Geothermal Energy: This company is a stimulus magnet!
Today's Financial News - Posted March 10, 2009
Today’s rise in CITI Group (NYSE:C) and Bank of America (NYSE:BAC) drew attention from the potential of alternative energy companies like U.S. Geothermal Inc. (AMEX:HTM)…
by J. Christoph Amberger
Baltimore—TFN: The U.S. markets soared today. News of positive earnings at embattled banking giant CITI Group (NYSE:C) indicated that there’s a spark of life remaining in the U.S. banking industry. Shares went up close to 30%… meaning that the former banking behemoth is no longer a penny stock. TFN Hot Stock Confidential members rode the coat tails of Citi Group’s rise to watch their position in Bank of America (NYSE:BAC) clock in at 21% gains.
Among the top-performing sectors today were energy and utilities. Especially alternative energy stocks.
Coincidence? Check out the stimulus bill, and you’ll find plenty of mention of renewable energy sources. Billions and billions of dollars are allocated to new battery technologies, solar energy, wind power… you name it.
Seems like only nuclear energy is too self-sufficient or promising to qualify for new subsidies. Not so geothermal energy. There’s a whopping $400 million… that’s $400,000,000… allocated for geothermal technologies.
Now, unless you live in Iceland, geothermal energy has not played a big role in your own backyard. The United States may generate more geothermal electricity than any other country. But the electricity produced represents less than one-half of a percent of the total U.S. output. And since the most active geothermal resources are usually found only along major tectonic plate boundaries, only four states have geothermal power plants so far:
California has 33 geothermal power plants that produce almost 90 percent of the nation’s geothermal electricity. Nevada has 14, and Hawaii and Utah each have one geothermal plant. So, there’s four states with geothermal capacities. That’s $100 million stimulus per state. There are a total of 49 geothermal power plants in the United States. That’s almost $8.2 million per plant.
Will $400 million in “government investments” double the U.S. output of geothermal energy? It just may. Come 2012 or 2016, geothermal energy may account for a whopping 1% of U.S. energy output. Money well spent, indeed.
Meanwhile, I expect government money to lift especially the smaller geothermal outfits. Companies like U.S. Geothermal Inc. (AMEX:HTM), which ended the fourth quarter in the hole $800,000. The company has a well-developed pipeline into government grants already. Last year, the U.S. Department of Energy chose U.S. Geothermal’s Raft River site in Idaho to demonstrate the viability of Enhanced Geothermal Systems. The Raft River EGS program totals up to $9 million, with the DOE providing up to $6 million as part of the cost-sharing arrangement.
The stock, now priced at around 79 cents, has weathered the post-Inauguration turmoils as well as any company caught in a 21% market drop posibly could.
While it may be a while until we see its 52-week high of $3.23 again, I think gains of 30-50% over the next 9 months are realistic. Be careful buying. This stock has an average volume of 275,000… so don’t chase it past 90 cents.
***** Strategic Options Update: This week looks like it’s custom-made for options traders! The markets are ready for a multi-day upward move… especially if the mark-to-market hearing goes well. And options prices have come down over the past two days as proven by the drop in the VIX.
To maximize gains on this volatile scenario, TFN Strategic Trader Andrew Snyder recommended one particular Call option today. There’s some risk in this play, with expiration in just under two weeks, but the potential is huge: “At their current price of $0.50, the breakeven on these options is $18. Shares of the stock are currently trading for $16.10, but traded above $18 as recently as last Thursday. With a little help from a market pop, this company should be above that level again before expiration.”
If you’ve followed Andy’s work over the years, you know that he likes to buy right alongside corporate insiders or major stakeholders. This is exactly what’s happening with this company. A major investment firm just bought over 4.3 million shares of the company at an average price of $19.23.
Andy writes: “Again, this is a risky play. But the reward far outweighs the downside!”
These options are still priced at $0.50, and Andy sees opportunity in buying up to $0.65. This is a straight-forward options play that anyone with Level 2 privileges can execute. If you feel ready to join our TFN Strategic Traders on this play , please follow this link…
By the way: TFN Strategic Trader Charter members are quickly realizing how smart a move they made. Through the power of leverage, we’re already seeing a powerful 67% surge on our Gene Switching option, with even more on the way. Investors who put just $1,000 into this simple strategy are already sitting on a position worth more than $1,600 since we first wrote about them in the TFNeNews last Wednesday. You may have missed out on some of the gains… but the remaining upside is HUGE! Don’t say we didn’t invite you!
Next Article: Strategic Options Update: Buy this option up to $0.65
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