By Brendan Coffey, Editor of Cabot Green Investor
From Cabot Wealth Advisory 4/21/11 Sign up for free Cabot Wealth Advisory e-newsletter
It's a company that makes high tech filters used inside lithium-ion batteries (and lead-acid, in which it is market leader), in the filtration and separation processes of manufacturing energy storage products and in pharmaceutical production and desalination. Its li-ion battery products are currently used in Apple's (AAPL) wildly successful iPad tablet computer and are seeing a surge in automaker interest as that industry gears up to roll out new hybrids and electric vehicles in coming years.
The company? Polypore (PPO).
I first recommended PPO to Cabot Green Investor subscribers in May of last year at 22 and it has been a consistent riser every since. At 53 now, my subscribers are enjoying a healthy triple-digit gain, yet I still think the stock has excellent upside. Apple and iPad have been behind much of the past year's price growth, helping Polypore double sales since 2005 through last year. It's safe to say the iPad is built into the current share price, but the hybrid and electric vehicle segment is what will provide the truly exceptional growth I see ahead.
By 2015, one estimate says that automakers will roll out or have serious designs for over 80 new models of hybrid and electric vehicles! A mere 5% of automotive builds going to EVs would more than double demand for the type of high tech li-ion membranes that Polypore produces. The low estimate of EV world demand has market penetration of 4% by 2015; the high estimate has nearly 10%. Given rising automaker interest, Polypore is expanding its North Carolina facility this year, adding another plant in that state and expanding its Korean facility. By 2012, the company will have 200% the capacity it had during the latter half of 2010.
But will demand be there to support all the EV investment being made by Polypore and automakers? As we enter summer, I foresee even greater pressure on gasoline prices, which will heighten consumer interest. At the start of the year, I dismissed expectations of $5 a gallon gas as over exuberant. With Libyan supply now largely gone from the market, $5 a gallon gas is much more likely, especially since the turmoil in the Middle East has essentially removed the industry's room for error.
Brendan Coffey
Analyst and Editor of Cabot Green Investor
Brendan Coffey is a member of the Cabot investment team and editor of
Cabot Green Investor. A veteran financial journalist, Brendan has spent more than a decade writing about investing for publications including Barron's, Forbes, The Wall Street Journal and a number of private-client brokerage newsletters.
By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 2/14/11 Sign up for free Cabot Wealth advisory e-newsletter
Polypore's (PPO) products are precisely engineered membranes that regulate the passage of gases and fluids in controlled environments.
Part of Polypore’s business is in medical fields—regulating the flow of blood plasma, for example—but that’s not where the exciting growth is.
The exciting growth is in energy.
Some of the company’s membranes go into the lead/acid batteries of traditional cars. Polypore supplies more than 50% of the world’s demand for high performance polyethylene battery separators to the lead/acid battery industry, and business is booming in some areas, particularly China.
But even more exciting is the growth of the lithium battery market, where the company has a dominant presence. Notebook computers, mobile telephones, digital cameras, power tools and more use lithium batteries.
The biggest winner for Polypore today is Apple’s iPad, which accounted for 17% of Apple’s fourth quarter revenues.
But looking beyond the iPad, I see a big market for batteries—and Polypore’s membranes—in hybrid vehicles and all-electric vehicles.
And then I see a big market for batteries—and Polypore’s membranes—in wind power and solar power installations. The batteries will be needed to store power, and to smooth delivery, and I think these markets have great growth in front of them.
In the third quarter, Polypore saw revenues grow 10% to $152 million and earnings jump 59% to $0.27 per share.
Fourth quarter earnings will be released after U.S. markets close on Wednesday, February 23, and I’m confident they’ll be very good.
Polypore (PPO) has been recommended by the advisory I edit, Cabot Stock of the Month Report. Since June of last year, my subscribers have profits of 134%. And every week, I send them an update by email telling them exactly what to do with their shares of PPO.
If that’s what you need for investment success, click here.
By Timothy Lutts, Chicf Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 1/10/11 Sign up for free Cabot Wealth Advisory e-newsletter
Polypore (PPO) is a stock I last mentioned in Cabot Wealth Advisory in August.
Located in Charlotte, North Carolina, the company makes high-tech polymer-based membranes for two markets.
The first, accounting for about one-fourth of the company’s business, is the medical market, where the membranes are instrumental in hemodialysis, blood oxygenation, ultrapure water filtration, degasification and other specialty applications. This business brought in $38.4 million in the third quarter of 2010, and it’s growing slowly.
The second market, accounting for about three-fourths of revenues—$133.3 million in the third quarter—and the majority of the growth, is the energy storage business.
Part one of this involves supplying membranes for traditional lead-acid batteries, where the biggest growth is now in China.
But the fastest-growing and most exciting part of the business involves supplying membranes for the lithium batteries used in electronics, including Apple’s iPad, and numerous new automobiles—both pure-electric and hybrid—that have lithium batteries.
That business grew 46% in the third quarter, to $34.1 million, and continued rapid growth is expected.
I recommended the stock here in August, when it was trading at 28, and it’s done very well since. It’s now trading at 44.
But I didn’t find the stock. That honor goes to Brendan Coffey, editor of Cabot Green Investor, who recommended it in June, when it was trading at 22.
If you bought it back then, congratulations. I hope you still own it. And if you didn’t buy it, you might consider buying some now. The stock has been building a base on top of 40 for more than a month, and its 50-day moving average is now at 38, promising support as the stock prepares for a breakout to new highs.
Or … you could get the latest advice from Brendan Coffey, who’s still recommending Polypore along with other stocks that benefit from the world’s embrace of earth-friendly stocks.
Last year, Brendan’s portfolio of roughly 10 Green stocks gained 26%, trouncing all other Green portfolios as well as the broad markets. Click here for more information
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
By Brendan Coffey, Editor of Cabot Green Investor
From Cabot Wealth Advisory 8/19/10 Sign up for free Cabot Wealth Advisory e-newsletter
I admit that I’ve long been a big fan of Apple products, especially the iPhone, which allowed me to whittle down three things I often carried—cell phone, Handspring PDA (remember those?) and a point-and-shoot camera—to just one. And designing such compelling products has done well by shareholders of Apple (AAPL). The stock has more than quintupled since June 2005, when the company announced it was switching to faster, more energy efficient Intel-based chips for its computers, from the IBM-supplied G-series.
If the introduction of the first iPhone, unveiled in January 2007, spurred you to buy the stock, you’re up about 160%. Since the unveiling of the iPad this January, shares are up 22%. IPads are selling so well, one industry analyst, iSuppli, projected in late July that Apple will have sold 100 million of the tablet PCs by the end of 2012. Apple sold 3.3 million of the iPads in the first quarter that they were in stores. It’s pretty clear Apple is on a winning streak, executing its business plan to near-perfection.
I like Apple as a stock, but what particularly interests me today is the fact that for Apple to execute so successfully, many other companies have to hit their marks as well. As Editor of Cabot Green Investor, which invests in alternative energy and related stocks, I find it fascinating that many of the items used in the iPad are also playing a part in the transformation of our a fossil-fuel dependent society to a cleaner, more renewable one.
One company that we can reasonably infer has some role in the iPad is Polypore (PPO), a North Carolina-based company that makes sophisticated filters and separators for use in lithium-ion batteries. According to analyst Craig Irwin at Wedbush Morgan, Polypore supplies the separators for the iPad’s li-ion battery (Polypore hasn’t confirmed this). Irwin’s revelation last week gave shares of PPO about a 10% boost. Cabot Green Investor subscribers bought Polypore in June, making the Apple connection a welcome bonus to what we already saw as a compelling investment.
That’s because lithium-ion batteries are the next generation of batteries that will eventually all but eliminate the lead-acid battery we use in most applications today. Li-ion batteries can be more fully charged more often than lead-acid batteries, lose their charge more slowly when not in use and are generally much lighter for the power they can store than comparable lead acid batteries. In the iPad, li-ions offer over 10 hours of operation on one charge, by some accounts.
The real growth market for li-ion batteries is in automobiles, especially as electric cars like the Nissan Leaf and hybrids like the Chevrolet Volt roll out. Last fall, another brokerage, AT Kearney, estimated the market for li-ion batteries in automobiles was just $32 million in 2009, but will skyrocket 700-fold to $22 billion by 2015 and then $74 billion by next decade.
Polypore is a leading supplier of separators for lead-acid automobile batteries already, making the shift into the more sophisticated, higher margin li-ion business a natural transition. It also makes filters and separators for the food and beverage industry, membranes needed in the pharmaceutical industry and filters to remove waste products from blood. Lead acid batteries remain a growth area too, thanks to Asian industrial demand. Polypore easily beat Wall Street expectations in its latest quarter, reported two weeks ago, posting sales of $150.1 million and earnings per share of 33 cents. For the full year, we see sales rising as much as 20% to over $600 million, while posting $1.22 or more in per-share profit.
To learn more about Polypore as well as other top Green stocks, click here: Cabot Green Investor.
Brendan Coffey
Analyst and Editor of Cabot Green Investor
Brendan Coffey is a member of the Cabot investment team and editor of Cabot Green Investor. A veteran financial journalist, Brendan has spent more than a decade writing about investing for publications including Barron's, Forbes, The Wall Street Journal and a number of private-client brokerage newsletters.