Raw Greed ethanol watchlist

Posted on June 19, 2006 , filed under Stocks | Print This Post

I believe trading ethanol stocks represents a strong speculative opportunity to trade against rising crude oil prices. Corn and bio-waste ethanol fuels are a hot alternative energy source to gasoline. As crude oil prices rise, I expect to see ethanol stocks continue to post gains. I believe the greatest future opportunity in ethanol stocks will be with companies that serve or produce ethanol in emerging markets. Consumers in emerging markets are having a difficult time absorbing the high cost of fuel. Brazil is currently the world’s largest producer of ethanol, followed by the U.S. in second and China in third place.

There is a lot of worry about ethanol being an alternative energy fad. Ethanol has been around since the 1970′s and only until recently has the cost of production to energy output ratio been in ethanol’s favor. In the past, the inverted cost to energy output ratio meant every dollar spent on ethanol production yielded less than a dollar’s worth of energy output. Due to manufacturing efficiencies and technology improvements, ethanol now gains more energy output than each dollar spent on production.

I believe ethanol is here to stay as an alternative fuel source to gasoline. In the long-term I expect to see global ethanol use grow. I do believe ethanol stocks have been driven up in a speculative frenzy, but I also believe there is room to grow so long as crude oil prices remain high.

Here is my current watchlist of ethanol related stocks:

Archer-Daniels-Midland Company (ADM)
VeraSun Energy Corporation (VSE)
Pacific Ethanol, Inc. (PEIX)
MGP Ingredients, Inc. (MGPI)
The Andersons, Inc. (ANDE)

Add this post to your favorite social networking site