The “Ring of Fire Millionaires” (DeHaemer)

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Christian DeHaemer appears to have gotten a bit of a reputation in the great Gumshoe Universe — readers started asking me about this pitch before I’d even seen it, which is rare, indeed.

And perhaps they’re not to be blamed — he and his colleagues over at Angel Publishing (Nick Hodge, et al) have been known to occasionally push a story so hard, and for so long, that share prices continually spike upward … at least when it happens to also be a good story with some external catalyst, or when the company they’re pitching is very small.

That’s caught the eye of a lot of folks in the burgeoning graphite space, and, most recently with DeHaemer, with his aggressively touted East Africa oil plays — particularly Africa Oil, which actually had an oil discovery and has been shooting out the lights this year both because of that discovery, and because DeHaemer won’t let anyone forget about them.

Today’s pitch for Crisis and Opportunity is not so wild as that, at least from my perspective — he’s teasing some natural gas-related investments, but most of them are relatively large North American companies and they’re not likely to quadruple in a few months like some of these little explorers or junior resource plays do. Still, he’s teasing a few interesting ideas and at least one of them is a really small stock, which tends to get people excited … and the masses have spoken, so we’ll try to answer with some sleuthifying.

The “Ring of Fire” being teased by DeHaemer this time around is not the widely-accepted “ring of fire” that describes the volcanic basins of the Asian rim (or “rim of fire,” sometimes), but a “ring” that DeHaemer draws on the US map, awkwardly encompassing the shale oil and gas fields of Texas, Louisiana, the Marcellus, the Bakken, and lots of others inbetween that sort of fit into that circle.

So it’s a natural gas play. But don’t worry (or at least, don’t worry as much as I think you’re starting to worry), it’s more a “picks and shovels” and a “low nat gas prices” pitch, not a recommendation for one of the many natural gas explorers or producers who are getting hammered with our incredibly low natural gas prices … those Marcellus Shale discoveries sure sounded a lot more exciting when natural gas was at $11 a few years ago than they do now at $1.80.

What, then, is he recommending? Here’s a bit of the tease to get us going:

“According to the Energy Information Administration (EIA), the United States is sitting on over 862 TRILLION cubic feet of natural gas buried in shale gas reserves throughout the Ring of Fire….

“That’s over a century’s worth of domestic supply at today’s consumption rates.

“And at today’s prices, that’s literally TRILLIONS of dollars’ worth of natural gas.

“This vast supply is a game-changer.

“And right now, there is a little-known piece of legislation sitting in Congress that, when passed, will propel the companies I’m recommending into once-in-a-lifetime profit plays.”

The catalyst of that “little-known piece of legislation” is, as you might have guessed, the oft-cited HR 1380, the Natural Gas Act that was supposed to jump-start natural gas as a transportation fuel (and may still do so, if it ever gets passed) … here’s how he puts it:

“In fact, this situation is so ripe for fortunes to be made, billionaire investors George Soros and T. Boone Pickens have thrown money into the game. And I’m not talking seed money here — unless you think a $122 million investment by Soros in one company alone is small potatoes…

“Why does he believe so much in this company?

“It’s all tied to a bill going through Congress right now called House Resolution 1380…

“HR1380: The Secret Catalyst to 532% Gains

“HR1380 is dubbed the New Alternative Transportation to Give Americans Solutions Act — or for short, the first letter of each word: NATGAS” ….

“HR1380 is the first thing the government has gotten right in years…

“You see, Uncle Sam is offering a $64,000 tax credit — PER TRUCK — to swap out diesel engines with engines that will run on natural gas. And at the going rate of $4.12 a gallon for diesel, everyone in the transportation industry has been looking for cheaper fuel alternatives.

“And here’s where the opportunity gets really big…

“The liquefied natural gas equivalent to gallon of diesel is less than a buck.

“So not only is natural gas over 75% cheaper than diesel, now Uncle Sam is going to PAY companies to switch over to natural gas engines.

“In the next five years, the number of natural gas-powered vehicles will shoot from nearly 100,000 to well over 700,000!

“And just when you thought it couldn’t get any more interesting, there’s one more thing you should know…

“Uncle Sam also wants to hand out up to $100,000 in tax breaks to companies that provide natural gas refueling pumps!

“The signing of NATGAS will send companies that have expertise in natural gas-powered engines and natural gas refueling capabilities into the stratosphere.”

The teases about HR 1380 have been around the block plenty of times, just as previous teases for similar measures cited the Pickens Plan a couple years back — there have been several bills proposed and that seemed “shoo ins” for promoting natural gas as a transportation fuel, particularly in large trucks, but for whatever reason (cost, a desire to make sure nothing gets passed that makes your political opponents look good, lobbying pressure from competitive technologies or resources, etc.), the bills haven’t passed and there isn’t a huge incentive structure for natural gas vehicles right now. We just passed the one-year anniversary of HR 1380′s introduction in this particular Congress, for whatever that’s worth, and the act’s major provisions most recently failed as an amendment to the Highway Bill last month (numbering starts over in each Congress, so if it doesn’t pass we’ll probably get a new bill for the teaser mill early next year).

Of course, the incredible drop in natural gas prices means that, if companies have the confidence to look a few years out and make investments, there might not NEED to be a big incentive structure, save perhaps for the infrastructure build out for refueling stations. But that’s still up for debate, particularly since volumes are still low enough that natural gas engines are substantially more expensive than diesel engines (again, debatable — particularly if you include estimates of “life of engine” maintenance) … the underlying fact that natural gas engines of comparable power to diesel exist, and can be run at dramatically lower fuel costs, is pushing a fair amount of gas conversion even without a robust federal program to incentivize fleet owners.

But anyway, we know about Westport Technologies (WPRT), which is the “big name” player in natural gas engine technology, and a stock we’ve covered many times since it first hit our radar in 2008 — and we know it looks godawful expensive at these prices, though not as crazy as it was a little while back when it was scraping it’s head on $50 a share. That’s apparently not the pick DeHaemer is teasing today (for what it’s worth, I called WPRT a “hold” in my annual review a few months ago when it was around $40, the story remains logical and compelling but it’s been now four years of “we’re almost profitable” talk and the valuation looked extended to me, though opinions certainly differ wildly on this one).

So what is he pitching, if not the perennial-newsletter-favorite WPRT?

“The first company I’m recommending to you supplies engineering services and fuel delivery systems used in natural gas engines.

“Every manufacturer that jumps into building natural gas-powered engines will need their engineering expertise and their products.

“That alone has them poised to double, maybe even triple, profits from the passage of HR1380.

“But what puts them head and shoulders above every other player is that they also provide the same types of services and products to natural gas storage and fuel distribution facilities…

“The very ones that will be built by the hundreds when HR1380 is passed.

“This company’s got both sides of HR1380 covered, and when the bill is signed… their stock will soar.

“532% could just be the beginning!”

Well, this one is not well-stocked enough with clues to give the Thinkolator a 100% certain answer, but we’ll say that this is “pretty sure” to be Fuel Systems Solutions (FSYS), which despite a Navellier teaser a few years ago is generally a much quieter and more diversified play on natural gas engineering and technology than Westport. It’s also a lot cheaper, since they’re actually profitable. The shares are down by 20% or so since the most recent failure of the natural gas legislation, and now trade at a trailing PE of about 80 and a 2013 PE of about 20 (analysts are expecting that they’ll make a bit more than 50 cents per share in 2012 and a dollar a share in 2013). They also trade pretty close to book value, though they’ve made some acquisitions so I don’t know if that’s “real” book value or “goodwill.”

Don’t know they company well, but they do offer a variety of natural gas technologies and services, including for refueling stations and for engines, though they’ve generally been talked about as more levered to nat gas as a gasoline replacement than to nat gas as a diesel replacement (ie, their technology or specialty is in smaller engines), I don’t know if that’s still true or not. I expect that part of the reason for FSYS’s poor performance relative to WPRT of late is that they don’t have a single-sector catalyst like Westport’s “Nat gas for heavy trucks” sales pitch, but if we’re going to generally trend toward more natural gas engines and more natural gas pumping stations, they would be a logical beneficiary. And they’re not freakishly expensive if the analysts are right, though I don’t know what regulatory assumptions the analysts are making.

Next?

“Wall Street barely realizes the potential of company #2 because they look at it the wrong way.

“And that’s why it’s currently such a bargain.

“Put quite simply, they’re a manufacturer of heavy-duty vehicles like trucks, buses, and RVs. While their brands are fairly well-known, what most investors miss is their potential to skyrocket when HR1380 is passed…

“Because unnoticed by many, they’ve just announced their intent to offer natural gas-powered vehicles.

“And just as overlooked is their partnership with Clean Energy Fuels Co. — the very same Clean Energy Fuels that T. Boone Pickens has a stake in!

“Not only is this company going to benefit from the huge government subsidies of HR1380; they’re also assuring their vehicles can refuel with natural gas, which will catapult their rate of adoption.”

Feed number two into the Thinkolator, and spooling out the other end we get our happy little answer: Navistar (NAV)

Which on the surface is a dirt-cheap truck maker, but they do have that natural gas initiative — you can see the details of their partnership with Clean Energy Fuels and the Pilot Flying J truck stop folks here in the press release, they basically are making a deal with customers to help make sure there are a certain number of refueling stations available on set routes, and that there will be a certain cost savings over time for nat gas refueling compared to diesel. So that might bear some fruit. There’s one brief article on that deal here if you want a quick catch-up.

2011 was clearly a very bad year for NAV, though I can’t say that I know why — it’s a competitive business, to be sure, and they carry a LOT of debt, but the US truck fleet is very old and there ought to be plenty of opportunity as those older rigs have to be replaced eventually. Oh, and yes, Navistar is primarily a truck maker, with their recognized International brand, but they do also make buses (IC Bus) and RV’s (Monaco). I think Navistar, like their recently-more-successful competitor PACCAR (PCAR — they make Peterbilt and Kenworth), is using either Westport or Cummins-Westport technology in their nat gas engines.

So there you have it — a cheap and debt-heavy truckmaker that’s pushing natural gas engines, and a slightly more “under the radar” natural gas technology company. HR 1380 hasn’t passed, and given the political climate nothing might pass this year, but if natural gas continues to push into the transportation market these are, so sez the Thinkolator, the two picks Christian DeHaemer is recommending as a play on that theme.

But it’s not his money at stake, of course, it’s yours — so what do you think? Believe we’ll finally see natural gas engines really take off? If so, will Navistar or Fuel Systems Solutions provide a good ride on that tide? Let us know with a comment below.

P.S. Yes, DeHaemer did also briefly tease a tinier pick in this ad that works on fracking water — sorry, didn’t finish checking that one yet, but I’ll share it soon … if it’s the little unlisted stock that I think it is, it’s awfully speculative, so I’ll take a little more time to check on that one. Stay tuned.

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36 Responses to The “Ring of Fire Millionaires” (DeHaemer)


  1. Forget about Westport (WPRT). How many shares can the average investor afford when the stock is trading in the 40s? I prefer the poor man’s Westport. It’s called Greenman Technologies (GMTI), and generally trades right around 70 cents a share.

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  2. Look at the chart, WPRT is dropping faster than Maria’s drawers at the old cantina. This is not a good time to buy WPRT!

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    • Pete, perhaps it is the perfect time to buy WPRT!! Do you rather buy it at $44 or at $32?
      I definitely prefer the lower price. Sure, we do not know where it goes from here, but what do we know for certain in this kind of a market???

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  3. Tax incentives are nice, decade low price for Natgas is nicer still. It would seem to me the big stumbling block is distribution AND some semblance of long term price stability. While using Natgas could significantly lower fleet fuel costs, few will make the capital expenditure unless they KNOW, (with as much certainty as this world allows) that the savings will last long enough to make it worth it and then some. Of course, if there isn’t a refuelling point as almost as ubiquitous as gas&diesel stations then it’s always a no-go.

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  4. I do not know where you got your info about natural gas engines but there is no such thing. The diesel engines made by CAT and all the rest are the same engines used in NG powered trucks. The modifications are small and readily available. The conversion cost is between about $8000 and $15000. I just spent about $10,000 on the conversion of a 3406 CAT engine which is an 800 cu. in. diesel engine that has been on the highways for 30 or 40 years. The conversion consists of replacement pistons because NG needs lower compression than diesel, a spark plug which screws into the injector hole and a high tech electronics package to fire the plugs at the right time. If they were doing these conversions in huge numbers for the highway and the conversion was done at the time of an overhaul, the cost would be about $5000 per engine. It seems like this is thought to be something new but it is not. Thailand, Japan, Malaysia, Australia, Indonesia, Korea, and Taiwan have been converting their trucks and powering them with NG for more than 4 years that I know about. It cost of the fuel is about 1/3 of the cost of diesel because NG delivers less power. I have written my congressman several times about this and cannot figure out why thay are dragging their feet on this except maybe they are being bribed by the oil companies to not do it.

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    • Most of the thousands of taxis you get into in Thailand are also run on gas (Compressed Natural Gas (CNG) or Natural Gas for Vehicles (NGV) as its often referred to in Thailand). Hence often no room to put your all luggage in the trunk as there’s a gas cylinder in there :) So if a country like Thailand can have gas so widely available, I suspect it’s down to either 1) vested interests or 2) having had cheap gasoline/diesel for so long historically and the resulting apathy. The technical side doesn’t seem difficult.

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    • Millions of diesel engines converted at ten grand a crack would unleash a multi-year
      flood of spending into the economy, create jobs, while lowering energy costs.

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  5. I’VE JUST JOINED GUMSHOE AND FIND IT BOTH INFORMATIVE AND ENTERTAINING, BUT PLEASE LEARN THE DIFFERENCE BETWEEN ITS AND IT’S. CONFUSION BETWEEN THE TWO IS PAINFUL TO THOSE OF US WHO VALUE THE LANGUAGE.

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  6. They are stalling to keep from looking like The prez is doing anything. It’s just election year politics ya’know.
    I believe that this switchover will come about in spite of the congressional BS. Don’t believe the oil co’s can stop it, or want to. Remember, they sell NG too.

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  7. Seems these kind of uncertainties leave the opportunity to get into the investment at a good price. I Googled “natural gas fuel injector” and got Omneteck (OMTK) a California Co. that among other innovations make injectors. I bought 500 shares three times at $2.17, $2.58 & $3.18 and sold 1000 share. I’m up $1560 profit and have an unrealized gain on my 500 remaining shares. I bought 100 share WPRT Jan 24 th this year at $36.93 and sold at $41.59 so I’m up $466. Wish I did this well on all my stock plays. May be time to check these other companies.

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  8. I just read the “The “Ring of Fire Millionaires” (emailed to me) before hitting this site, he wasted too much virtual ink to tell me HIS

    THE-BOTTOM-LINE™
    $_____________

    swap engine? why?

    replace piston? never heard of that… unless, maybe, make it more fuel efficent

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  9. I keep seeing WPRT referred to as Westport Technologies. Unless they’ve changed their
    name in the last few minutes, it’s Westport Innovations. At least that’s what their website says.

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  10. I’ve been noticing another truck firm selling NG-powered trucks, buses etc. Yet it wasn’t mentioned in the article or the ‘reviews’. That would be Volvo (VOLVY.PK). Is there some significance to its absence? I’m serious here. If they paid a nice Divvy I would have bought their stock last year but . . . I’m not IN yet. I’m very interested in any response to my query.
    Many thanks.

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  11. I guess if your vehicle spends a lot of miles with empty space then gas is good. Most big trucks I see surrender a load of pay space to the gas cylinders. Smaller capacity must have a cost which no one yet is factoring in. But I guess in time the units will get bigger to compensate for the loss in storage space.

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  12. Enjoyed your article, as always. Im curious, but couldnt they be referring to VIIC Vision Industries? They won the contract to furnish the Los Angeles Port with thousands of nat gas powered trucks i believe, and they are supposed to have a nat gas powered economy car coming out in Canada later this year. Ive been watching this tiny company for some time. They trade at i think 11 cents per stock but i dont see how they couldnt soon flourish considering also that they contract out for the the labor etc. im dying to know what you think of this stock, since i never see anyone comment on it. Thank you

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  13. Dang it, can’t somebody just decide on one and tell me which is the best one to buy? I hate all this guesswork, I just want to buy a nat gas related stock, and after that article and this one, no one seems too certain. Just tell me which one, please, thanks.

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  14. i believe Vision industries, aka Vision Motor Corp also has signed a deal with Cummins as well….

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  15. I think the tiny stock they are talking about is OOIL that had a pice in their news release that said their equipment recovered 98% of the hydrocarbons in fracking water. Same system is used to harvest oil from alge. It did a reverse split toward the end of last year. It was up around 2.50 or so at the beginning of the year at the close today it was $1.46

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  16. Why bother with these “Pie In The Sky ” Teaser stocks when 90% or more of them turn out to be losers ……..Buy some of my picks ……..and only then will you begin to recoup your losses.

    Looking through my notes ….the following have performed great, and I feel will continue to do so in the immediate future.

    1. CREE http://finviz.com/quote.ashx?t=cree&ty=c&ta=1&p=d

    2. CSII http://finviz.com/quote.ashx?t=csii&ty=c&ta=1&p=d
    20 Bucks should be an easy shot!

    3. EVC http://finviz.com/quote.ashx?t=evc&ty=c&ta=1&p=d
    Absolute beauty folks

    4 HW http://finviz.com/quote.ashx?t=hw&ty=c&ta=1&p=d

    5. NLS http://finviz.com/quote.ashx?t=nls&ty=c&ta=1&p=d

    6. PGTI http://finviz.com/quote.ashx?t=pgti&ty=c&ta=1&p=d

    7. UNXL http://finviz.com/quote.ashx?t=unxl&ty=c&ta=1&p=d

    I do own EVC, CSII, PGTI, CREE and seriously seeking to take positions in the other stocks! Bought and sold UNXL , but looking to buy back in.

    How about 2 more Super Stock killers? Sure why not …….here ya go

    AMRI http://finviz.com/quote.ashx?t=amri&ty=c&ta=1&p=d

    SNAK http://finviz.com/quote.ashx?t=snak&ty=c&ta=1&p=d

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  17. You guys are doing a great job with your Thinkolator. I truly dislike the subscription videos that you cannot even pause it. Remember the kook who recommended Yellow Media in 2010? Look where that stock is.

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  18. Good morning folks. I would like to recomend another great small stock that actually catches natural gas from sites that are getting mined. The companys name is Capstone Turbine Corp. Its only $1.15. A bargain in any ones language. Lots of potental with this little beauty$$$$$$$$

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  19. I bought CPST many years ago and all it did was go down in price. Maybe its (not it’s) time has finally arrived ???

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    • You’re not alone there my friend. I hung in there for quite a while. It seemed they had a great product line but something was wrong in admin/marketing … something.
      My recollection is that they would get many small orders but no big breakthroughs.
      Finally dumped at a loss.
      Don’t follow any of my advice though… at one time I had 700 shares of SAND.

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