One Stock to Buy Right Now
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Do you remember where you were when September 11th attacks devastated the U.S.? Or, how about where you were (if you were alive) when the Japanese dragged the U.S. into World War II by bombing Pearl Harbor in 1941? Well, if you were alive for those two, you almost certainly remember where you were. Yet, few people could say the same when a much more recent foreign attack hit us. Granted, this was (and still is) a very different kind of attack; yet, it's one that affects nearly all of us.
Gas hit $5/gallon where I live in the Summer of 2008. I live in the Midwest in one of the most heavily taxed counties in all of the country, so the price here wasn't representative of the entire nation. Still, I remember when pumps would shut off before my tank was even full because they weren't programmed to allow purchases to go over a certain price. Believe it or not, the national average gas price in the summer of 2008 reached $4.12/gallon. Four dollars and twelve cents. On average! Unfortunately, there is almost nothing our country can do to change these gas prices. But, does that mean there is nothing we can do at all?
You've heard all of the ideas put on the table by the sciences: corn, algae, and cooking oil have all shown promise as possible replacements for gasoline. Yet, even still, countless cars and trucks refill with gasoline and diesel fuel each day. It has looked as though we would be slave to the wrath of the middle east for a long time. Until now.
Oil prices have skyrocketed in the past few years with no sign of slowing down. Just look at the graph below, showing the average oil price across different parts of the country.
Evidently, oil and diesel are not the solution. But that doesn't mean that there's no solution.
A $394 billion dollar industry. With one small-cap company leading the way.
So, what's the answer?
The answer in natural gas. And the company is Westport Innovations (NASDAQ: WPRT). But before I get to why Westport stands out amongst the rest of the players in the natural gas field, why don't I first explain why natural gas is the answer in the first place.
It's clean. Very clean. It's much better for the environment that oil and diesel fuels are. It's far lower in carbon emissions and it also burns cleaner than oil.
It's cheap. Especially in comparison to the alternatives. But, I'll get to that in a second.
And, lastly, and possibly most importantly, it's abundant. There is plenty of it to go around already. And, best of all, it's domestic. There is no need for the U.S. to rely on barrels of oil frm the middle east of expensive offshore drilling for scarce amounts of oil. It's here, and it's ready.
Forbes notes that "natural gas is getting cheaper, but diesel and gasoline are not," and "that holds major implications for businesses." Businesses like United Parcel Service (NYSE: UPS), who have realized the amazing potential in natural gas. In fact, the director of maintenance and engineering at UPS, Michael Britt, Sr., has stated that "[natural gas] is the only long-term viable option to diesel." No wonder UPS has recently placed orders for 48 natural gas trucks with intentions to add 952 more. Veolia Environmental is also adding numerous natural gas vehicles to it's fleet, as are countless other companies. But they aren't grasping at straws. They know something that very few do: something Dave Hurst, a senior analyst at Pike Research, is willing to share: "the cost of natural gas is expected to remain significantly lower than diesel and gasoline."
The below graph shows that, if trends continue, Hurst will be right.
Now, on to the perfect company to handle all of this: Westport Innovations. Westport has been a long-time Motley Fool favorite. This is because the enormous Natural Gas industry is essentially all theirs. Now, I know that sounds crazy for such a small-cap company, but, hear me out. The secret is that Westport has all the patents in their field: the field of natural gas fuel injectors. In fact, Ford (NYSE: F) has over 2,200% the market cap of Westport, yet fewer than half as many patents; Siemens AG (NYSE: SI) 3,300%, and only a third as many; and General Motors (NYSE: GM) over 1,900% the market cap of Westport, with only a quarter as many patents. Being that Westport has the technology locked up, all they have to do is wait. The average street life of a truck is about 7 years before it heads to the truck graveyard or is salvaged for parts. And, as countless companies replace their dying fleet with natural gas-powered trucks, it is only a matter of time before Westport Innovations has conquered the entire field, making them the perfect stock to buy now.
The Foolish bottom line
There is one extremely critical element to Westport Innovation's success: the pricing of natural gas and oil. As long as natural gas stays as cheap as it is, and and long as diesel and gasoline don't take unexpected long-term dives in price, then they should have the market at their fingertips. So, while they play the waiting game, don't let yourself get caught waiting too long. Get involved in this stock now, before it's too late.
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Michael Nolan is long WPRT. The Motley Fool owns shares of Westport Innovations. Motley Fool newsletter services recommend Westport Innovations. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.