The concept of creating energy from nothing seems similar to the
dream of Middle Age alchemists who tried to conjure up gold from
thin air. Except for one thing - in the 21st Century, generating
energy from non-fossil fuel sources is the real deal.
Now there is wind power, solar power and other low-polluting
ways to generate electricity - and all are important as demand for
electric power puts pressure on the modern grid. The U.S. Energy
Information Administration estimates that global electricity demand
will reach 28.9 trillion kilowatt-hours by 2025, up from 18
trillion kWh in 2006.
In a little known index I found a company that's involved in one
of the former trendy energy technologies that has fallen out of
favor in recent years. Yet the company I found was one of the
hottest stocks at the end of 2010 on my secret index -- the Russell
Interest appears to be growing in fuel cells, and
FuelCell Energy (Nasdaq: FCEL)
is heating up with investors. The stock's return in the final three
months of the year was 104 percent, making FuelCell Energy the
second-best performer on the Russell 2000 as of December 31.
Fuel cells, which were first conceived in the 19th century, can
create power by putting a gas - such as hydrogen or methane - in
contact with a reactant, in the presence of a catalyst. Fuel cells
are low in pollution, very reliable and generally more efficient
than competing technologies, but the manufacturing plants are
expensive to build.
According to the latest data available from Price
WaterhouseCoopers, shipments of fuel cell systems in 2009 were
approximately 24,000 units, an increase of 41 percent over
***FuelCell Energy is no newcomer to the technology, having been
founded in 1969 in Danbury, Connecticut. It shipped its first
commercial power unit to the Kirin brewery in Japan in 2003.
Now its power generators can be found throughout the world in a
diverse range of industries - from an onion farm to a bakery that
uses organic waste as fuel, to a California prison. In fact, many
of its commercial sales have gone to California, the leader in
America's push for green energy. That said, South Korea remains
FuelCell's largest market.
The company reported that for the fiscal year ended October 31
it cut losses by 18 percent when compared with the year before, but
revenue fell slightly to $19.7 million. The company said its sales
backlog at fiscal year-end was $154.3 million, its largest ever.
During 2010, FuelCell Energy also received its first order from an
Pacific Gas & Electric (
On January 10, FuelCell Energy announced that it had agreed to
sell 10.2 million units to an investor, which will raise $17.8
million for product development and expansion of manufacturing
***Analysts following FuelCell Energy have remained fairly
bullish on shares, with three of the six following the company
rating it a "strong buy." Currently, the median 12-month price
target is $3.25, which represents 63 percent upside potential.
FuelCell Energy's stock has doubled since moving below $1 in
August, and I would have to label any investment in this company as
speculative. But as the world's power demands continue to grow and
alternatives become increasingly competitive, we're likely to hear
more about fuel cells.
Now is a good time to invest in energy, and my
Small Cap Investor PRO
portfolio includes several interesting energy companies, including
one in the red-hot China market.
Click here to learn more about how to use the
Russell 2000 to find the best stocks.