Publisher's Note:

It's my honor and pleasure to introduce you to Ian Cooper. I worked with Ian several years ago when we were both investment analysts for the advisory service, Taipan.

Ian has decided to join Energy & Capital as our small cap and trading expert. He is a superstar technical analyst, initiating 950 winning trades in this decade alone. His win-to-loss ratio is an astonishing 72%... in other words, out of 10 trades he initiates, 7.2 result in profits.

Please join me in welcoming Ian to the Energy & Capital team.

 

Oil Investing: Profit from the End of Cheap Oil

I'm an options and value stock guy by trade. But after the explosive opportunities I've seen lately in small stock land, I'm preparing to launch Small Cap Trading Pit to seek out the next Exxon Mobil (NYSE:XOM), the next MEMC Electronic Materials (NYSE:WFR), or even the next eBay Inc. (NASDAQ:EBAY).

Exposure to small cap stocks is a necessity if you want to build a strong portfolio.

History proves that small cap stocks outperform large cap stocks. The 2006 Ibbotson Yearbook, for example, tells us that from 1925 through 2005, small cap stocks brought in annual 12.6% returns, as compared to annual returns of 10.4% for large cap stocks.

But enough of my introduction... let's look at one stock that stands to mirror MEMC Electronics' five-year run from $2 to $70.

Peak Oil: Here We Are at $93 . . .

At $40 a barrel, crude was expensive. At $60, it wasn't sustainable. At $80, it was a one-time event that we'd never see again. But here we are at $90+, watching as it tries to take out $100.

 

Truth is, the era of cheap oil is behind us. Tony Hayward, CEO of British Petroleum, BP plc (NYSE:BP), will tell you that. Heck, our own Brian Hicks has been pounding that table for years, despite critics who believe $90+ oil is unsustainable.

 

Another rebel uprising in Nigeria, supply issues in the Gulf of Mexico, a choke-hold on the Strait of Hormuz, an impending war with Iran, and we'll be well above $150 a barrel. Even the World Energy Council (WEC) forecasts energy demand doubling by 2050.

 

But the suggested solution is always the same--alternative sources of energy. To ensure that 6.6 billion inhabitants of Earth have access to energy, significant investments in alternative sources of energy are needed.

 

All over the globe countries and companies are racing to reduce their emissions. So much so that carbon and other emissions now come with a price. In lieu of paying hefty fines or splurging for carbon credits, many companies are simply finding it more feasible to pony up the money and clean up their operations. And those massive clean-up efforts have stimulated billions--if not trillions--of cleantech spending. We've discovered one small company that is using the clean air to cash out.

Learn more.

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The End of Cheap Oil: Investing in the Solution

Solar companies are running amok on $90-plus oil.

You can buy First Solar, Inc. (NASDAQ:FSLR) at $200. You can buy JA Solar Holdings Co. (NASDAQ:JASO) at $51. And you can buy Trina Solar Limited (NYSE:TSL) at $50.

But take a closer look, and you'll see the industry is running out of power, and fast, unless polysilicon supply can keep up with the pace of demand.

The solar industry uses silicon panels to convert sunlight into electricity. Right now, only a select few solar companies in the world have the resources to supply enough panels to match the rising demand. And sure, those few have sky-high gains to show for it.

The current shortage is actually a production capacity issue. Polysilicon companies aren't making their product in large enough quantities to satisfy the solar industry's needs, keeping the solar market at a standstill.

So the solar companies have started funneling money into polysilicon manufacturers to fund the construction of new facilities and increase output.

And, thanks to this desperate influx of spending, along with the insane increase in demand, the polysilicon market is in the midst of a veritable feeding frenzy.

The End of Cheap Oil: When the Fuel Tank's Dry, Prices Fly High . . .

As demand for polysilicon grows, supply wanes. The price of polysilicon is already $70 a kilogram, double that of 2004.

Without solar panels, there's no solar power. The industry is dead in the water. All the current activity in the solar sector will grind to a halt.

Face it. Strong global demand for solar isn't going to slow in the face of $95 oil . . . and there's plenty to get excited about thanks to China's insatiable demand ahead of the Summer 2008 Olympics, and the United States' solar energy plans:

· George W. Bush has announced plans to increase federal government spending on solar energy to $150 million.

· California's Governor Schwarzenegger has pledged a million solar rooftops by 2017.

· Former New York Governor George Pataki even inked a bill offering a $5,000 tax credit to homeowners who installed solar-power roofing.

· Add to this the Chinese parliament's plans to convert 10% of the country's energy consumption to renewable energy sources by 2020, including the use of solar-generated electricity and solar water heating, and you've got an emerging industry with only a select few players for all the wealth to flow to.

But without enough polysilicon supply, the valuations are unsustainable . . .

We've already seen China Sunergy plummet 15% on warnings that short supply of polysilicon will cut into Q2 margins.

But then take a look at a polysilicon-supplying company like MEMC Electronics, whose stock soared from $45 to more than $70 within a year.

Is it too late to profit from the polysilicon supply-demand crunch? No.

Take a look at $132 million Hoku Scientific, Inc (NASDAQ:HOKU), a small cap stock stuck in a four-month coiled spring with more than $500 million in inked deals with Sanyo Electric Co. (OTC:SANYY) and Expertise Water Division.

On the recent pullback to sub-$8, I have a $10 near-term price target on HOKU. The company is taking steps to ensure that its polysilicon plant is on schedule for mid 2008, with initial polysilicon shipments by 2009.

Stay tuned for more in SC Trading Pit.

Happy Profiting,

Ian L. Cooper
energyandcapital.com

"Energy stocks... The only way a human is going to make any money."

-- Matt Simmons, Peak Oil's first and most vocal proponent,
and founder of the country's last pure play energy investment banking firm.

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With Nanosolar's new paper thin PV sheet in production, what would be the impact of PS market? I know it wouldn't be absolete but it will definately have a huge impact. Why would people buy expenseve PS solar cells while they can get much cheaper and flexible material with higher out put and 1/3 the cost. Also, this material can be put on any surface even on building glasses to top of cars. ref. nanosolar.com

Has anyone heard of the new oil fields coming on line in the South China Sea, 300 billon barrels..... the fields off the Brazilian coast another 90 billion, the fields in Africa another 70 billon, Russia and upper middle eastern countries another 280 billion, the tar-sands in central Canada, Montana & Colorado ..... off the east and west coasts of the US. and the list is growing every week .... The Gulf is just now half open to drilling. Their finding oil 10,000 feet below the waters of the Atlantic at 30,000 feet that will make OPEC look like a piker. In am interview with Carl Rose it was Lee Raymond, former CEO of Exxon who said just before his retirement "With the new technologies coming on line we have enough crude in the ground for the next 250 year if we start developing alterative fuels in the next ten years". He was referring primarily to fuels like hydrogen ..... The concept of Ethanol as an alterative is a fraud. To fill this nation needs for Ethanol we would have to plant every square foot of fertile land in the US with corn. What good does it do for inflation when the cost of other croups go up as more and more farmer turn to corn as a croup of choice. I've been researching the oil and gasoline debacle every day for the last seven years, and I have to say "you ain't seen nuttin yet!" The oil rush is on. And just like the subprime debacle the oil new suppliers coming on line is going to crash the market. This is something that can't be kept under raps for much longer.

Also the cost of petrol in Europe carries a 75 to 80% tax, meaning that if you remove the tax the cost of petrol drops to $1.97 a US gallon, and in the rest of Europe the story is about the same. What to they get for that tax of 80%, they get nearly free health care, free higher education for those students who carry good grade through the lower grades.... they get better highway and bridges, good transit systems that can carry you all over western Europe. So when you hear someone talking about the cost of petrol in Europe, don't forget to point out to them the details of that misleading statement.

We were being set up in 1983 when the fed under Regan deregulated the commodities markets. and even before that when Nixon took us off the gold standard. Now even OPEC is saying we are being taken to the clearers by the crude oil speculators, as well as a host of other deceptions now being played out in the US markets. I just dump my gold holdings last week after 12 years of playing that game ... as well as my green stocks. I'm playing the hydrogen production and fuel-cell industry in Norway and Canada now.

This morning I got a phone call from a Paul Chapmen at the U.S. Dept. Of Energy, but that another story about 600 new fields opening in 2006 on and off shore in the US.

People investing in crude now are to late to make the big bucks.

Not all solar power companies use silicon - there is a company whose third generation solar technology uses paste and dye. It is designed to mimick a natural process and is claimed to be more efficient in low light conditions eg inside rooms. They have just signed a deal with a major materials manufacturer. Sorry to be cryptic but I had to work hard to uncover the name!

I question the wisdom of investing in polysilicon while the new thin film, triple coated, plastic PV cells are waiting in the wings which should be much cheaper and require no silicon. Remember how Edison teasted so many kinds of banboo to find the type which would make his carbon filament light bulb? Please ask the important questions before investing!

George Pataki is no longer governor of New York. What other claims are also incorrect?

It's nice to find a website where smart people know what they are talking about. Peak-Polysilicon? Yes, it's a supply production problem. Yet correct me if I am wrong, some solar requires crucial metals and such as silver, gallium and indium? We need to think clearly about modernity. All of modernity is about digging something out of the ground and burning it. How modern is that? Or burning some fuel to dig something else out of the ground and consuming it in huge vast quantities. 25% of the cost of mining is the cost of fuel. Yes I am for solar but it is and has a huge problem of scale. We need to make as much money from it before the barn door closes forever. We are like the dog that chases a car. We will never catch it! Regards, Aramco Renick

it would be nice if you would say where hoku company is(what country) and who their primary market is.