Clean Energy Fuels (CLNE)
By
Brendan Coffey, Analyst and Editor of
Cabot Green InvestorFrom Cabot Wealth Advisory, 7/14/08
Sign up for free Cabot Wealth Advisory e-newsletterThis is a company whose operations are right up our (
Cabot Green Investor) alley—producing cleaner energy for automobiles. Oil billionaire T. Boone Pickens founded
Clean Energy Fuels (CLNE) in the early 1990s in the belief that natural gas could be a cheaper alternative to diesel for vehicles, because natural gas as a commodity is widely available in the United States. Sales were about $118 million last year compared with $92 in 2006 and $78 million in 2005. Pickens took the company public in May of last year and controls 60% of the stock.
Is it Green? Sure, natural gas burns cleaner than diesel, which is why many utilities and urban buses are powered by it. It's not as Green as solar or wind, but incremental gains count, too. Part of Clean Energy's strategy is to benefit from state and local mandates for cleaner burning fuels for municipal vehicles, a prospect that seems to be improving.
Is it Cabot Green Investor worthy? There is a lot to like. Sales growth is fine, at 26% annually, and has the promise of being able to post greater rates of increase, as natural gas becomes a more viable fuel option, something we like even more. As a businessman, Pickens didn't make billions because he's lucky, so we're glad he still has a hand on the wheel here, meeting our criteria that a company should have good management. Its market cap ($500 million) also is a size we like, since it signifies a company that is past the volatile and speculative start-up stage but still is growing into its market. Looks good?
Well, after we examine the sales growth trends and market potential, evaluate the management and become comfortable with the financials, we check the technicals. The time-tested Cabot growth model has shown that buying stocks with strong charts—showing an upward momentum in price on increasing volume—is a key differentiating factor in whether a stock is a winner or a loser for the buyer. There are many very good companies out there, but not every one is a stock worth buying.
Looking at Clean Energy, the company went public at 12 in May 2007, worked up to 19 pretty quickly, before plunging to 12 again by August 2007. Since IPOs usually have little institutional support this isn't surprising, though still not welcome. Shares recovered and worked up to 20 near the end of 2007. Then they steadily began declining, testing and holding support around 13 twice, but they failed to rally and broke through that support this May to a low of 11.
A Pickens-prodded bounce sent shares up double digits on consecutive trading days last week, but a brief rally does not a trend make. Shares still sit below the 50-day moving average, and look all the more bearish because that average is on a downtrend, too. Now it faces lots of resistance up through 14. It's not a buy yet, if it ever will be.
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