The Stock That Makes Soros Smile
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George is getting more wrinkles by the minute but stocks like this make him forget all that. He may not be breaking the Bank of England with this trade, but his fund still made over $6 million from this stock on last Thursday alone. It was up over 9% on the day! This will offset some of Soro's poorer investments as of late in JPMorgan (down 18% in the last 3 months) and Chevron (down over 8% in the last 3 months).
It is the Vancouver, Canada based Westport Innovations (NASDAQ: WPRT). They design and build alternative fuel engines for cars and factories. Although, profits aren't through the roof (or existent), Westport saw a revenue increase of over 132% in the last quarter. They are selling natural gas powered bus engines and other specialty engines at the moment and plan to really break into the consumer market soon. Natural gas engines becoming mainstream for consumers will make Mr. Soros even more wealthy.
Why is this Important?
Westport is turning into a valuable company as two factors persist and Soros knows it. The first factor is low natural gas prices. They have been sliding downhill for years and have been hurting producers for a while. The lower the prices go and the longer the prices remain low, the more economically viable it is to purchase a vehicle with a natural gas powered engine.
The second factor is the price of the most common vehicle fuel: gasoline. Since drivers are feeling ripped off at the pump, they will surely look for alternatives. According to gasbuddy.com, some states on the west coast are paying up to 4.17 for a gallon! Westport can only hope prices at the pump continue to increase.
As these factors play out what is needed for a large influx in natural gas powered vehicles being bought? Mainstream manufacturers need to be built before the average consumer takes the plunge. Ford (NYSE: F) recently came out with a line of trucks powered by natural gas which use Westport WiNG Power systems. These F-250s and F-350s can use both natural gas and another type of fuel. Due to the option of two fuels, this technology can ease into the market nicely. We are yet to see if any American auto manufacturers follow suit in North America. GM and Fiat have introduced natural gas powered consumer vehicles in other parts of the world though.
Another aspect needed before a large influx of natural gas powered vehicles is more service stations offering natural gas. Currently there are about 3,500 natural gas service stations in the US (many only available to government workers) versus the 129,000 gasoline stations. This is the classic network problem or chicken and egg problem. Nobody wants to commit to your party unless they know other people are coming too. So nobody wants to buy a natural gas powered car until there are a lot of service stations and service stations don't want to build until there are more natural gas powered cars.
Will the industry overcome these hurdles? Soros and, lately, the market believes it will.
mthiessen has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford and Westport Innovations. Motley Fool newsletter services recommend Ford and 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.
