 to 5 cents per mile driven, or even less if you can take advantage of free charging at work or at public charging stations.  Buyers of used EVs get these same savings, without the extra up-front cost. If you’re looking for an affordable car, look no farther than a used EV.

The post Surprisingly Affordable Electric Vehicles appeared first on Alternative Energy Stocks.

Car manufacturers have fully embraced self-driving or autonomous cars.  It is not because they have heard a loud clamor for such technology from consumers.  No, automakers are keen on the idea because manufacture of self-driving cars could help them overcome the short comings of highly cyclical sales pattern associated with its car dependent upon a single driver.  In other words, they are in it for themselves whether consumers benefit or not.

If consumers are not so important, at least investors should benefit. Besides the car manufacturers there are a few smaller companies that can give investors a taste of the self-driving car phenomenon.

LiDar and Sensors

Self-driving cars will not go far without guidance input about its immediate environment.  LiDar is a surveying method works much like radar, but uses pulsed laser light to illuminate a target and then measure the reflected pulses with sensors. Differences in laser return times and wavelengths are then used to create three dimensional representations of a target.  Such systems show great utility for controlling autonomous vehicles.

A key player in the LiDar field is LedderTech, a privately-held developer of sensor technology.  LedderTech just landed a $24 million bridge financing in the form of a revolving loan from Desjardins Group and a convertible note from Desjardins-Innovatech.  Expect LedderTech to come back to the capital market in the coming months to secure a longer-term financing.  In September 2017, the company closed a $101 million venture capital round that included investments by Osram Licht AG (OSR:  DE), Aptiv and Integrated Device Technology (IDTI:  Nasdaq).  GCA Advisors acted as the placement agent for the earlier round and could be a likely conduit for investors seeking a spot in LedderTech’s next financing.

New car technologies are not just in the hands of high risk startups.  Headquartered in Ireland, Aptiv Plc. (APTV:  NYSE) manufactures electronic components and safety technology for cars and commercial vehicles.  Aptiv was previously called Delphi Automotive and is the remaining business after spin out of Delphi’s legacy power train division.

What is left in Aptiv is the company’s autonomous vehicle technology.  Aptiv deployed thirty self-driving BMWs in Las Vegas for use in a network service sponsored by the on-demand transportation service Lyft.  The cars are outfitted with Aptiv’s LiDar and ultrasonic sensors.  After a four-month trial period, Aptiv celebrated a record 96% of riders giving the service a five-star rating.

Aptiv is fortified with acquired technology as well as its own.  Aptiv paid $450 million to acquire nuTonomy, a technology spin-out of the Massachusetts Institute of Technology.  Just like Lyft, nuTonomy has its eye on the nascent market for ‘automated mobility on demand.’  Lyft also deployed nuTonomy’s software solution in a car ride service in Boston.

Aptiv represents an old school company with a new age product line.  As such it presents a particularly compelling way to participate in the autonomous vehicle growth opportunities.  The company reported $1.0 billion in net income or $4.05 per share on $14.2 billion in total sales in the twelve months ending September 2018.  Aptiv is even mature enough to have established a dividend that delivers 1.4% yield at the current price level.

Lyft of its Own

Since partnering with Aptiv and several others with autonomous driving technology, Lyft made a strategic decision to develop its own technologies.  Building its experience in Las Vegas with the automated car service, Lyft appears poised to become a strong player in not only a competent service provider, but also a technology leader.

Privately-held Lyft is reportedly planning an initial public offering in 2019. Until then investors could tap into Lyft’s ambition through its various investors.  One is option is Canada’s Tier One auto parts manufacturer Magna International, Inc. (MGA:  NYSE).  Lyft received a $200 million investment from Magna as part of a $1.0 billion venture capital round led by Google’s CapitalG.  The deal valued Lyft at $11.7 billion, providing the hint of a very exciting IPO!

Watchful Eye

Collision avoidance is important for self-driving cars and driver controlled cars alike.  Intel’s subsidiary Mobileye Vision Technology Ltd. based in Israel has taken a lead in developing an advanced driver assistance system that is marketed to fleet owners such as trucking companies, law enforcement and bus line operators.  Intel claims Mobileye has captured as much as 70% of the market for driver assistance systems that have been included on at least 27 million cars already on the road.

Mobileye really did not capture anyone’s attention until it landed a contract to supply an upgrade of its EyeQ4 to as the eyes of automated cars. Mobileye reportedly was in direct competition with Nvidia Corporation (NVDA:  Nasdaq) for the order.

Of course, the only way to get a stake in the ‘eyes’ of autonomous cars is to buy shares in its semiconductor industry partner, Intel (INTC:  Nasdaq). There are worse investments.  Intel delivers 21% return on equity and its dividend currently provides a 2.6% yield.

Mobility as a Service

If a large semiconductor company with interests in automotive components is not appealing, private-held Zoox, Inc. might be an alternative. Zoox is a very early stage company with lofty goals for autonomous driving technology and mobility services.  Zoox distinguished itself by become the first company to be allowed to test driverless cars in California with real passengers.  The company wants to debut a ride-hailing service using autonomous vehicles as early as 2020.

It is an ambitious goal and that takes money.  Zoox has already raise a total of $800 million in two venture capital rounds.

Before investors start writing checks to invest in Zoox, the risks of an early stage operation should be fully considered.  The company has none of the stuffy protocols of an established operator like Intel or Aptiv.  However, there is still a bit of instability at Zoox as evidenced by the firing one of its founders just a few weeks after the closing of the round one financing.

These are dozens of companies, large and small, homing in on autonomous driving and the services that could develop using the technology.  The movement portends a significant change in the automotive industry as well as transportation fuel.  The individually directed car and its combustion engine have been a central part of modern American culture.  The muscle car of the fifties and all its attendant images of machismo and power is likely to become a thing of past.  It will be interesting to see what imagery advertisers and brand managers conjure up for the car that does everything.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 12/21/18 as “Stake in Autonomous Cars.” 

The post Less Well Known Autonomous Car Stocks appeared first on Alternative Energy Stocks.

There is a clutch of self-driving cars and cars with autonomous driving features on the market today.  Drivers just cannot seem to get enough of them.  Apparently, the idea of zooming down the highway with little to no responsibility holds considerable appeal.  Then again, maybe it is the novelty of the idea that will eventually give way to the next fad.

In August 2018, Cox Automotive revealed the results of a survey that found fewer Americans are embracing self-driving technology than previously thought.  A surprising 49% of respondents said they would NEVER own a fully-autonomous car.  This is up from 30% naysayers two years ago. Views on the safety potential in self-driving cars have shifted as well.  The Cox survey found that 45% of the respondents in the recent survey believe the roads will be safer with self-driving cars.  The confidence level was 63% two years ago.

Why have automotive manufacturers put so much time, effort and capital into a technology that is losing favor with consumers at such a fast pace? According to the Brookings Institute by the end of third quarter 2017, over $80 billion had been invested in technology to deliver cars with various levels of driving autonomy.  CB Insights reports another $4.2 billion was invested in the first nine months of 2018.

Automotive manufacturers are certainly not responding to a clamor for autonomous driving from consumers.  Interest in self-driving cars really came first from the U.S. military where automatic vehicle deployment could help keep soldiers safer.  Over half of casualties in combat zones involve military personnel making critical deliveries of fuel, food and supplies.  Car makers grabbed onto the idea because production of self-driving cars could help them overcome the short comings of highly cyclical sales pattern associated with its present production lines.

Unlike the cars we know today that are the equipment of an individual driver, autonomous driving cars could be operated collectively.  Certainly individuals could still own or lease a car, but likely the technology could give rise to various service models for transportation and delivery. Consequently, the buying decision could shed its cyclic nature, giving automotive manufacturers hope for consistent revenue throughout the year.

Automotive manufacturers are certainly willing to dictate to consumers what they want, not because the product is a good for consumers but because the product has great advantage for the producer  –  consistent quarterly earnings that drive stock prices!  All of a sudden the $80 billion investment seems like a bargain.

History has recorded ambitious manufacturers as winners and we expect a repeat.  Autonomous driving cars could be a compelling investment opportunity.  The early entrants to the competition have been the most popular so far:  Tesla (TSLA:  Nasdaq), Alphabet (GOOG:  Nasdaq), Audi AG (NSU:  DE), and Toyota (TM:  NYSE) to name just four.

In the next post we explore a few less obvious options.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 12/18/18 as “Manufacturers Going All Out for Self-driving Car Tech.” 

The post Manufacturers Going All Out for Self-driving Car Tech appeared first on Alternative Energy Stocks.

Earlier this week Westport Fuel (WPRT:  Nasdaq) reported financial results for the quarter ending September 2018.  Based on British Columbia, Westport is a developer and manufacturer of clean fuel systems for both fossil and renewable fuel sources.  It has taken some years, but Westport management has worked hard and overcome a number of obstacles to bring a mix of engines and systems capable of handling various fuels such as natural gas, hydrogen and liquid petroleum gas.

Revenue jumped to $65.5 million in the September 2018, quarter delivering $4.3 million in cash earnings.  The company’s relationship with truck engine manufacturer Cummins (CMI: NYSE) is proving to be one of the most important top-line growth drivers.  The Cummins Westport joint venture is finding good traction in the commercial transportation market with the Westport natural gas engines.  The engines are being marketed as low-cost alternatives to achieve zero emission goals.

It was the second consecutive quarter that Westport was able to bring in a profit, at least after adjusting for non-cash expenses.  R&D expenses were $7.8 million in the recently reported quarter compared to $12.8 million in the same period a year ago.  With the completion of the Westport HPDI 2.0 technology, management has eased off on research and development activity. 

The Westport HPDI 2.0 innovations have been well received in the freight market that has been reliant on high-polluting diesel engines to economically power heavy-duty vehicles. HPDI 2.0 technology makes it possible for heavy trucks to operate on natural gas.  Although natural gas is a fossil fuel, it still represents lower carbon dioxide emissions than diesel.  Yet natural gas can deliver as much power as diesel and at a lower cost.

Perhaps shrewdly on Westport’s part, the Westport HPDI 2.0 can be integrated into any engine on the market.  This has made is possible for Westport to form an alliance with Weichai Power Company Ltd. (WEICF: OTC) in Shandong, China.  Weichai manufactures diesel engines and plans to use the Westport HPCI 2.0 technology to deliver natural gas engines that will satisfy China’s new emissions standards.  The truck engines are expected to be on the market by the second half of 2019.  Westport has committed to supplying HPCI 2.0 components for 18,000 units through 2023.

Big commitments require strong balance sheets.  The Weichai arrangement alone calls for approximately 4,000 units per year or about 333 per month.  The number is not so intimidating on its own, except that Westport delivered only 5,031 in the first nine months of 2018.  That is about 360 units per month.  In other words, Westport will need to almost double production by next year to deliver on its promises to the China truck producer.

Westport held $54.2 million in cash on its balance sheet at the end of September 2018.  Cash has been fortified through the recent sale of Westport’s compressed natural gas compressor operations for $14.7 million. Working capital was $61.8 million, down from $80.9 million at the end of 2018.  The shrinkage in working capital was largely the result of using cash to support operations.  In the first nine months of 2018, Westport used $24.7 million in cash to keep the home fires burning. Despite the reduction in R&D spending, Westport is still out spending gross profits from the sale of its products and services.  To make matters worse in the most recent nine months products costs have increased to 75.2% of sales compared to 73.1% in the first nine months of the previous year.  It seems logical that with increases in production, Westport can get its cost situation under control.

Investors did not applaud Westport’s third quarter financial report.  The shares opened lower in the first day of trading following the announcement.  We expect the shares to remain under pressure given that the Moving Average Convergence Divergence (MACD) line is now moving downward toward its signal line.  The situation suggests supply outstrips demand at the present time and will need to resort to lower prices to achieve fulfillment.

The price weakness could be a gift for those investors who see potential in Westport’s various strategic relationships.  The company has valuable technology for the truck market, but lacks the experience or connections to reach the market on its own.  Investors might not be satisfied with Westport’s profit margins and continued cash burn.  However, the situation could be materially worse if Westport was striking out on its own.  With a building order pipeline, it would seem that Westport may have a chance to achieve more efficiency.

Debra Fiakas is the Managing Director of Crystal Equity Research, an alternative research resource on small capitalization companies in selected industries. Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

This article was first published on the Small Cap Strategist weblog on 11/20/18 as “Westpower Fuels Natural Gas Conversion.” 

The post Westport Fuels Natural Gas Conversion appeared first on Alternative Energy Stocks.