Friday, October 12, 2007

Hey, want to see a really bad description of why to invest in a biofuel stock?

The staff reporter Chuck Marvin attempts to recommend a Clean Tech energy stock.

He fails to grasp anything distinguishing about his biodiesel pick and furthermore claims that though it's failing to make money (though its already publicly traded) the stock will simply because of a federal tax credit and the fact that the CEO worked for a defunct major oil company in Saudi Arabia.

This is the best example I've ever seen of some novice to Clean Tech just shaking an investment in front of uninformed investors expecting them to jump simply because he uses buzz words like biomass, biodiesel, and feedstock.

There are only three things that would really make a biofuel stock stick out above the others. A guaranteed feedstock supply (say a strategic partner with real commodity weight), a guaranteed offtake agreement (say a large contracted user buying at market prices), or a paradigm shifting demonstrated technology. He fails to provide any of these and instead makes claims that fail to stand up to any critical thinking at all.

For instance, the article adds at the end "P.S. Even in a recession, this stock could still make you money!" going on to even claim the stock is "recession-proof and poised to deliver +30% returns in the next year." Red flags should be going off just based on that.

By the way. His pick is Nova Biosource Fuels who he claims is a $300 Million dollar biofuel producer trading below $3 a share. He claims Nova Biosource has a favorable contract to supply a capacity of over 200 million gallons of production with finished product made at $2.00.

I'll believe it when I see it. Nova's website shows some promise. I would need to see more to make a real decision about their technology. Based on his description though I see alot to be very cautious about even if you are playing with a penny stock.

1 comment:

Anonymous said...

Turns out after the article they are filing to sell $200 million in additional stock. Can you smell pumping up the market price before they unload another round of equity.