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In the last natural gas boom in 2002-2007, T. Boone Pickens pocketed $1.4 billion. Now he's convinced that natural gas will knock other fuels out of the market… and diesel will be the first to go. Truckers are dumping it and switching to this cleaner, cheaper, all-American gas. You could turn $10,000 into a whopping… Read more.
| | | 9/11/2014 By Thomas Scarlett 
Some industries rise and fall with the trends, but garbage disposal is a hardy perennial. In fact, as the economy improves and the population expands, Americans will probably generate more trash this year than ever before. Waste Management Inc. (NYSE: WM) has been the U.S. leader in this field for many years, and it remains that today. Growing revenue from acquired entities around the world, higher capital expenditures and increasing operational efficiencies have enabled the company's earnings to keep rising. WM is the world's largest solid waste collection and disposal company. It also treats and disposes of hazardous and medical waste, as well as operating energy-producing facilities. The company's most recent earnings report was solid. Revenue for the second quarter was $210 million, or $0.45per share, compared with $244 million for the second quarter of 2013. Results in the second quarter of 2014 included approximately $69 million of after-tax charges primarily related to the divestiture of operations in Puerto Rico. Excluding these impacts, net income would have been $279 million, or $0.60per share. "Our strong yield and cost controls delivered growth in income from operations, operating EBITDA, and adjusted earnings per share when compared to second quarter 2013 results," commented David P. Steiner, President and Chief Executive Officer of Waste Management. "We saw an increase of 40 basis points in our income from operations margin, and 120 basis points on an adjusted basis. Our yield was 2.3%, marking the fifth consecutive quarter exceeding both 2.0% and CPI." The results have been driven by the company's continued focus on increasing internal revenue growth from yield and controlling costs. Net cash provided by operating activities increased by $162 million, almost 30 percent, to $736 million in the third quarter from the prior year, and through the first nine months of 2013 was $1.9 billion. WM had the best quarterly free cash flow that it has seen since the third quarter of 2008.Revenue increased by 4.6 percent, or $160 million, from the prior year, primarily from acquisitions and internal revenue growth. Operating expenses increased by $96 million from the prior year. The majority of the increase relates to the acquired operations of Greenstar and RCI, increased recycling costs, and the timing of repair and maintenance costs at the company's waste-to-energy facilities. The company still expects to spend between $1.3 billion and $1.4 billion on capital expenditures in 2014. Waste Management's services generate a robust cash flow that it largely devotes to acquisitions, dividends and share buybacks. The company has consistently paid dividends since 1998.In the most recent quarter, the company returned $171 million to shareholders in the form of dividends. Steiner added, "In the third quarter we maintained our disciplined approach to improving yield, reducing costs, and managing working capital and capital expenditures, which is reflected in our earnings growth and in the improvement in net cash provided by operating activities and free cash flow. As a result, we are on track to achieve our full-year goals." Waste Management has maintained its dominant position by constantly adapting to changes in the industry, including new environmental regulations and new scientific innovations. The company has announced that it's building a facility that will create pipeline-ready natural gas from its Milam Landfill in Fairmont City, Ill. The processed renewable natural gas will be injected into the pipelines of Ameren Illinois for withdrawal at other locations, including some Waste Management facilities. Once there, it will be used to fuel truck fleets and other equipment that run on compressed natural gas, or CNG. Waste Management is calling the plant the Renewable Natural Gas Facility and expects it to begin delivering gas to the pipelines in late summer 2014. "Ameren Illinois applauds Waste Management for deploying an innovative technology to fuel their fleet," said Richard J. Mark, president and CEO of Ameren Illinois. "This is a first-of-its-kind collaboration for Ameren Illinois to facilitate the transportation of clean, renewable natural gas through our pipelines to the U.S. gas distribution grid." Like wind and solar, landfill gas is a renewable source of energy endorsed by the U.S. Environmental Protection Agency as an alternative to fossil fuels. It's produced as waste naturally decomposes inside a landfill. Once captured, the gas is filtered and compressed and can be used to fuel an engine or a turbine to generate electricity. At the new Renewable Natural Gas Facility, the landfill gas will be further processed to produce pipeline-quality natural gas. The stock has risen since the last time we recommended it. But given the company's myriad assets, both tangible and intangible, the price still seems quite reasonable. Buy up to 55. Tom Scarlett is an investment analyst atPersonal Financeand its parent web siteInvesting Daily. | | |
U.S. investors are making a big mistake by ignoring global income stocks. A record $1.3 billion in dividends were paid out worldwide. Only 33% were paid by U.S. companies. Almost $900 million came from international stocks.
Don't miss out on this treasure trove of international dividends. We found huge global yields of 10.05%, 10.10%, and 10.32%. (And don't worry, all of these stocks are readily available on U.S. exchanges.) All have ten-bagger growth potential to boot! Warren Buffett is a big investor. Here are 5 of the world's best global dividend stocks.
| | | 9/10/2014 By Jim Fink 
Another week, another all-time closing high for the S&P 500. With the market close on Friday, September 5th, the S&P 500 has risen for five consecutive weeks -- the longest win streak of 2014. For the year, the S&P has risen 9.9%, including 3.8% in August alone, which was the best monthly gain since February and the best-performing August in 14 years(since 2000).All three Dow Jones stock indexes(industrials, transports, and utilities) are moving higher together, which is a bullish sign. Fears of wage-cost inflation and geopolitical turmoil in Ukraine and Gaza that caused a small stock-market correction in late July/early August -- when stocks quickly dropped 4.3% over a two-week period -- have evaporated, with stocks quickly reversing course back up in bungee-jump fashion, hitting new all-time highs. Ceasefires in both Ukraine and Gaza have reduced concern, as well as recent economic data indicating a "Goldilocks" environment that is not too hot and not too cold, which should simultaneously promote corporate earnings growth and prevent the Federal Reserve from raising short-term interest rates. All of this economic strength has caused the Economic Cycle Research Institute's (ECRI) Future Inflation Gauge to hit a 71-month high reading, which is somewhat worrisome. One person who doesn't appear worried is Fed Chairman Janet Yellen, who stated in her August 22ndJackson Hole speech: "Underutilization of labor resources still remains significant. Given this assessment, it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after our current asset purchase program ends, especially if projected inflation continues to run below the 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored." This labor "slack," however, could be a mirage and caused by "pent-up wage deflation" where employers kept wages abnormally high during the recession to maintain employee morale, so that the wage level during the economic recovery is now normal and doesn't need to be raised. If this is the case, the current lack of wage increases should not be construed as evidence of labor slack, but simply a lull in wage increases that could explode higher if the economic recovery continues. The stock market rally continued last week precisely because the August jobs report was weaker than expected, with only 142,000 new jobs -- less than the 225,000 expected. In addition, the job numbers for June and July were revised down by 28,000. In this case, bad news for the economy is good news for the stock market because it signifies less chance that wage inflation will ignite anytime soon and force the Fed's hand to raise short-term rates. Also helping to keep U.S. interest rates low is the much-weaker economic news elsewhere in the world. On September 4th,the European Central Bank (ECB) became so worried about a resumption of recession and deflation that it surprised analysts by cutting interest rates (51 out of 57 economists surveyed had predicted no rate cut) after ECB President Mario Draghi had stated previously that no further rate cuts were possible after June's rate cut. In addition, the ECB initiated a quantitative easing program that will purchase asset-backed securities (ABS) and "covered" bonds (general obligation debt with ABS collateral) from European banks in an amount that could total $650 million over three years.
The ECB stopped short of authorizing the purchase of government bonds, but most analysts now expect such an expansion of the European QE program to be inevitable. Capital inflows into U.S. debt markets to escape the low and declining rates available in the European Union will put downward pressure on U.S. rates despite the improving economic news in the U.S. In addition, declining U.S. productivity is causing economists to downgrade the long-term growth potential of the U.S. economy. The combination of strengthening U.S. economic growth and continued low interest rates caused by economic weakness elsewhere in the world is a powerful combination for continued U.S. stock-market gains. In fact,Morgan Stanley recently predicted that the S&P 500 could rise an additional 50% to 3,000over the next five years (by 2020)! Over the intermediate term, positive momentum should continue to propel the S&P 500 higher. Between August 8thand September 3rd,the S&P 500 closed above its 5-day moving average for 18 consecutive trading days, which is very rare and historically bullish. I would stay invested because the Ivy Portfolio market-timing system based on the 10-month moving average Moving Averages: Month-End Update for stocks, bonds, and real estate (the only sell is commodities). This article originally appeared in the Small Cap All-Stars column. Never miss an issue. Sign up to receive Small Cap All-Stars by email. | | |
Unless you've been living under a rock for the past eight years, you've heard about the massive amounts of natural gas and oil being produced in our country. And if you've ever thought there had to be a way to make money from it, you're right. But let me give you a piece of advice: Steer clear of "Big Oil." They were late to the party and are still playing an expensive game of catch-up.
Instead, why not take a look at six under-the-radar opportunities I've found? So far this year, they're crushing the S&P 500 by 6 times.
I'll give you the complete lucrative story on all six when you click here.
| | | 9/10/2014 By Robert Rapier 
The Inherent Challenge for Advanced Biofuels In last week's Energy Letter, I reviewed some of the technologies used to produce so-called "advanced biofuels" in Pulp Fiction: The Broken Promises of Biofuels. These biofuels tend to be expensive to produce, even though there are significant sources of waste biomass that does not compete with food crops and can be used as a feedstock. In a nutshell, the fundamental problem is that biomass (generally plant material of some sort) has a low energy density. This factor increases the cost of transporting it, and it results in decreased yields and increased production costs relative to current fossil fuel prices. When you consider what fossil fuels represent, this becomes easy to understand. In the case of crude oil, for instance, Mother Nature grew and harvested the biomass. The earth supplied the heat and pressure to slowly convert this ancient biomass into the energy-dense form we know as crude oil. In the case of biofuels -- both advanced and conventional -- human inputs are required to plant and harvest the biomass, as well as energy-intensive steps to convert the biomass into a (typically) liquid fuel. Even after initial processing these liquid fuels are generally of lower energy density than petroleum, and often more steps are required to make them more compatible with the transportation infrastructure. These issues explain the challenges of producing biofuels economically, and they are the primary reasons for failure of many advanced biofuel companies. Some first-generation biofuels -- such as ethanol produced from corn or sugarcane -- have nevertheless overcome the challenges and can be competitive with petroleum (depending largely on geography). But the extra steps and lower yields inherent in most advanced biofuel schemes have meant that commercialization of these fuels remains elusive. Advanced Biofuel Companies Go Public Nevertheless, a number of companies are trying. In 2011 venture capitalist Vinod Khosla took three companies public with the goal of commercializing advanced biofuel production: Gevo (NASDAQ: GEVO), Amyris (NASDAQ: AMRS) and KiOR (NASDAQ: KIOR). Gevo's route involves production of iso-butanol, a commodity chemical, and subsequent conversion of this chemical into jet fuel, chemicals, and speciality fuels. Amyris uses genetically modified microorganisms to produce fuels and chemicals, although lately the company has focused more on the speciality chemicals industry. KiOR, on the other hand, billed itself as a pure-play advanced biofuel producer. KiOR promised to turn biomass not into ethanol (despite some early headlines touting KiOR's "cellulosic ethanol" technology), but into an actual drop-in petroleum replacement. There were claims made by the company and repeated (and sometimes confused) in the media such as "KiOR's process produces a near-perfect match to crude oil in a matter of seconds", or "They're going to do what it takes millions of years for Mother Nature to do in a matter of seconds." That latter quote was made by then Mississippi Governor Haley Barbour, who helped KiOR secure a $75 million loan from the state of Mississippi to entice KiOR to build a $213 million demonstration plant there. More on that below. The Problems with KiOR Because I am a chemical engineer working in the area of alternative fuels and providing advice to investors, KiOR's claims piqued my interest. What it claimed, and more generally what the media reported about the company, didn't ring true. So I investigated, became convinced that the company was overstating its case, and in a 2011 article -- Why I Didn't Short KiOR -- argued that KiOR was "grossly overvalued" after fueling unrealistic expectations among investors. On the day I wrote that, KiOR closed at $15.50 and sported a market capitalization of about $1.7 billion. Last Friday, KiOR closed at 9 cents a share. The market capitalization has dropped to $5.9 million, and is down 99.4% in not quite three years. Gevo and Amyris haven't fared much better, with Gevo down 97.3% since its IPO and Amyris down 76.4%. (Note that these stocks are extremely volatile. Now that it's a penny stock, a few cents' movement in KiOR's share price can amount to a very large percentage move, so understand that investing in KiOR at this point isn't much different than simply gambling).  KiOR share price from IPO through Aug. 25, 2014 So what happened to this company that many investors believed had such a bright future? While KiOR hasn't commented extensively on what went wrong, it is clear that once it started up its wood-to-fuel plant in Columbus, Mississippi, the production process proved more difficult and costly than expected. KiOR was using a variant of the fast pyrolysis process described in last week's Energy Letter. As explained last week, this process results not in hydrocarbons, but rather in compounds that contain oxygen such as aldehydes, carboxylic acids, ketones, alcohols, and sugars. In order to be used as transportation fuel, these compounds require further upgrading, and less than 40% of the mass of the pyrolysis oil is converted to gasoline or diesel. The low yields drive up the costs. Investors should have recognized trouble brewing when KiOR kept failing to meet its own guidance. The company lowered production targets in August 2013 and again in November of that year, yet still ended up short of the twice reduced forecast at the end of the year. In December, KiOR said it was idling the Columbus plant to save money and to work on improvements. At that point, I figured it would be bankrupt by the end of 2014. In fact, that was one of the five predictions I made in January. The Hype Machine Also in January I appeared on 60 Minutes in a segment called The Cleantech Crash, in which Vinod Khosla and Lesley Stahl had the following exchange about KiOR: Vinod Khosla: Nature takes a million years to produce our crude oil. KiOR can produce it in seconds. And we take that, add this magic catalyst- Lesley Stahl: This is the secret sauce? Vinod Khosla: Yeah. Lesley Stahl: You throw that on top of the chips? Vinod Khosla: And then, out comes something that looks that looks just like crude oil. It smells like crude, it works like crude except it's 100 percent renewable. Then it's distilled onsite into... Lesley Stahl: Clean gasoline? Vinod Khosla: Clean green gasoline. Lesley Stahl: This goes right into the tank, right? You don't have to build a new infrastructure? Vinod Khosla: Absolutely. Lesley Stahl: You make it sound almost -- sorry -- too good to be true. There must be a downside. Vinod Khosla: There is no downside. Although this segment aired in January, it was recorded in the fourth quarter of 2013. Around this time Vinod Khosla convinced Bill Gates to invest a few million dollars in the company and, as shown by the exchange above, was still hyping and overstating KiOR's technology despite problems that were well-known at that time. This is why investors need good, objective advice from people who understand the technology. As I explained to Lesley Stahl, while I strongly support the development of advanced biofuels, Vinod Khosla has done a lot of harm to the sector by overpromising on various technologies and then failing to deliver. This leads to public perception that advanced biofuels are a boondoggle. This becomes particularly problematic when tax dollars were secured by promising more than a technology can deliver, as it makes it more difficult for more promising technologies to secure funding. This isn't the first time that Khosla has been involved in an advanced biofuel company that overpromised, took public funding, and then went out of business. This also happened with Range Fuels, which squandered public funding while "inventing" technology that had in fact been practiced for decades. In the case of KiOR, in June of this year the company was unable to make a loan payment on the remaining $69.4 million it still owes to the state of Mississippi. The state is unlikely to see those funds paid back, but it could have been much worse. In 2011 (pre-IPO) KiOR announced that it had received a term sheet for a loan guarantee supporting over $1 billion of capital spending from the US Department of Energy's Loan Guarantee Program. This funding ultimately fell through, so the biggest losers in the KiOR failure are shareholders, the taxpayers of Mississippi, and Khosla himself. As I noted when predicting KiOR's bankruptcy, Khosla can continue to throw good money after bad to keep the doors open. He has in fact done just that. In March KiOR announced that it was out of money and unlikely to receive further investments from Bill Gates. Khosla stepped forward with a $25 million loan -- payable at $5 million a month and subject to certain milestones being met. This loan has prevented a formal bankruptcy filing, but isn't enough money to restart the plant. KiOR has almost certainly by now used up that $25 million, and I don't believe Khosla is likely to keep lending. On the other hand, he is probably desperately seeking to avoid a formal bankruptcy filing as it would be his second high-profile failure in the advanced biofuels space. He may instead seek a deal for KiOR to be taken private or to be absorbed by another company in order to avoid a formal declaration of bankruptcy. On the Nature of Failure This article isn't a criticism of failure. Failure in business is to be expected, and we certainly need visionaries who push the boundaries of new technology. Failure can occur for a number of reasons, including many that are entirely understandable. However, if failure takes place because unrealistic claims were made and unrealistic expectations set, those who lost money in the failed venture may take a harsher view. They may even file class action lawsuits against those who misrepresented a company's outlook. But in reality, outside of outright fraud, the investor can only blame himself for failing to do the appropriate due diligence. In any case, when failures occur, we should take the opportunity to learn from them. There is much to be learned from KiOR's journey from hot biofuel IPO in 2011 to penny stock. The odds of this technology soon being resurrected from the ashes are slim. But there are technology lessons learned that can be applied as future companies attempt this pathway. Conclusions There are several lessons for investors here. The first is that the advanced biofuel space is very challenging. It is capital intensive and can take many years to produce returns. This is not the sort of model that has been successful in the past for venture capitalists. The second is that investors need to be careful whom they listen to. A number of analysts gave strong recommendations on KiOR, and many reiterated those recommendations all the way down. These recommendations were based on the company's own guidance, but other statements KiOR made about its technology should have raised questions about management's credibility for any expert. Finally, just because some is an expert in one field does not make them an expert in another. Vinod Khosla made his fortune in Silicon Valley. Bill Gates made his fortune in software. Neither of them have any demonstrated expertise in the energy sector, nor more specifically in advanced biofuels. Therefore, an investment by either of them in a sector outside their expertise shouldn't be viewed by investors as a particularly positive signal. Indeed, if you had invested in KiOR on the day that Bill Gates' investment was announced and held through today, you would be down 96.5%. This article originally appeared in the The Energy Letter column. Never miss an issue. Sign up to receive The Energy Letter by email. | | |
AP reports that the U.S. Geological Service has increased oil production estimates of the Bakken oil fields to 7.4 billion barrels. One top-secret company has access to 85,000 acres in the heart of Bakken. But he also has a secret weapon – a high-tech drill bit that can cut through 2 miles of rocky shale like butter. His oil recovery rates are stunning, and early investors are sure to be the new generation of oil millionaires. Details here.
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