What Are Carbon Credits?

Today, just prior to the market’s open, China Energy Recovery made an annoucement which opens a whole new line of interest as it relates to their business- it also helps explain their 110% annual growth rate the last two years running, and headed that way this year.

CGYV announced the following about one of the 2005 installations- the Two Lions sulfuric acid plant- the largest sulfuric acid plant in China.

It seems Two Lions has such a perfect environmental footprint that it has been awarded Carbon Credits which will equate to more than $2.5 million in extra annual revenues.

So, this leads to the inevitable question- What the Heck is a Carbon Credit?

Carbon Credits were established in the Kyoto Accord- a world wide doctrine signed by 179 countries which sets standards for carbon emissions. Under the Accord, emerging nations are allowed a certain quantity of carbon emissions. The concept is designed to mitigate the climatic changes from global warming.

The United States, under the Bush Administration, has refused to sign the Kyoto Accord, a move that has angered many friendly nations around the world.

All other major nations, including all of Europe, has signed the Kyoto Accord and adheres to its standards.

Under the Accord, emerging nations are allowed a limited carbon footprint. Within their respective countries, there may be industries that generate a positive carbon footprint, and others with a negative carbon foot print.

The industries with a negative carbon footprint must buy carbon credits through an exchange to equate to zero carbon. Manufacturers with a strong carbon signature can generate carbon credits that can be sold for cash.

According to the release, Two Lions is so fuel efficient it is generating carbon credits that will yield more than $2.5 million in cash payments annually. Moreover, as a result of the CGYV installation, Two Lions is burning 120,000 less tons of coal than it would without CGYV’s technology. That’s a lot of smoke in the air.

These carbon credits add a whole new dimension to the attractiveness of their technology. It’s another way for the installer to get a return on investment.

Yesterday was a very interesting day for the stock. I cautioned investors in an early BLOG the stock was trading poorly, and it might pay to wait for stabilization if you wanted to pick up some shares.

The stock was pretty much in a free fall yesterday until about mid day. This is an hourly chart from yesterday- each bar represents one hour of trading. Note the big down bars in the early sell off, associated with high volume.

At the end of the day, the stock turns rather abruptly up to finish much better on a nice volume surge.

As I suggested in yesterday’s BLOG, I suspect a couple of the funds who invested in the stock are dumping rather aggressively for reasons unrelated to the company. That’s just an educated guess.

They may have simply run out of supply, as the stock has traded pretty darn good volume for the past two weeks.

I’m not prepared to trust it yet. It will be interesting to see how it opens today and trades throughout the remainder of the session. I’d really like to see a couple of quiet days with very little pressure on the stock to be convinced the excess supplies have been absorbed.

For more information on Carbon Credits, Click Here. To read today’s press release, Click Here.
Comments and questions are welcome.

6 thoughts on “What Are Carbon Credits?

  1. I just want to share my opinion with your readers that the seller in the stock is obviously selling for reasons other than the nature of his original investment in the stock (he bought the stock to make money through price appreciation). He needs the cash, period. I think an hypothesis that the seller got himself in trouble in another sector and has to raise cash by selling his $2.18 cost basis CGYV shares is credible and highly probable. I believe, like you mentioned, that the stock could slip below 2.10. Therefore, spending all one’s cash following the stock down might not be the best plan. Leaving some cash available in case there is a reactionary low in the stock brought about by the newer longs tossing in the towel might be a better idea. This is a bummer, but a short term one only. This is, overall, a real opportunity to allow us all to set aside fear and make an investment at these levels in the stock. The stock’s value has gone up with it’s decline in price as evidenced by the increased sales base. I believe risk oriented investors should position this one appropriately within their portfolios and get ready to make some substantial gains within days to weeks. When the seller is done, the stock will respond. I have no doubt and have put my money on that premise. Kind of long winded, but I mean well:)

    Thanks for letting me blog.

    Editor: There’s lots of irrational sellers out there who are selling for reasons having nothing to do with the company’s. At some point, this will be a benefit for a few brave souls with 2 C’s- Courage and Cash. I don’t know when it will be day to day, but if you can see out six months, what an opportunity.

  2. I need some help I am confused. While reading your site I see a ssl on cgyv at 3.00 now I am reading that it is 2.00 can you explain to me which one is correct. I am still in the stock but now it is 1.85 should I get out or stay in. I cant really afford to lose much more on this. I bought at 3.20 if that helps you. Thanks

    Editor: Good question- I introduced CGYV at about $3.50 with a $3.00 SSL. That was over a weekend, and that Monday the market was down over 500 points and stocks were just collapsing in a free fall. I waited 10 days, then reintroduced the company- a kind of “start over” if you will for those who weren’t in the stock at about $2.50 with a $2 SSL. Of course, then we had a nearly 800 point drop in the markets. The stock traded a bit below that SSL the second time around, but seems to be firming now. The SSL only matters if you are focused on preservation of capital. If you are a long term investor in the idea, it doesn’t make much difference. In the case of CGYV, I have personally been a buyer of the stock from $4 down to $2 on this one- I have put over $110k of my own money into the stock. I have decided to be long term on this particular stock as I think the valuation here is absolutely absurd and the company won’t need to raise any capital- they have plenty of cash and are making money. I believe the low price is being forced by irrational selling from early financing funds who have to raise cash at any cost. To me, that makes for a great opportunity. I think if you are going to be long term in a small stock in this environment, it needs to be in a company that won’t need to raise capital. Capital is going to be very expensive in this world. I would suggest you watch the video on Suggested Stop Losses in the video library for a better understanding.

  3. Some clown has decided, on another blog, to do the ole “attack your character” thing to try and bash the stock through bashing you. I just wanted to head that off at the pass, if you will, be letting your readers know how I felt about that…from an experienced, broker point of view. During the 2000 market crash, dishonest and honest clients alike (mine) lost money. Everyone, pros, money managers…everyone, lost money. BUT some of those dishonest clients who looked at the big firms for recourse sued. They correctly figured that the feasibility of a drawn out arbitration (in our business it is arbitration that settles the matter) to the big firm was not as cost effective as a settlement. Money for nothing. The dishonest client walks away with something for their dishones efforts. 3/4s of the senior VPs and brokers in my office were sued during that timeframe. I was sued. Merrill settled them all for peanuts compared to the actual asking amount. Investment advisors get sued all the time. Newsletters are prime targets for those who blame others. My public profile with the SEC has my settlements on there. It happens in our busniness but WHAT NO ONE EVER DOES IS CREATE A SEC-LIKE PROFILE OF THE ONE WHO IS SUING. WHAT ABOUT THE CHARACTER OF THE PERSON(S) DOING THE LITIGATION?
    Your SEC record, mine whoevers, does NOT EXCUSE AN INDIVIDUAL INVESTOR FROM ACCOUNTABILITY. All investors in cgyv or whatever security invest with eyes wide open, on their own accord. We, the advisors, advise with the best interest of the reader/client in mind with full disclosure. But, the evil, litigious nature of some victimizes honest people like you and like me.

    Thanks for all you do for us. You find us stocks we didn’t know about. Then, when we invest, it is UP TO US TO BUY AND SELL IN ACCORDANCE WITH OUR INDIVIDUAL CIRCUMSTANCES AND INVESTMENT OBJECTIVES. You publish SSLs and for those who, bless their hearts, don’t know otherwise, better listen. If they don’t, they are accountable. Heck even without your Suggested Stop Loss, we, the investor/reader, are accountable for researching the company.

    We are accountable for our own actions.

    Thanks for letting me ramble.

    Editor: I don’t know what all this noise is about, and I really don’t care. The companies are the companies, and I don’t run any of them. They will either do well or not, and investors should look at the facts on the companies.

  4. http://www.otcjournal.com/OTCJ-Its-Noisy-Out-There/af/archive/20081004-1/

    The above piece you wrote is the exact same translation, I believe, for the CGYV.OB market. The stock has not just sold off, it is DEPRESSED AND COMPRESSED. It will most likely double from here within a fairly short period of time (days/weeks) before establishing a firm, 30-45 degree sloped graphical upward trend. I believe this and I’ve been placing, constant purchasee orders accordingly. Having said that, for your readers, I have a high risk tolerance and don’t necessarily think this is a buy for every investor. But, the aggressive types should be accumulating, in my opinion, while this fund manager (s) is/are selling. Additionally, I believe this company’s stock will experience double the liquidity (trading volume) that it currently displays on a daily basis when the fear/smoke clears. Like you said, fear is the picture here and deciphering the real message is difficult. If it wasn’t, everybody would be a genius with money to spare…:)

    Thanks for the great piece pasted above.

    editor: Thanks for helping people get to the content.

  5. I want to thank Lewis and the editor for all the info on GCYV. I bought the stock at
    4 3/4, (a thousand shares). I am a long time investor in this stock, (three to five years). Of course it hurts to see this stock down like this but I feel like this is not from anything fundementally wrong with this company. This I feel is a buying opportunity.

    Editor: The problem with this stock is forced liquidations. If you look at the registration statement, you will see a number of small funds who participated in a financing last spring at $2.18. $8.5 million was raised. A number of the smaller funds have since been forced to sell regardless of price thanks to a combination of redemptions from the investors and a seizing of the assets by creditors who are simply dumping the shares with no regard for price. This is painful in the short run, but a part of an overall bottoming process for the markets overall, small stocks, and CGYV especially. Once this process has runs its course, the stock could easily return to a reasonable valuation.

  6. The market is going up and yet this stock cannot get a spark I want too buy more but I almost feel that somebody knows a dark side to this company that makes it a bad apple because nobody seems to want it even with all the promising outlook . Your Thoughts please .

    Editor: There was a lot of forced selling from the funds who invested early. I think we are past that, and I think eventually the stock will start to behave better. I don’t believe you can make any predictions either technically about when the turn will be here. Clearly, the market and investors are not rational right now. If you want to continue to own this stock, you have to make the assumption the world will eventually turn its attention back to China, and be looking for bargains. I think it will be some time before we see growth return to the US, but there will be continued growth in China. They are starting to talk about it in the media now. Also, whether there seems to be a black cloud or not, the numbers in the SEC filings are the numbers. No matter what anyone says about the markets or even me, those are the numbers. Unless they are fraudulent, there is no argument that suggests the stock is worth less than where it is trading today.