“A Pioneer in Creating Highly Efficient Vehicles” from Cabot

This one’s from Brendan Coffey and the fine folks at Cabot in an ad for their Green Investor newsletter (click here if you’ve ever subscribed and wish to review it) — and it’s all about a company that is a defense department contractor, but also has some potential as a “green” company.

The letter is a teaser of sorts, for the “5 Most Promising American Green Companies to Buy Now,” but they do actually mention the name of one of those companies in the letter — and they leave us with a little pile of clues about the others.

Along the way, they provide what has become sort of the standard push for alternative energy as an investing strategy — Bill Gates, Warren Buffett and T. Boone Pickens are on board, and this will be the next major revolution in technology and American life, so get with the program already.

Here’s their wording:

“At the turn of the 20th century it was Oil. At the end of the 20th century it was the Internet Explosion.

“Now, government and corporate powers-that-be are scrambling to back the next–and possibly the most groundbreaking–technological revolution in history.

“Here’s How You Can Follow the Money to what may be the single biggest investment opportunity of your lifetime!”

So that makes you sit up a little bit in your seat, eh? Maybe pay a little attention? That is, assuming you haven’t become jaded from reading 7,382 similar pronouncements in the last six months (full disclosure: that number was invented, because I’m too lazy to count).

The one company that they “reveal” for us in the text of the ad is TetraTek, the environmental (broadly defined) consulting firm — that’s certainly a fine company, and you can argue it’s a bit expensive, or that it’s cheap compared to its growth potential. You can make your own call on that, let me move on and figure out the company that they don’t reveal.

Here’s how the clues are worded in Cabot’s letter:

“This company is a pioneer in creating highly efficient vehicles that run without the benefit of fossil fuel. But it makes the bulk of its cash from a decidedly less bucolic business–the military.

“This fascinating company supplies a vital part of the U.S. Army’s surveillance arsenal–small lightweight aircraft (think glorified model planes) that soldiers launch into the air by hand. The Army uses these planes to conduct local scouting missions in the city and the mountains, enabling platoons to see via remote camera the lay of the land and the location of potential enemies. The most popular of these is a 4.2-pound drone with a 4.5-foot wingspan guided by remote control.

“Is it Green? Well, the alternative would be using a propeller-driven aircraft and crew like the U.S. Army’s RC-7 “Crazy Hawk,” which weighs 47,000 pounds and eats fuel for lunch–or sending
soldiers into the line of fire.

“By the way, this firm was chosen as one of the “Rising 10″ most promising, fast-growth companies by Homeland Security Today, and was recently added to Standard & Poor’s Small-Cap 600 index. Brendan
added its stock to the Cabot Green Investor portfolio on January 8.”

So who is this? Thinkolator sez …. Aerovironment (AVAV).

Aerovironment was indeed one of the “rising 10″ most promising companies according to that Homeland Security magazine in the Spring of 2008 — interestingly enough, a competitor that I really wish was public, General Atomics, was on that list the prior year (their main business focus is in nuclear energy, but they also make the Predator, which in some ways competes with Aerovironment’s Raven, Puma, Wasp, Dragon Eye, etc.)

And January 8 would have been a rough time to pick this stock, assuming they still hold it (which seems a safe assumption — the ad was emailed out as recently as yesterday). AVAV at the time was priced around $37, and climbed quickly to $41 before earnings and investor sentiment crushed the stock back down to the $20s. It’s now trading around $27.

Aerovironment has also been a favorite of investors and the investment pundits for quite some time — as have most of the “rising 10″ or any other list of growing or “hot” homeland security and defense contractors, including iRobot and L-1 Identity Solutions. I actually wrote briefly about AVAV back in the early days of Stock Gumshoe, more than two years ago, following up on a teaser ad from Taipan … the “hot” names never really die, and this one has been hot indeed — for a while it was one of the top few performers on the Gumshoe tracking spreadsheets, especially last Fall and Winter, when the stock was climbing when almost everything else collapsed.

Unfortunately, investors in AVAV earlier this year found that when you combine high expectations and a pricey valuation and a big earnings miss, you get the same thing as you do when you combine a toddler, a tricycle, and a set of stairs — so wear your helmet.

AVAV’s big business is in unmanned drone aircraft, the Raven, Puma, etc. etc. They have a pretty broad product lineup now — different capabilities and altitudes, different weights and sizes, ability to land on water, most of the stuff you’d kind of guess that folks had been working on for unmanned reconaissance aircraft. And from what little I know, military folks around the world are still awful happy to use these instead of sending people (and really expensive aircraft) into harm’s way, especially for things like surveillance and intelligence gathering.

Their other business, the more “green” stuff that isn’t quite as lucrative, currently, includes some cool stuff that you may have heard of — the company was founded by the late human-powered flight (and glider) pioneer Paul MacCready, and well before the unmanned drones that now make them a fortune they were known for the Gossamer Condor and the Gossamer Albatross, record-setting human powered airplanes (you can see both at the Smithsonian Air and Space Museums if you’re ever in my fair city), and for the solar-powered planes the Gossamer Penguin and Pathfinder, which led the way to defense work that I assume morphed into the unmanned vehicle innovations.

Along the way, they also worked on the GM Sunraycer, the solar-powered car, and at developing both power generation and recharging technologies — including some wind turbines that you can just plunk down on the roofs of buildings, and the PosiCharge system, a rapid recharging technology that’s apparently used to recharge industrial electric vehicles and may be a promising technology for the coming (someday) fleet of electric cars. I have no idea whether or not the technology they have in these areas is leading the pack or not, but it sure looks cool (you can see it on their website here).

If you like a nice big dose of military and defense contractor, with a chaser of earth-friendly power goodies, then perhaps this will be your happy juice. I’d imagine that their profitability in the next few years will continue to ride on the number of unmanned aerial vehicles they are able to sell. This is a competitive environment, with other offerings from both General Atomics (with their Predator), which seems like the other very large player, and from Textron, Boeing, and foreign defense firms (Israel Aircraft Industries, for one).

It seems to me that AVAV is the leader in the small and light reconnaissance and sensing planes, but I don’t think they make the bigger unmanned aircraft that carry weapons or perform more direct war-fighting tasks — but that’s just my impression after some very superficial research, so I’d urge you to learn them up on your own if you’re interested in these shares (and of course, share with us).

There were a couple other terse hints about other companies teased in the letter, too — let’s see if I can get you started on those:

“Brendan has his eye on other rising Green companies, too–like one that holds license rights to several key technologies used in geothermal and other heat transfer-based power generation (still an almost untapped resource in this country) … a manufacturer of thin-film solar panels that can be rolled up like a tarp … an innovative company that’s making big profits turning ordinary garbage into a sought-after commodity … and many others.”

I’ll throw out Raser as the likely solution for the geothermal one, and the “garbage into commodity” could be Bluefire Ethanol or Covanta, I suppose (wild guesses), and flexible thin film solar could also be a lot of different companies, but among the publicly traded ones a solid guess is Energy Conversion Devices. Feel free to throw out your own guesses on any of those if you like, or any comments about Aerovironment or their competitors.

And if you’ve ever subscribed to any of the Cabot newsletters, please click here to share your opinion with a brief review. Thanks!

The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.

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Cabot’s “Stock of the Month” … hint: it’s Chinese

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Red Hot Profits from Green China: Electric Vehicles

“Sometimes you have to look under the hood to find the best opportunities …”

1. I think the next green revolution will be the ultra capacitor battery. This will greatly reduce the weight of batteries and will allow electric cars to be recharged in just a couple of minutes and vastly extend their range because of the lighter weight. It will also make solar more practical because it will require fewer batteries and the batteries will last much longer. There are many companies and universities trying to create an ultra capacitor battery but none have perfected it. The private company EEStor claims to have a working ultra capacitor battery and has a contract with Zenn motors to deliver the battery last year but missed the deadline. Many think EEstor can’t deliver the battery and a few hopefuls think they can. The first company to produce a working viable ultra capacitor battery will revolutionize the auto industry and make billions of $. The question is when?

   For more info on EEStor, visit http://theeestory.com/.

   Just one guy’s opinion.

   [Reply]

   

   Dusty Reply:
   May 20th, 2009 at 12:03 pm

   I have just enough electronics background to be seriously doubtful of super-battery claims. A lot of things have promise in miniature scale but everything changes dramatically when it is increased in size to meet the needs of full sized-equipment. Even when a technology works, like lithium batteries, there are unexpected problems and hazards. I have never personally seen a lithium battery burn but accounts by others who have watched even two or three ounce Lithiums burn are enough to never bring one into my house (R/C airplanes). I also wonder how bad a minor car wreck with really big Lithiums burning might be. No mention is even ever made of the cost of replacing the car battery pack every 3 to 5 years. The “ultra-capacitor” battery in automobile power sizes strikes me as being right in there with the “200 MPG carburetor” and some other tech wonders that never really were. Exotic new technologies do appear, however. Carbon fiber for example.

   ——Dusty.

   [Reply]

   

   Big Mo Reply:
   May 20th, 2009 at 7:44 pm

   Just sold my Zenn stock for a nice (and quick) 92% profit, and it’s still going up, mainly on speculation regarding the EEstor battery. You can’t buy EEstor, but you can buy Zenn stock. I think they’ll have a production model available in the next 6 months. (Why did I sell? Couldn’t pass up that kind of quick profit!)

   [Reply]

   

   Jack Willard Reply:
   May 21st, 2009 at 11:47 am

   The 3500 volts required to charge the EESU will make it difficult to implement as a rechargable auto battery. The heat generated from the charging could rupture the ceramic materials used in the device. (Expansion and contraction).

   Why not combine a lead acid or Li-ion with a cheaper ultracapacitor.

   There is a new one comong on the market which has the promise of solving the problem. It has 10-20 times the power and energy density as the ultracaps presently on the market. Here is a paper I found on the internet. It is called Reticle Carbon.
   A New Material for Ultracapacitors
   March 11, 2009 |
   The popular and news making EEStor has a competitor coming. EEStor, now famed for their secrecy about what goes in their capacitor, leaves lots of room for speculation. Of note is they have gained more credibility over the years and seem closer to delivering product.

   The ultracapacitor field is based on simple, or as simple as possible, electron storage. For that to happen the electrons need to ‘park’ on something that will take them on and let them go easily. Conductive materials are obvious choices. Constructing ultracapacitors seems simple but entails considerable materials and assembly sophistication.

   Dr. Carl C. Nesbitt the CEO and Chief Technology Officer at Reticle Inc. Los Altos, California is following his experience with the carbon his company uses for water treatment and other filtration processes into ultracapacitors. Reticle’s other carbon products are likely supporting the whole of the research effort and Dr. Nesbitt has made quite substantial and impressive progress. From his discussion on ultracapacitors.org we’ll have an overview look for today.

   Dr. Nesbitt has developed a unique electrode material he’s named ‘Reticle Carbon’ that’s ideally suited for electric double-layer ultracapacitors. Reticle Carbon is simple to manufacture yet has low electrical resistance (low ohms) with high surface areas (1,250-1,750 m2/g), and the highest reported specific capacitance (200-310 F/g). Activated carbon is used to make Reticle Carbon by consolidating granular activated carbon that has been selected for its properties with no binders, fillers or adhesives. The manufacturing process is single-stage, but flexible enough so that the company can tailor the properties of the material for ultracapacitors.

   Dr. Nesbitt does a very good explaining some of the important attribute of capacitors, a little more than a paragraph that will refresh and inform. Then he explains the carbon sources and processes used to build the particles that store or ‘park’ electrons. The discussion makes clear the importance of surface area to make capacitors with very high storage volumes.

   Reticle Bond Points. Click image for more.

   Then the issue becomes getting electrons in and out. For this to happen at low voltages the materials whether carbon or not, need to be in contact with each other and with the electrodes that carry electrons in and out. What may be Reticle’s breakthrough is Dr. Nesbitt asserts he has a technology to form the carbon into a fully connected ‘solid’ – free of binder chemicals, adhesives or highly pressurized constructions. As you can imagine adding substances would form current barriers and high compression would crush out the total surface area.

   Reticle uses temperature and pressure to form small bonds among all of the particles. The process can be tailored for unique properties, such as macroporosity ranging from 10-40%, good electrical resistance and thermal conductivity measured as low as 0.1 W/m.K. However, the most unique property of the material is the demonstrated high surface areas, ranging from 1,250 to over 1,750 m2/g, which is a function of the commercial grade carbon selected as the precursor. Compared with other activated carbon materials, this is an exceptionally high surface area range with high conductivity.

   Loose Distribution vs Reticle Consolidation. Click image for more.

   Connecting all of the particles is significant, particles must touch to ensure that all of the charge is distributed across all of the surface area – any particles not in direct, constant contact will not charge, wasting volume and materials. In other ultracapacitor designs as the material gets thicker the missed connections accumulate limiting the potential dimensions. Reticle is claiming their build process is fully linking the particles removing the dimensional limits.

   That leads to the process making a variable amount of charge as design criteria demand. The more the Reticle process consolidates the carbon more total charge with higher conductivity. Lighter consolidation would increase the capacity at higher ohms. One might envision that the voltage and weight considerations in a design would drive the consolidation selections.

   Reticle Late Prototype. Click image for more.

   Dr. Nesbitt acknowledges that Reticle is looking for capital to begin commercial production. The company has simple prototypes built with very low cost materials in simple constructions. The first prototype was built using 0.4 grams of the lightly consolidated carbon yielding 53F/g of specific capacitance. Nesbitt expects, fairly it seems, that using Reticle carbon will obtain higher capacities as the improved carbon and consolidation is incorporated into test units. It seems likely that test units might be available.

   This is the point at which the remaining issue, that of the electrolytes, comes up. Nesbitt acknowledges that the commercially available electrolytes are limitations at the capacities of the Reticle prototypes. At such intense densities a higher level of ionic strength is needed, a market demand that isn’t being answered as other than Reticle – no customers exist.

   Dr. Nesbitt’s discussion closes with an analysis of the Reticle position today versus the two main shipping competitors. As the discussion flows one becomes aware that the company is already quite competitive and has major advantages to offer as the electrolyte issue resolves and experience is gained adding more innovation to the basic science.

   Reticle carbon offers new and unique properties in basic matters such as raw material availability, processing costs, gross capacity and low investment thresholds. As demand grows and should adequate capital appear Reticle’s new form of consolidated activated carbon offers a good path the huge electrical storage in the expanding field of ultracapacitors.

   What is interesting beyond the technology is the attention given to the physical volumes and weights of the Reticle ultracapacitors. One main attraction of capacitors over batteries in portable and transport applications is that capacitors are lighter and weight matters a great deal. It’s a coincidental pity that Dr. Nesbitt and his technology are coming to maturity just as two of the U.S. auto manufacturers are flirting with bankruptcy. This technology just might be better than my personal goal that charging will need to get below 10 minutes per 100 miles of range.

   Congratulations Dr. Nesbitt. I hope this post will push something or someone useful your way.

   [Reply]

   Posted by Brent | May 20, 2009, 10:16 am

2. Flyable model airplanes have been one of my hobbies all my life. Radio controlled models were a precursor to military use. The military is doing a lot now with unmanned aircraft but I think there is a long way to go. Serious investment needs bigger markets. For the interested investor I have no problem with AVAV as being a defense industries company. My money will wait until there is a much larger market and maybe dividends. That will be when there are UAVs over most American cities most of the time with Police markings and probably TV station markings. UAVs will be reliable and vastly cheaper than helicopters for crime and traffic watch. The support contractors will be almost like utility companies. If fixed-wing UAVs cannot do the job, the modelers are already flying some incredible R/C helicopters, including a few with gas turbine (jet) engines.

   [Reply]

   Posted by Dusty | May 20, 2009, 11:25 am

3. I think another reason it’s listed in Cabot’s Green newsletter maybe the fact that it also has awind power distributed energy business. It manufactures & supplies small wind turbines designed to supply electricity for single large buildings.

   [Reply]

   

   Katie Catt Reply:
   May 20th, 2009 at 12:21 pm

   It was also removed ie sold as a Cabot Stock of the Month listing after the poor earnings were announced.

   [Reply]

   Posted by Katie Catt | May 20, 2009, 12:16 pm

4. AVAV has been difficult to trade. We were stopped out in December and again in January at $33. Thank goodness because they reported awful earnings in March. The stock tanked to $18.50. RJ&A reduced their target from $38 to $28 – Never a good sign. AVAV is a 2 for 5 positive trading under the BRL. Middle of the trading range is $24 so you may want to wait for a pullback.

   [Reply]

   Posted by farley 5 | May 20, 2009, 12:32 pm

5. [...] more here:  Stock Gumshoe Investigates: “A Pioneer in Creating Highly … Fatal error: Call to undefined function add_submit_it() in [...]

   Posted by Model Aircraft | May 20, 2009, 3:17 pm

6. Do we have any info. on SOLAR INTEGRATED which trades in London on AIM under the ticker symbol “SIT” at about 8.5p?
   They make light weight solar roofing materials with thin film amorphous silicon photovoltic cells built into the roofing materials film rolls. These rolls can be installed just like regular roofing rolls but cost more and will generate electric power which can be sold back to the power grid or used to reduce the “buy” from the grid.
   regards walter

   [Reply]

   

   Glenn Reply:
   May 21st, 2009 at 12:57 am

   DYE an Australian company have patents on dye cell technology (nano tech) which are used in windows and thin sheets etc by different companys in many countries. They are much cheaper than silicon cells and work in lower light

   [Reply]

   Posted by WALTER OROURKE | May 20, 2009, 7:34 pm

7. Flexible thin film solar plays are XSUNX (Symbol XSNX) and NENE for nano application.

   [Reply]

   Posted by idbjls2 | May 22, 2009, 12:04 am