Mampilly’s “Untapped Ocean of Energy Found Under All 50 States”

What's the geothermal stock being teased by Profits Unlimited?

By Travis Johnson, Stock Gumshoe, March 7, 2017

My eyes lit up when I saw the latest ad from Paul Mampilly for his Profits Unlimited newsletter — more geothermal! Woohoo! Even the ad looked familiar — we saw quite a few of those ‘heat map’ images of the US five or ten years ago when geothermal stocks “heated up,” so it gave me a nice moment of flashback to the early days of Stock Gumshoe.

(Today, incidentally, is Stock Gumshoe’s 10th birthday… I quietly launched this site on March 7, 2007 with a teaser solution about one of the many “next Berkshire Hathaway” ideas that come along every year… and perhaps it’s appropriate that that particular stock, Brookfield Asset Management, has pretty much tracked with the S&P 500 over the past decade despite the ribald and rapturous promises made on its behalf. I guess it’s appropriate that our 10th birthday has been equally quiet so far, despite the fact that probably 100 times as many people will read this article as read that one in 2007. And yes, mostly it’s quiet because I haven’t come up with a good way to celebrate. Any ideas?)

So anyway, geothermal teasing got revved up early on in Stock Gumshoe’s first year. I have some fond memories of what was in many ways a “bubble” in a small number of heavily touted geothermal stocks, which were benefitting from super-high oil and gas prices that drove interest in “renewables”.

Back in 2007 we were on the verge of a couple years of teaser pitches using terms like “Sonoma Grizzly Power” and “Slow Volcano Power” and “Thermogenic Oil,” all phrases invented to help pitch little junior geothermal stocks… most of which are no longer with us and some of which were downright scammy operations. Raser Technologies, US Geothermal, Sierra Geothermal, Polaris Geothermal, Ram Power, Western GeoPower… there were quite a few little guys active seven or eight years ago, some of them very well-connected with big-name resource investors, and they all collapsed quite dramatically.

Some of them have come back to life in recent years, and there are a few real geothermal businesses in the US and elsewhere around the world that do make money, so what sort of pick is Paul Mampilly making now as he tries to reinvigorate investor enthusiasm in the geothermal space?

Let’s check the ad to see what clues he provides. First, here’s the official NREL version of that geothermal map — you can click on it for a larger version:

Now, the big picture from Mampilly that gets the ad going, referring to a simplified copy of that map (the map is from 2008-2009, incidentally, not a lot of study has gone into updating it since):

“You see, the colors of this map reveal a huge untapped energy reserve that spans across the entire United States.

“A relatively unknown energy that is under the Empire State Building in New York City … beneath the roller coaster rides at Disney World in Orlando … below the Sears Tower in Chicago … and under the shiny lights of the Las Vegas Strip.

“And this energy is so expansive and untouched, the Earth Policy Institute recently reported that there’s ‘50,000 times more [of this] energy contained in the first six miles of the Earth’s crust than in all the planet’s oil and natural gas resources.’

“That’s enough energy to power the United States for the next 30,000 years.”

That’s true as a scientific notion, though not necessarily as an economic one — in mining parlance, I suspect most of that geothermal potential would be classified as “inferred resources”, not as “proven and probable reserves” … we know the heat is there, but it’s not so easy to produce it economically except in a few places, like the Geysers in California, or in Iceland, where there’s good infrastructure and access to geothermal resources fairly close to the surface… and geothermal plants are not cheap, so they have to compete with the price of electricity generated from solar panels, or natural gas plants, or nuclear power.

New technologies continue to advance for geothermal production, making it feasible to generate electricity in slightly less perfect spots than the Geysers, and at lower cost, but that doesn’t mean you can make money by just plunking a drill bit into the ground anywhere that shows orange or red on that map.

Geothermal power has been a hot topic more than once in the last 50 years, and it may be that we’re at an inflection point where more money goes into geothermal — past inflection points for geothermal have come because of rising oil and gas prices, or because of strong tax incentives for renewable energy. Or, perhaps, we could also be at such an inflection point for utility-scale solar or wind farms that geothermal will have trouble competing… I don’t know, I just want to raise the possibility for you to make sure you’ve got enough skepticism on hand to counter the hype of “power the world for 30,000 years.”

And then the meat of the tease:

“And here’s the really exciting news … I’ve discovered a little-known company that is at the forefront of it all. They have the game-changing technology that harnesses this energy and converts it into electricity.

“Make no mistake, this relatively unknown Midwestern company is positioned to disrupt the entire energy industry … it could be bigger than ExxonMobil, Chevron and Shell Oil combined … and make investors John D. Rockefeller-type fortunes.

“Those who invest in this company now will have the chance to mint millions … and all it takes is an initial stake of just $50 if you would like.”

You should NEVER go into an investment looking for John D. Rockefeller-type fortunes, of course — and that kind of thinking, touted so breezily in an investment newsletter ad, is corrosive to rational thought.

They do not, of course, guarantee that their small company will be bigger than ExxonMobil, Chevron and Shell combined, but just the mentioning of it makes us stop worrying about whether we’re paying 50 times earnings or 10 times earnings for a stock — it doesn’t matter if it’s a little expensive if it’s going to be the next global monopoly, right?

And yes, as the teases note, Warren Buffett has invested millions in geothermal energy — though he did so quite indirectly almost 20 years ago, through the fact that Berkshire’s large utility operation owns ten geothermal power plants in the other substantial operating geothermal site in the US, the Salton Sea in Southern California (there have sometimes been plans for possible expansion at that site, but they haven’t actually built a new generation project there since 2000).

More from Mampilly on the specific company being hinted at:

“At the center of it all is an innovative company in the Midwest … with over 80 patents to harness this fuel’s power.

“Shareholders in this $2 billion firm include institutions like Vanguard, BlackRock and American Century, and it has deals lined up in some of the biggest energy-consuming countries in the world, including: China, France, India, Japan and Russia.

“And I believe, if everything falls into place, its stock will hand early investors the opportunity to make as much as five, 10, even 20 times their money in the months ahead. That’s millions of dollars for those who want in, starting for as little as $50.”

So who is it? Thinkolator sez Mampilly must be teasing Ormat Technologies (ORA). And yes, that’s despite the fact that the references to “Midwestern” are not a good fit for Ormat, which is headquartered in Nevada — I don’t know whether that’s a red herring or an exaggerated view of what “midwestern” means.

Thanks to an earnings beat a week ago, combined with the attention of Mampilly’s large-scale newsletter, ORA is no longer at $50 like it was back in January and late last year — it has surged up to $58 a share, with a market cap now of about $2.9 billion.

Ormat is certainly the largest pure-play geothermal stock in the US, and they are both a designer and builder of geothermal power plants and equipment, and an operator of a few facilities (the revenue of late is roughly 1/3 from sales — engineering, equipment and construction; and 2/3 from electricity sales from their operated facilities).

They’ve been around for a long time, and they were probably the easiest and least speculative geothermal investment you could have made back in 2007 and 2008 (though the valuation was tough to swallow at the peak back then as well, when it briefly had a trailing PE of 80), though it was the junior project developers like US Geothermal and Polaris and Sierra and Ram Power that were more often teased and touted by newsletters (ORA shares are now slightly above where they were at the January 2008 peak — they bottomed out in late 2011 at around $15… most of the speculative geothermal stocks from a decade ago are down at least 75% from their peak, in some cases they’re down 99-100%).

ORA shares have done very well of late as interest in geothermal seems to have perked up a bit, and as Ormat has continued its recovery from a tough 2010-2012 period to grow both revenues and earnings, and they now also have a backlog of orders that’s roughly equal to a year’s worth of revenue… which isn’t a lot for an engineering company, but does at least provide some baseline for current-year expectations.

That doesn’t mean they’re “on fire”, at least not when it comes to actual financial performance — you do probably have to read between the lines and inject some “story” optimism in order to get excited about Ormat. The stock posted earnings per share of $2.46 in 2015, $1.90 in 2016 ($2.19 non-GAAP), and is predicted by analysts to earn $2.31 in 2017, $2.62 in 2018 and $2.71 in 2019.

That means buyers of the stock today are paying more than 20X 2019 earnings — that might work out, particularly if the optimism that shows in analyst estimates rising over the past year is warranted, but it’s a lot to pay for a company with relatively slow growth (that’s roughly 8%/year earnings growth from 2016-2019).

So it seems to me that it’s a little hard to buy based on the fundamentals right now — which means you need to have some real confidence in the growth story and in Ormat’s ability to substantially outperform those analyst expectations. That’s the skepticism you can use to counter the dreams of greed that might be percolating in your brain… and as for the optimism, you might start with the company’s own 2016 investor presentation.

The rub, of course, is that most of the big-picture comments and the “this will revolutionize the world” quotes are still from 2008 or 2009… and, in fact, many of the most enticing quotes in Mampilly’s ad were pulled from a 2008 LA Times story.

That doesn’t mean that geothermal is less real, but it does mean that we should probably be skeptical of those who promise huge and rapid investments in the sector or any other kind of dramatic change… the logic of this kind of energy was trumpeted from the rooftops in 2008 (and, before that, in 1980, and in the late 1960s), but geothermal plants are generally large, complex, capital-intensive (and often water-intensive) projects that often depend on government incentives or regulatory assistance, and they aren’t necessarily built easily or quickly.

So there you have it — I don’t know that I can get excited about Ormat at this price, but it is a real company that is almost entirely focused on operating and building geothermal plants, and they are profitable and growing. Beyond that, I’ll leave it to you to make your own call… it is, after all, your money. I’m pretty sure you’re not going to make “five times your money” in “the months ahead” on Ormat shares… but, of course, that depends a lot on how many months you think “in the months ahead” implies.

Any thoughts about Ormat or geothermal to share with the group today? Let us know with a comment below. Thanks for reading!

Disclosure: I do own shares of Berkshire Hathaway an but don’t own shares of any other company covered above. I will not trade in any covered investment for at least three days per Stock Gumshoe’s trading rules.


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124 Comments on "Mampilly’s “Untapped Ocean of Energy Found Under All 50 States”"

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jyoung0071
Irregular
431
jyoung0071

Thank you and congratulations on 10th! You are the best. So many of your posts are invaluable treatises on investing in general and/or scholarly discourses on various financial methodologies and/or info on various asset classes and reflect vast knowledge and experience. Thanks again!

Gary
Guest
0
Gary

Great website! Great post! Hope you have another 10 great years and more.

jpeters98
Irregular
9
jpeters98

Congratulations Travis.
You are the best.

traderj44
Irregular
10

Congratulations at least 10 more years thanks for all you do

Barb
Guest
0

Congrats on the 10 years. Keep up the good work. I depend on you. I am one of those people that get excited hearing all the sales pitches. I come to this site right away to get the real truth the keep me from wasting a lot of money.

Myron Martin
Author
324
As usual Travis jerks us back to reality. I did invest in junior geothermal companies back in the 8o’s when it was a “hot topic, won on a few of them and lost on a few others, never did invest in ORMAT itself but it might have been a better bet. Have to agree with Travis, at current prices I can’t see anyone making 5X their money in the months ahead, this is indeed a long shot at current prices. I would be remise however it not congratulating Travis on 10 years of highly useful commentary on the excesses of… Read more »
Randy Parkes
Guest
0
Randy Parkes

Thanks for the info! It’s great to get the low down on these hyped pitches. Congratulations on your tenth. I suggest you do a stock hype parody. Promise your investors a 10,000 % potential return on a 1 cent subscription. Call it the stock service that will disrupt the investment industry. Of course it’s 100% guaranteed money back.

Paul McNally
Guest
0

Congrats on 10 yrs. Your web site is my first stop whenever I’m tempted to jump into the next miracle, especially in energy related companies.

rogerpage3115
Member
3
rogerpage3115

I found that ork is a Israel company based in usa .. went to yahoo search and ‘pocked around .. Check it out .. The Gumshoe is like having a friend in my house. Roger Hamilton..AKA rogerpage3111

tjg
Guest
0
tjg

a great posting good to see past all the hype

Fishook
Guest
0
Fishook

“Honesty is not manipulation of possibility.”
Congrats to Travis on your 10 year Anniversary of your thoughtful approach to the markets many gurus as I contemplate a Premium membership to the gumshoe

robert garcia
Guest
0
robert garcia

Well, I knew that years ago. The question was, is, the current energy lobby on wanting to first recoup the investments they have already made in the traditional energy resources and then how to position themselves using laws steered their way by the lobbyist. IF they are not going to be major players in it, they will not want it to be developed

Doug
Guest
0
Doug

How do these people get away with such hype? The financial services business seems quite regulated, yet these clowns proliferate. Too bad more people don’t have access to your terrific site.

Dick
Guest
0
Dick

great summary; straight forward and clearly explained

Tom Lynott
Guest
0
Tom Lynott

low oil and gas costs/prices make large disruptive gains unlikely in alternative energy plays. I lost a small fortune years ago putting together a tire recycling business. Total costs to recycle FREE tires into use able rubber products was higher than the same products made from scratch, due to low oil prices..!

Russell
Guest
0

Never done this before. who do i buy share from and do i get started I heard i can buy share for $50.00 a share is this true?

SoGiAm
Irregular
8992

Russell, to get your feet wet in investing, you arrived at the BEST place on the planet, IMHO. Travis has provided an article that is invaluable for beginners: https://www.stockgumshoe.com/2014/11/first-steps-and-favorite-tools-for-new-investors/ Best2YouAlwayz – Ben
Disclosure: “I have never received anything of pecuniary value from any person, entity or company ever presented by me in Stock Gumshoe or any other media.” – #ZKSS

jkwood
Irregular
-1
jkwood

I am a fan of both you and Mampilly. I own several of Mamipilly’s “Profits Unlimited” stock choices and they are doing very well in general. This particular enticement piece on Ormart Technolgies is used as an enticement to Banyan Hill advice letters, but never recommended as an entry into Mampilly’s Profits Unimilited list. I enjoy reading your advises and learning from doing that. Best, JK

frank_n_steyn
Irregular
12
frank_n_steyn

Not in Profits Unlimited, nor Extreme Fortunes portfolios, and don’t believe it’s been discussed for either.

LouieP
Guest
0
LouieP
Really? Why not mentioned the 5-6 losers recently accumulated that were pushed with exuberance and hype. Almost appears like a Pump n Dump ploy. The bla bla reads all in their body language and more with JL Yastine promo vids, it appears like a shame-y sell. The company has one extreme of “pro advisors” amplifying a market crash, and the other boasting there’s no better time to be in the stock market; and how both if you buy in will be your best investment. IMO Bottom line, no one can truly predict the market. Those who claim they can and… Read more »
Gerald Withers
Irregular
3
Gerald Withers

Travis: congrats on the 10th! how about a quiet evening with your family and closest friends! just remember that the gummie community is always with you in spirit! thanks for all you do for us!

Loren
Guest
0
Loren

I find it interesting that three directors resigned upon a large investment by ORIX with no reason given in the news articles. This change of management causes me to avoid investing in the company until I know WHY.

fischershaw
Irregular
35
fischershaw

Seems like a better return on a pure geothermal investment could be had by just installing a geothermal system for one’s house.

Al Finnell
Guest
0
Al Finnell

Get a drill rig to go down 10,000 feet in your back yard and yes, you have a furnace.

D. McCullam
Guest
0
D. McCullam

It appears the EPA et al are sounding off on geothermal activities near the Salton Sea. They claim that the process of removing /replacing large quantities of water is contributing to earthquake possibilities in the San Andreas fault, a few miles from the Sea.

sheldon
Irregular
199
sheldon

Congrats!
I quickly realised the value of your site and became a lifetime member very soon after discovering it.
An excellent investment.

herbalix
Guest
0
herbalix

Can only agree with you Sheldon…to me the value of this website is tremendous…Travis is brilliant and it took me me a bit longer than you to became a lifetime irregular…but that was only because i could not believe how great this stockgumshoe really is…
good luck to all the Gummies and ‘Gummies-to-be’….or anyone else for this matter…

Paul
Guest
0
Paul

Congratulations Travis! I always enjoy reading your posts. Nice mix of pragmatic realism and subtle humor 🙂

lcolombi
Irregular
2
lcolombi

Cheers to 10 years more at least! Thank you for such valuable information and sleuthing!

frank_n_steyn
Irregular
12
frank_n_steyn

The 2008 article states this geothermal co. is quiet efficient, and produces enough electricity to power the over 200,000 homes in Reno, except it doesn’t. No real movement on this next miracle of energy for the over 20 years that I’m aware of.

pam day
Guest
0
pam day

So enjoy your insight…congrats on 10 years!

MCGILTON98846
Irregular
-9

Also my 70th birthday today.WOW !

thinairmony
Irregular
-232

In Hawaii isn’t magma that flows out of the volcanoes? Wouldn’t that be the same thing 6 miles below the main land of the U.S. ? ORA STOCK QUOTE
$55.71 $0.10 (0.2%)
BATS BZX Real Time Price as of August 18, 2017, 4:02 p.m.

Charles O\'Malley
Guest
0
Charles O\'Malley

hi Travis,I am a long time reader though I don’t invest much anymore. i enjoy your take on the hype and in this Trumped up world your honesty stands out. From the far side of the Atlantic it looks a mess

DrCashFlow
Guest
0
DrCashFlow

TJ has been and continues to be an under appreciated and still relatively unknown sleuthing superstar. Incalculable value added, or perhaps more to the point, protection against value subtracted. I go both long and short, and have made my share of profits on short sales triggered by the master’s scepticism. Well played, Dr Johnson

dolphin
Member
4
dolphin
Mampilly and Profits Unlimited? As I see it, P.U. & Mampill, Is a Pump & dumper. A number of stocks this past year were b.s. with such high glorification to build expectations and serious suggestions subscribers about stocks. What about a 50k plus population that is P.U. has? His suggestions are made when a stock is already primed. His exits are way late. After a pump, then he follows up with more glorified hype of how excited he is that it’s going to do great. A couple weeks later the stocks fall. He did this with IBM, SBUX, GE and… Read more »
Jack Bob
Guest
0
Jack Bob

I enjoy your articles, but it seems you have a personal vendetta against Mampilly.
Maybe a little envy at all the success he has had?

Jack Bob
Guest
0
Jack Bob

good analysis, but why did you not post my comment about having a personal vendetta against mampilly?

Stephen
Guest
0
Stephen

Sounds too good to be true

PU sub
Guest
0
PU sub

Happy 10t Anniv! Love this no BS website. Answers questions instead of posing more questions!

PU sub
Guest
0
PU sub

BTW, some company in China bought about 20+% of ORA shares. That would be amazing if ORA technology is purchased to use in China.

picklerick
Guest
0

Personally i think that companies should have taken advantage of this years ago when the idea was first thought of because those people would be rich and famous.

Thais
Guest
0
Thais

Tossing John D. Rockefeller-type, in to pitch reminds me of kids trying to be persuasive “Just ask my Mom she’ll tell you…”The writer borrowing it’s facts from other ad’s I be-leave that considered plagiarism …
I thank you for your keen insight, very informative . Amazing how you considered each at every paragraph (with comment) in such detail. kudos and happy 10th.

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