“Invest in America’s Super Car Today!”

By Travis Johnson, Stock Gumshoe, November 26, 2007

This ad comes in from Greg Guenthner (who likes to call himself “Gunner”) and the good folks at Bulletin Board Elite, a subscription service that will run you $2,000 a year … and he backs up his claim to your money by sharing stories of several bulletin board and OTC stocks that had remarkable runs and moved to the big exchanges (including NutriSystem and some uranium company). The ad has also come in under the heading, “The Automotive Breakthrough that Could Change Detroit Forever.”

One is left to assume that he could have gotten you into these companies for 5,000% gains.

There are plenty of these stories of real breakout stocks, of course, and plenty of people who would like to be able to pick only the successful stocks from the wasteland or crushed stocks, scams, and hopeless dreams that is the OTCBB. “Gunner” thinks he can do it, and he’s got a stock he’s teasing for us today.

This company has developed a new lithium ion battery for automobiles that apparently is smaller, lighter, and more efficient than the nickel-metal hydride batteries currently used in electric and hybrid cars. That’s clearly a big deal — automakers have been wanting to switch over to lighter li-ion batteries (the same technology that powers laptop computers) for years, and are gradually moving toward that goal, but my impression is that they haven’t been considered safe, stable, or affordable enough yet for automotive use (as my warm knees can currently attest, they heat up quite a bit when in use … and as Michael Dell can tell you, sometimes they catch on fire).

And there’s some good hyperbole, of course: “The change in battery technology that this company represents is like replacing the Wright Brothers’ first airplane with a super-advanced jet fighter!”

What are we told about this particular little company, other than the fact that their technology could be in “80% of all new cars in less than a decade?”

Well, it’s priced right around 60 cents as of the last email I saw, though I’ve seen hundreds of copies of this email over the past week or so.

The best clue is this: This tiny company is backed by one of the largest automotive equipment manufacturers in the world, which owns a 20% stake.

That’s about all they reveal … but your friendly neighborhood Gumshoe is on the case, with a Thinkolator well charged up after a week of lazy turkey-eating. Unless the tryptophan is gumming up the works, I can be fairly confident in saying that this company is …

Ener1 (ENEI, trades over the counter)

I don’t know a whole heck of a lot about the company, though they are fairly large for an OTC firm — their enterprise value (the market cap plus net debt) is about $400 million, so they’re no “two guys in a garage” fly by night startup, at least.

The actual battery firm is called EnerDel, but it’s 80% owned by Ener1 (which itself used to be called Boca Research) and is 20% owned by their joint venture partner, Delphi. Delphi is one of the largest auto parts companies in the world and a major supplier to GM in particular, so that’s certainly a boon for anyone trying to break into that business in a big way.

Here’s the Indianapolis Star article that the ad quoted about the company and their battery technology announcement, in case you want to read up on it a bit.

Ener1 actually has several other lines of business, I’m not sure which ones are generating sales right now — but whichever one it is isn’t exactly setting the world on fire just yet, as one might expect from a 60 cent OTC stock. They’re trading for about 800 times sales at the moment. The other divisions are probably significantly less promising in the short term than the EnerDel battery division. They also have a fuel cell division that’s working so far on supplying some fuel cell components to developers, and a nanotech division that is, I assume, as much of a cash burner as most other nano firms are at the moment.

According to a quick read of some of their filings and their most recent chairman’s letter, they seem to believe that 2008 is going to be something of a pivotal year, particularly with getting more automobile manufacturers further along on the path to li-ion batteries, hopefully EnerDel’s version. They are working with USCAR, which is the high tech development cooperative between the big three US automakers, and they seem to believe that their technology meets the criteria for the first wave of development under the terms of the US Advanced Battery Consortium (USABC).

So now you can ask me, “does anyone else have advanced lithium ion battery technology that competes with EnerDel?” Or at least, I hope you’re asking that of yourself before investing money in this one.

That remains the largest conceit of the newsletter teaser email, that they paint a picture of a fabulous investing thesis that you can easily agree with — “li-ion batteries are no brainers for hybrid cars, dude” — but they fail to mention that, of course, all the major automotive and industrial battery suppliers are also hard at work on this technology. In this case, just a cursory glance tells you that NEC, Matsushita, Sanyo and the other big makers of li-ion batteries for other uses are trying to keep market share in the automotive market, too. And there is copious research money going into next generation batteries — so the great ideas are unlikely to stop flowing. Everyone seems to believe that it’s still going to be really hard to get a Li-ion battery that is as reliable and safe and cheap as the current NiMH batteries … and I haven’t noticed a sudden consensus that this one little company is the one that holds the secret. That, of course, is why it’s trading at 60 cents and you’ve never heard of it.

Does that mean EnerDel and Ener1 aren’t worth a look, or won’t be huge gainers? I have no idea — maybe their technology is really better, safer, stronger, and less likely to burst into flame than Sanyo’s products. Maybe they will be the next big winner as lithium ion batteries make it into the automotive market over the next 3, 5, or ten years, but I’d urge you to read up on the business a bit before allowing yourself to become convinced … the fact that they’re in maybe the right business at the right time doesn’t necessarily mean that they’re going to win, or that they’re right for your portfolio.

Though the fact that I’ve seen so many emails on this means some of you are probably chomping at the bit after a few days away from the markets, and Guenthner is likely to continue pushing it, so maybe it’ll pop up well above 60 cents this week anyway … heck, this one is small enough that even the Gumshoe’s meager (but mighty!) readership could probably move the needle if so inclined. Certainly not the kind of thing I’d be eager to bet on.

Good luck, welcome back from vacation to the Americans among you, and happy investing!

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