By Brendan Coffey, Editor of Cabot Global Energy Investor
From Cabot Wealth Advisory 11/21/11
An area of great interest to me as an investor right now is alternative fuels. Primarily, I believe natural gas has the potential to be a viable alternative to diesel in the trucking and industrial equipment sector. Already many ports, such as Long Beach, California, require trucks and equipment to be natural gas-powered, because the fuel burns far cleaner than diesel. Natural gas is also abundant in the U.S., relatively low-priced and its price isn't affected terribly by international oil prices.
A leading firm in the production of natural gas engines is Westport Innovations (WPRT), a Canadian firm that has a very profitable joint venture with truck engine maker Cummins as well as Volvo trucks, Weichai, the leading China heavy equipment maker, and others. While the company has focused on trucks and industrial equipment, it is now expanding into light trucks. Earlier this autumn, Westport inked deals to supply natural gas engines to the Ford (F) F-series trucks and also finalized a venture with General Motors (GM) to develop natural gas engines for GM's light truck line.
The number of natural gas vehicles on the road worldwide has grown from about one million in 2000 to over 12 million in 2010, an annual growth rate of 26%. In North America, analysis firm Frost & Sullivan expects natural gas fueled trucks to grow to 8% of the region's truck sales market by 2017, from 1% last year (currently, a natural gas truck costs 20% more than its diesel counterpart). According to the researchers, as long as the gallon equivalent of natural gas is $1.50 less than diesel prices, the extra upfront cost is worth paying. Of late, diesel has been averaging around $4 a gallon, while natural gas trucking firms have been paying $1.65 to $1.80 per gallon equivalent to fuel their vehicles. That's a good price dynamic, one that will continue to help Westport grow its $200 million annual sales.
Editor's Note: You can learn more about the energy stocks mentioned above and many more leaders in the sector in Cabot Global Energy Investor. Don't miss another recommendation! Learn how you can be an early investor in this high-potential area today by clicking here now.
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.