Update On Alternative Energy Stocks

I am a strong proponent of the long term viability of alternative energy stocks but recent market actions have been very hard on these stocks. If you read my weekly update on the NEX renewable energy index you will see how badly this whole sector has been hammered. I also follow two renewable energy stocks on this site, VeraSun Energy (VSE) and Green Hunter Energy (GRH). Both companies have recent news that show diverging prospects for each.

VeraSun Energy stock collapsed yesterday from an already very low value on rumors of pending bankruptcy. I have written numerous times about how I believed VeraSun’s largest, lowest cost model would allow them to survive high corn prices and maintain at least a thin profit margin. This all came undone in the summer when the company locked in corn futures at record high prices and was hit by falling ethanol prices. My last article was based on the hope that another company would be interested in VSE’s assets and purchase the company. If this company does declare bankruptcy any interested party will get those nice ethanol plant for pennies on the dollar. I think VeraSun could easily go under.

Green Hunter Energy seems to be working towards avoiding the fate of VeraSun by vertically integrating their biodiesel refining business. This article from the DTN Ethanol Center reports the company’s purchase of a diesel fuel distributor to help distribute their product. GRH is also developing their own Jatropha plantations in South America to provide a steady, cost controlled supply of feedstock. Green Hunter is a very developmental stage alternative energy producer (they are also developing wind energy) but they seem to have a business plan that takes lessons from troubles than have hit other companies in the sector. I believe the company has excellent long term prospects.

This site’s Opportunities Portfolio has positions in VSE, GRH and the renewable energy ETF: PBD (PBD). VSE has fallen to less than 0.5% of the portfolio but will be sold out on any kind of share price rally.

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