Money and Investing Thoughts

GM has unveiled this fuel cell powered hybrid prototype Cadillac. It uses the same drive train architecture as the Chevy Volt. I like the use of wheel motors to provide all wheel drive. If GM can get some of the advanced hybrid technology to market at a competitive cost and in numbers, the next decade could be very good for the General.

The claimed largest photovoltaic solar system has gone into operation at Nellis Air Force Base, on the northern edge of Las Vegas, NV. The 14 megawatt system will provide 25% of the base’s power requirements.

I put up these pictures because I spent 3 great years flying F-16s out of Nellis back in the mid 80′s. Things were a lot different then. In the squadron we had a Wang word processor the size of a washing machine. Flight planning was done by hand and there was no GPS. The F-16 did, though have some pretty slick bomb dropping and navigation technology, at least for that era. So without any further ado, here are some pictures courtesy of cleantech.com

Headwaters, Inc. (HW: 2.70 0.00 0.00%) has had it’s stock severely beaten down, probably for good reason, because the business line that has provided 60% of profits has basically shut down at the end of 2007. Residual profits from the discontinued alternative energy line will continue at a reduced rate in 2008, then cease. Ouch!

Besides the discontinuing alt. energy business, Headwaters next biggest line is construction materials. This business is tied to new home and commercial construction. We all know how that has been going. Double ouch!

The future, however, looks pretty positive for Headwaters (especially the stock price). HW is in several different business areas, some of which are related to others. The discontinued alternative energy business was related to coal, and the company has taken some of that expertise into new ventures. I will give a brief overview of each:

• Coal Combustion Products: Fly ash as a residual of coal combustion is processed and sold as a addition or substitute for Portland cement. The fly ash improves the quality of concrete and is used in some of the construction materials products. Sales of the products continue to grow in spite of the turn down in housing construction.

• Construction Materials: Almost half of revenues, HW sells architectural stone, block, brick and stucco products. Sales have remained steady despite the turn down in home construction and remodeling. New product lines grew at a 22% rate for 2007 and an acquisition increased products and revenues.

• Coal Cleaning: HW has developed a process to clean waste coal to make it usable. This business should start providing revenue in 2008.

• HCAT Technology: The company has developed a process to transform residual, heavy bottom of the barrel oil into high value light oil. The technology is in the verification phase at several refineries. The market could be 500,000 barrels of oil per day with up to 80 cents profit per barrel processed. Definitely a growth area in the next few years.

• Other businesses: A hydrogen peroxide plant in Korea should start providing significant revenue and earnings with growth potential. An existing 50 million gallon ethanol plant should be more profitable in 2008. (I think ethanol producers will surprise with their profits for 2008).

So Headwaters is a company with some growth possibilities to replace the lost alternative energy profits. At a PE of 10 to 12 on 2008 projected earnings I think the stock is an excellent value at these levels. HW was added to this blog’s 20 Stock Portfolio for the start of the year.

Note: I currently do not have a position in HW.

I will just throw this one right out there: I think Atlas Pipeline Partners LP (APL: 36.41 0.00 0.00%) looks like an excellent source of high income, with some growth thrown in.

APL is in the natural gas pipeline business, where it’s many miles of pipeline gather natural gas from wells to be transported to processing locations, which is also the company’s business. The company get gas from about 6,500 wells in the Appalachian region and collects and processes over 1.1 billion cf/day in it’s Mid Continent region (TX, OK, AR, KS).

APL is 64% owned by Atlas Energy (ATN: 0.00 N/A N/A),

Correction (and I appreciate the comment):

In your article you state that APL is owned by ATN which is incorrect. APL is actually owned by AHD which in turn is owned by ATLS. ATLS actually owns and manages APL, ATN and AHD.

Sincerely,

Robert R. Firth
COO Atlas Pipeline Holdings (AHD)
President and CEO APLMC (APL)

which provides 100% of APL’s Appalachian gas to transport and process. APL gets the gas for the life of the well contract and receives a fee of 16% of the market price of the gas they process. Atlas has plans to add over 1000 wells to the existing 6,500. In mid continent is appears that APL collects and process gas for a variety of producing customers.

Atlas Pipeline Partners has shown very strong revenues, earnings and distributions over the last 5 years. As an income stock, the distribution has been increasing at a 13% rate. Current yield is 8.5% and the 2008 projected distributions of $3.80 put the yield for this year over 9%. If gas prices rebound from their current funk (especially in relation to oil) earnings could really pop. I also like the fact this company has a $1.6 billion market cap, so is not as well followed. The stock price has been falling for about 6 months, probably in response to low natural gas prices.

I am adding APL to this blog’s 20 Stock Portfolio. I currently do not have a position in this stock, but I am trying to eyeball a bottom in the price to pick up a few shares.