Each week I recap the results of the WilderHill New Energy Global Innovation Index, symbol NEX, and published by New Energy Finance Ltd. The index consists of approximately 90 stocks from 22 countries. The NEX is the tracking index for the PowerShares Global Clean Energy Portfolio ETF (PBD: 9.26 +0.14 +1.54%). For reference, the NEX has a 52 week high of 436.21 and closed 2008 at 177.99.
For the week that ended on Monday, 01/19 the NEX lost 4.4% closing at 171.4. The NASDAQ and S&P 500 were down 0.6% and 2.3% for the same period. In the sectors, energy conversion was the best of a bad lot losing only 1.1%. Biofuels and biomass was the worst performing sector, losing 5.4%. The two largest sectors in the NEX, solar energy and wind energy were closely grouped near the index decline. Solar energy was off 4.9% and wind energy was down 4.6%.
Here are the best and worst performing stocks from the NEX for the week:
NEX top gainers since 13/01/09
GT Solar International SOLR + 23.9%
Epistar 2448 + 11.1%
Byd Co 1211 + 9.9%
5N Plus VNP + 9.9%
Xinjiang Goldwind 2202 + 9.4%
NEX top losers since 13/01/09
JA Solar Holdings JASO - 24.6%
Umicore UMI - 17.4%
Theolia 18481 – 14.9%
Kingspan Group KSP - 13.8%
Sanyo Electric 6764 - 12.7%
I found the article linked above very interesting and thought provoking. The main point of the story is that oil traders are dumping their near term contracts because they have no where to store the oil. Since reading this article this morning oil has recovered over 10% as other traders (I assume) rush in to cover their positions. Reading the article above and the oil news through the day has me wondering whether oil traders are setting themselves up for a big squeeze. Let me lay out the facts as I see them.
Worldwide oil consumption has fallen about 500,000 barrels per day from the levels of last year.
The contango in the oil futures has producers of oil selling it in forward contracts. The 6 month futures were $17 to $18 /barrel higher than the current spot last time I looked and end of 2009 contracts were $20 better than current prices.
Oil in storage for future delivery is starting to take up all available storage space.
If there is not enough storage or demand where will current and near term production go? Prices will have to drop to the point where producers reduce production to something less than current demand.
If production does not contract significantly, in a few months their will be future’s contract holders buying $55 oil that is worth less than $40.
Somebodies will be going broke!
I know OPEC has committed to significant cuts in production and that is the reason for the oil price contango (so I read). But there seems to be a problem is the oil industry runs out of storage for oil sold into future contracts. I do not know what the effects of this can be, and it appears that somewhere there is going to be a big squeeze!
I would appreciate your feedback and thoughts on this topic.
This bid by CF Industries (CF: 178.71 +4.66 +2.68%) sucks for Terra Industries (TRA: 0.00 N/A N/A) shareholders. I think the stock is grossly undervalued. I wrote here that TRA had a valuation problem when you look just at the company’s cash holdings and the value of their stake in Terra Nitrogen (TNH: 192.00 +2.00 +1.05%). The market values the non-TNH part of Terra’s business, which generates 70% of their revenues at less than zero.
I do see a couple of positive’s in this bid:
First, it puts TRA in play and may end up pushing the stock back up to a reasonable level.
Second, if the purchase does go through, shareholders will end up owning shares of CF, which is in the same industry.
This was a smart move by CF to try to pick up Terra’s assets on the cheap. Let us hope this bid starts a bidding war and the shares continue to appreciate.
Each week I recap the results of the WilderHill New Energy Global Innovation Index, symbol NEX, and published by New Energy Finance Ltd. The index consists of approximately 90 stocks from 22 countries. The NEX is the tracking index for the PowerShares Global Clean Energy Portfolio ETF (PBD: 9.26 +0.14 +1.54%). For reference, the NEX has a 52 week high of 436.21 and closed 2008 at 177.99.
For the week ending Friday, 1/12 the NEX lost 6.5%, closing at 179.22. The NASDAQ and S&P 500 were down 5.5% and 6.2% for the same period. All sectors in the NEX lost ground for the week led by ‘energy conversion’ which lost 11.4%. This is the same sector which was the top gainer the previous week. Oh fickle fate! The two largest sectors in the index, solar energy and wind energy lost 10.2% and 6.1%, respectively. Energy efficiency was the best of a bad bunch, losing only 2.8%.
Here are the best and worst stocks from the NEX for the week:
NEX top gainers since 06/01/09
Sharp 6753 + 18.7%
Zhejiang Yankon 600261 + 12.7%
EnerNOC ENOC + 11.1%
Cree CREE + 10.0%
Energy Development Corp EDC + 9.2%
NEX top losers since 06/01/09
Ener1 HEV - 31.4%
SunPower SPWRA – 22.7%
Q-Cells QCE – 22.1%
Nordex NDX1 – 21.1%
Zoltek ZOLT - 20.8%
I have been a long time watcher of Companhia Siderurgica Nacional (SID: 10.55 +0.06 +0.57%), hereafter known as CSN. I owned the stock for a while in 2007 and sold for a nice profit. I thought the share price was to extreme in mid 2008, but now the shares are attractive again.
CSN is a Brazilian iron ore miner and steel producer. The majority of the revenues come from the sales of flat rolled steel. Also, the majority of revenues come from sales in Brazil. The company is hugely profitable with steadily growing revenues. For the 3rd quarter of 2008 the company reported revenues of R$4.0 billion and EBITDA of R$2.1 billion, both records. Here are some of the facts about the company (all from Q3 2008):
CSN generates 76% of their revenues from the sales of steel. This steel goes to the Brazilian automotive, agricultural machinery, appliance manufacture and construction industries.
Domestic sales were 88% of steel sales. CSN has 39% of the Brazilian steel market.
Of the steel exports 45% go to Latin America and 31% to Europe.
CSN owns the market niche of tin plate steel which is used for steel packaging. CSN has a 98% market share in that product in Brazil.
CSN owns it own iron mines of which most of the production goes to make the company’s steel.
Sales of iron ore accounted for 16% of revenues in the 3rd quarter of 2008. This was double the percentage of one year earlier.
There were a couple of interesting events in the 2nd half of 2008 that had a material affect on the company’s finances:
First, in the 3rd quarter the company took a R$1.3 billion loss on their rolling Total Return Equity Swap, which is based on the U.S. ADR price. The company initiated the swap in 2003 and had accumulated R$3.1 billion in profits on the swaps before the recent quarterly loss. Since the shares fell again in the 4th quarter, I would not be surprised to see another loss from this instrument on the next quarterly report.
Second, after the close of the 3rd quarter CSN made an agreement to sell a consortium of Japanese steel companies 40% of its iron ore mining subsidiary NAMISA for $3 billion (U.S. $). My math values the remaining 60% that CSN owns at $4.5 billion. NAMISA’s business plan has the mines producing 18 million tons of iron ore in 2009, increasing to 38 million tons in 2013. Company management has pointed out in several publications that NAMISA does not hold all of CSN’s mining assets.
CSN pay an annual dividend, usually in May. Their policy is to pay out at least 25% of the company’s net income. The $1.74 listed by Yahoo Finance as the dividend paid in 2008 appears to be the amount in Reals. Currency rates can have a big effect on the value of the U.S. ADRs. The dollar currently fetches about 2.3 Reals. If the Real weakens, i.e. more per $buck, the value of the U.S. ADR will fall. A strong dollar is hard on ADR values.
The bottom line is that CSN sells the majority of its production into the Brazilian economy, which is expected to continue growing. Exports offer the opportunity for additional profits when the rest of the world’s appetite for iron ore and steel increases. At the current share price I like the possibilities over the next couple of years.
Note: SID is a component of this site’s hypothetical Opportunities Portfolio. I currently do not hold a personal position.
