Nat Gas Engine Power: WPRT and CMI
The natural gas revolution might sneak up on some investors if they aren't paying attention. Case in point is the institutional accumulation of Westport Innovations (NasdaqGS: WPRT - News), the little $1 billion company that is seen as the technology leader in converting diesel truck engines to run on nat gas.
This is a weekly chart to highlight the 4 weeks of big buying, two back-to-back in late March and early April and two in the first half of September. Riding the upward trend of its 20 and 40-week moving averages will bring more attention too.
If you've followed my column here this year, or at TheStreet.com last year, you know that I look at this opportunity on a couple of different levels.
First, the optimism about the company is built largely around the Congressional bill H.R. 1380, the so-called Natural Gas Act, which is designed to create government subsidies via tax credits to encourage the conversion of 18-wheelers. Oil billionaire T. Boone Pickens has been a vocal proponent and active lobbyist for this legislation.
Second, even without the government incentives, using domestically abundant, cheap, and clean-burning natural gas for our major mode of transportation of goods across the country is a no-brainer. It will happen eventually, with or without subsidies.
I have been trading the swings in WPRT this year ever since it broke above $20, getting familiar with the stock and what moves it. But I had great 'secret' edge besides the logical, fundamental story above.
Big Brother Cummins
Westport didn't find just any partner to secure its position as the leader in this industry. They went with one of the top diesel engine manufacturers in the world, Cummins (NYSE: CMI - News).
The two companies call their joint venture Cummins-Westport. Such a simple, powerful name you almost never hear. When I first heard it, I suddenly realized that not only was there a meaningful future for nat-gas engines since the big guy was on board.
I also realized that Westport must have the technology and management to be a serious player or Cummins would not have chosen them to partner with. This gave me extra confidence to buy an unprofitable company, a sort of 'psycho-fundamental' edge in the trade.
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