Friday File Retread: “Green ATF Seizes Canadian Power Grid,” and a “Secret Ammunition” bonus

By Travis Johnson, Stock Gumshoe, March 31, 2010

I continued to get a lot of questions about this “Green ATF” teaser from the Green Chip folks over the last week or so, and now that it’s been several weeks since I first wrote about the teaser in the Friday File it seems fair to share it with everyone here on the free site. What follows is the Friday File from March 5, it has not been updated or edited — the “green” stock spiked for a little while following the initial excitement of this ad, but has since fallen back to a price slightly below where it was when I wrote this three weeks ago (the “bonus” pick that I mention first is priced about the same). And don’t worry, I’ll get back to writing something new for y’all tomorrow — thanks!

Before I get started with the focus of today’s Friday File, a green energy stock, I wanted to give you a quick bonus idea: You might have noticed that I wrote about Matt Badiali’s teasting of Denbury Resources yesterday, the oil stock that’s using CO2 injection to boost production, but he also teased a couple other ideas in that letter.

One of those ideas was for another oil services stock, one that makes the “secret ammunition” for extracting oil from shale fields. In this case he wasn’t talking about CO2 injection (that was the “magic drug”), but about proppants. These are little balls, essentially, that are injected in the wells as they fracture the shale, helping to hold open space so more oil can be extracted (at least, that’s my “I don’t understand this stuff” explanation).

And Badiali was kind enough to include some patent numbers in this tease (7,615,172… 7,387,752… 7,255,815… 7,119,039… 7,036,591… 5,188,175), so I can tell you that this proppant maker is the dominant producer of one particular kind of proppant, the ceramic variety: Carbo Ceramics (CRR).

I haven’t had a chance to look at this one very carefully yet, but it is a fairly low-profile, billion dollar company, and they are profitable and expected to grow earnings — the forward PE is about 17, the PEG ratio (price/estimated earnings/future growth) of about 1.3, so not terribly expensive on its face. Then again, their last earnings report came in worse than the Street expected, and there is a large short position (almost 20% of the float). The stock bounced back fast from the crash, doubling since last March, and despite a dip over the last couple months the shares are still within $10 or so of all-time highs. No debt, and decent margins, but I don’t know anything about the fundamentals of the business or the competitors — and particularly, how essential their product is and whether other non-ceramic proppants perform well in comparison.

So that’s a quickie for your consideration, just thought you’d want to know.

Today I want to take a look at another green energy teaser for the Friday File — in part because the “green” investing stuff seems to be heating up again after a good hiatus when a lot of these capital-intensive projects took a hit during the market crash (and the oil crash), and in part because it sounded like it might be an interesting opportunity, despite the overhyped ridiculousness of the ad.

Here’s how the Green Chip Stocks folks pitch their idea:

“Historic policy coup creates a $30 billion market overnight… Leaving you as few as 7 days to claim 171% gains….

“A few months ago, British Columbia Premier Gordon Campbell authorized the formation of a new task force.

“Its mission: To systematically shut down the province’s oil, gas and coal power industries…

“While at the same time transferring over $30 billion in tax dollars to a small group of relatively unknown, clean power producers.

“And it’s about to turn one very special small-cap company into a cash-rich energy powerhouse.”

To further the frightening “big government” fears, which are pretty easily stoked in a large portion of the investing public, they also include a quote from a reputable newspaper:

“The government is using ‘intentionally secretive’ methods to block scrutiny of its [Green ATF] … The task force is excluded from compliance with both information and privacy laws…” — Vancouver Sun, January 28, 2010.

That quote, by the way, is from a singularly boring Sun article about the complaints over the machinations of this task force — including that the task force used Google email accounts instead of government ones. You can read the article here if you like.

The spiel is that the ATF (the Bureau of Alcohol, Tobacco, Firearms and Explosives in the Justice Department) is the most “feared” agency in the Western World (they include references to Ruby Ridge, and the David Koresh standoff in Waco), but that this new task force in British Columbia is even more all-powerful. Here’s how they put it:

“Outside of Communist Russia, modern China, and a few other dictator-states in the Eastern Hemisphere, no other government agency’s scope and impact could compare to that of the U.S. BATF.

“But that all changed on November 2, 2009, when British Columbia Premier Gordon Campbell established the Green Energy Advisory Task Force.

“Their single mission: to enforce Canada’s emerging energy policies.

“And as jack-booted government agencies go, they’re the new kings of the hill.

“However, unlike the U.S. Bureau of Alcohol Tobacco and Firearms, this new Green Energy Advisory Task Force can actually make you rich… “

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I know, pretty ridiculous, no? It’s pretty hard to picture green energy bureaucrats in jackboots, even those vicious bureaucrats from Western Canada … but still, we’ll let them have their fearmongering imagery and we’ll just look and see how this is supposed to be profitable for Green Chip Stocks subscribers.

Here’s how the tease describes the new regulatory guidelines:

“You see, British Columbia’s parliament recently passed a radical environmental-initiative called the BC Energy Plan.

“And to ensure that this campaign is successful in drastically reducing the region’s carbon footprint, the Green ATF is takin