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To
OTC Journal Members:
On to a new and timely idea. In the
April
8th edition I mentioned that I would be looking for new ideas in
small companies that could generate attention from national media. I like
those big, streaky runs when stocks get noticed. They make for great profit
opportunities. Here's the first of two new ideas positioned to generate
some serious attention. With oil spiking to new all time highs at $70 plus,
it's very timely. I'll let CNBC do the talking for me and
you be the judge.
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US Energy Initiatives (OTC BB: HYFS) (Former
Name: Hybrid Fuel): The Right Idea At the Right Time
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Anybody thinking about rising fuel
costs these days? It would appear $3 plus gas at the pump is here to stay.US
Energy of Tampa, Florida is offering a fuel and money saving solution.
In order to avoid confusion, you should know the company recently changed
names to US Energy Initiatives Corp, but still shows as
Hybrid
Fuel at many quote sites.
I was going to publish on this stock
Tuesday after the close, but a 30% surge in price that day on big
volume held me back. I am emphatic about helping you trade smart. Accumulating
these stocks on the 61.8% retracements is a must. HYFS hit the number
today- time to grab the pullback.
HYFS manufactures and markets
retrofit systems that allow engines to run on two different types of fuel
simultaneously. This is known as "Dual Fuel Technology".
The company is focusing its sales
efforts today on the diesel engine market, but has other applications with
its core technology.
In short, you take a diesel engine,
invest about $4,500 with HYFS, retrofit it with their system,
and then burn diesel fuel and natural gas or liquefied natural gas simultaneously.
Net return to owner in fuel savings: complete
return on investment of initial cash lay out in 8 to 12 months, depending
on the engine and its usage.
Consider the chart. This chart depicts
the price of Crude Oil vs Natural Gas in BOE (barrel of oil equivalents).
Both peaked simultaneously in December. However, since then, oil has charged
to new highs, while natural gas has cratered despite dire predictions to
the contrary.
Personally, I don't buy into the
concept that skyrocketing oil prices are the result of supply/demand imbalances-
I believe geopolitical risk is a major component in the pricing. Note that
in the last month the price of oil has spiked to a new high as Iran threatened
to become a nuclear power and the war in Iraq drags on. Natural gas has
remained low because it is harvested regionally, and therefore not subject
to international market speculation.
Once installed, the HYFS system
not only reduces fuel consumption considerably without sacrificing performance,
it also reduces pollutants dramatically.
"There's even a way to harness the power of
hybrid without replacing the entire truck"
Melissa Lee from Going Green
Report Aired 3/30/06 on CNBC |
Looking for an idea in a low priced
stock with lots of upside that could get considerable media coverage? I'll
let CNBC do the talking for me. Here's a video clip from a special
report aired on CNBC included Hybrid Fuel Systems as an up and comer
in the fuel savings arena:
Simply Click
Here to view the video. Your video player- either
Windows Media, Real Time, or QuikTime should automatically open and play
the video. If you don't have a media player or speakers, you will not be
able to view the presentation. It runs 3 minutes 26 seconds. If this company
starts delivering major sales contracts, it could be the best 3 minute
26 seconds you ever invested in your life, provided you own the stock.
Here's the url for those tech saavy
individuals: http://www.otcjournal.com/news_images/hybrid.wmv
Here's a couple of pictures of a
retrofitted vehicle. This is the Trash Hauler shown in the CNBC video
clip. The system is bolted in the engine compartment. It requires two
technicians and one day's work.
Throughout the remainder of 2006
I expect the company to gain considerable sales traction- especially in
the Far East. As Melissa Lee points out in the video clip, the price
of diesel in the Far East runs as much as seven times the price in North
America. In addition, there is a great concentration of heavy equipment
doing a lot of work in China and other regions of the Far East- the market
is enormous for their products, and the equipment is only out of service
for one day to complete the retrofit process.
HYFS recently filed it's year
end numbers for 2005. On paper, the company lost $3.26 million on $652K
in sales. Sales were up 470% over the previous year, but still at an anemic
number. I expect the top line to improve considerably in 2006 by a much
greater margin.
As of March 24th, HYFS had
about 105 million shares issued and outstanding, yielding a total market
value of about $28.5 million. Clearly, the stock is not trading
on its trailing numbers. The market has great expectations for this company.
Sticking with our discipline of accumulating
on retracements, the chart tells me one should be accumulating this stock
between $.27 and $.33 (between the 61.8% and .382% levels).
What's our upside? I believe it is
simply a function of sales announcements. The larger the sales, and the
more high profile the customer, the better the stock will trade. I would
not be embarking on coverage of this company if they didn't have a full
pipeline. Not all sales will come to fruition. However, after extensive
conversations with management, I like our chances. Certainly, with oil
making new all time highs, this stock will catch the attention of the market
if and when they deliver.
Moreover, retrofitting is not the
only avenue they are pursuing. They are in discussions with several OEMs
(Original Equipment Manufacturers) to include the system on new equipment.
If the market decides to sell off
due to fears of inflation on the heels of skyrocketing oil and gold, this
stock will serve as an excellent hedge against a correction in other sectors.
As sales are delivered, I believe
we have a good opportunity for main stream media coverage. You can see
what happened on the chart from the CNBC coverage- a 4 million share
day and a new multi month high. I see this kind of spike happening again
in the future.
After all, consider the following.
In Lee's report she mentions UPS, Fedex, Eaton Corp (ETN), and
US Energy Initiatives (HYFS). Of the four, only two have actually developed
technology, making them investment candidates. The other two are consumers
of the technology. Of the two in which you can invest, one is much riskier,
but has far more upside from where it stands today. You do the math.
Accumulate between $.27 and
$.33
for the next event driven surge. This level should just be the beginning.
This one is sure to have tradable surges. Longer term upside: If the company
can deliver on some of the opportunities in its pipeline, I could see it
at $1 down the high oil/lower natural gas cost road.
I'll be putting up a BLOG
in the next couple of days for questions and comments.
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