For those of you who may not have seen the most recent Cabot Market Letter, here is a part of that letter that refers to Ballard.
I know that some of you aren't too fond of Cabot; however, please remember that he isn't the only investment analyst that is recommending Ballard. Morgan Stanley Dean Witter is among those as well as several major Canadian investment houses... and there's more to come.
THE CABOT MARKET LETTER # 876
APRIL 3, 1998
(Excerpt)
BALLARD POWER
CAN THIS ROMANCE CONTINUE?
Since our last Letter Ballard Power soared from 102 to 132 1/2 and then
back to 94. It's now moving ahead once again. It has an exceptionally
strong RP line. Please don't assume that the price is too high. Just buy
fewer shares. There may be only a few times in your life when you are
presented with an investment idea as big as this one.
If you were to make a list of the greatest inventions of the past century,
you might name the telephone, radio, airplane, television, and most
recently, the semiconductor. Whatever the invention, if it truly changed
the world you can be sure that early investors in the industry reaped big
profits. Which brings us to Ballard Power. . . . .a company whose
technology has the potential to change the world just as much as those
other technologies did.
The technology in this case is the fuel cell. Used for decades by NASA to
power spacecraft, the technology is fast developing to the point where it
will be cost-effective to use it in your car. A fuel cell can create
electrical energy without creating pollution. . . . .thus powering an
electric motor that propels your car. It can run silently. It can fit in a
suitcase. It has few moving parts. It needs no muffler. And it can
extract energy from fuel more than twice as efficiently as today's standard
internal combustion engine. Both power and range can be as good as today's
cars!
There are still some obstacles, but they are being surmounted quickly. For
example, the fuel cell's platinum catalyst has traditionally been its most
expensive component. But since 1990 engineers at Ballard have reduced the
use of platinum in their fuel cells by 90%. Then there's the question of
what to use for a fuel. Hydrogen is used in the fuel cell itself, but
there will on an-board reformer, which transforms either gasoline or
methanol into hydrogen. Methanol is easier to convert, but harder to find
today. Gasoline is ubiquitous, but harder to convert to hydrogen. . . .
.and the warm-up time for the reformer is an unacceptable 10 minutes. But
these challenges are being tackled by an increasingly large and motivated
and successful group of engineers and scientists.
Today, Ballard's work-force numbers over 350. And they're not working
alone. Daimler-Benz has committed $325 million to become a minority
partner. Ford has invested $420 million, and also contributes expertise in
electric drive systems from its disappointing battery-powered EVI. Early
customers of the ever-improving fuel cells have included Chrysler, General
Motors, Honda, Nissan, Volkswagen and Volvo. Conspicuously absent is
Toyota, going it alone so far. Competitors, all bigger but less focused,
include Allied Signal, Siemens and United Technologies. But Ballard is
single-minded, and has a three-to-four-year lead. It also has 210 patents
granted or filed, which we believe will keep it ahead of competitors.
Ballard's goal is to become the automotive equivalent of Intel, providing
the standard power source for all the world's automobiles. Ballard CEO
Firoz Rasul expects 10,000 to 50,000 fuel cell cars to be built in 2004.
Ford's goal is to have cars in production by 2004. And Daimler-Benz's goal
was also 2004. . . . .a year ago. . . . .but CEO JĀrgen Schrempp recently
said, "If we achieve what we project, I think we can go into serious
production for cars sometime in 1999 or 2000."!!!
Thus if you take a long-term view, and envision Ballard meeting its goals,
we can conclude, easily, that the stock is a good investment today. On the
other hand, if you look only at the present you see a firm with minimal
revenues, no earnings in sight for several years, and a market
capitalization of $2.6 billion. To some, that's a clear overvaluation. Our
method is to look at the stock, and see what the investment community, in
its collective wisdom, is saying. With Ballard, it's clear. Both the
stock's price and RP line have been on an upward trend since November of
1996 when the stock was 19. To a large degree this appears to be buying by
individual investors, who have learned about the company through articles
in publications like The New York Times, Investor's Business Daily,
Business Week, Wired, Ward's Auto World and Automobile Magazine. Most
recently, Fortune Magazine ran a feature story on the company that boosted
the stock to its latest peak on March 17. The pullback since then, to a
brief low of 94, has been normal and acceptable.
So the question is, will the stock keep on climbing to new highs? Will the
investing public keep on bidding this stock up in anticipation of a
glorious future? Will the romance continue? We know that it can. And we
hope that it will. So we continue to rate the stock a buy. And we
continue to keep a close watch on that RP line.
Final note: There may be only a few times in your life when you are
presented with an investment idea as big as this one. Ballard has the
potential to have as big an impact on the world as the microprocessor. It
has the potential to truly change the world.
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