Newsletter Watch: U.S. Geothermal
"To limit risks when investing in alternative energy,” Keith Fitz-Gerald says, "We look for companies that meet three specific criteria: an actionable business model, a strong financial position and an actual revenue stream.”
Fitz-Gerald—who works from homes in both the United States and Japan—is a 20-year veteran of the money management and newsletter world. He recently became a contributing editor to Money Morning, a daily global newswire service, and is also the editor of the New China Trader.
One small-cap company that he believes meets all of his aforementioned objectives is Idaho-based U.S. Geothermal Inc. (TSE: GTH).
"The company has been in start-up mode for a few years now, but it's now set for the big time,” Fitz-Gerald says. "Since I started following this tiny dynamo, the stock price has risen 278%. Even so, we're just starting to experience this company's true power—pun absolutely intended."
As its name implies, U.S. Geothermal is a renewable energy company focused on the production of electricity using geothermal energy. Fitz-Gerald says geothermal power utilizes naturally heated underground water springs to turn turbines above ground by injecting water into the ground and pulling out steam.
Because of this, he observes, geothermal plants are not immune to oil or natural gas prices. In fact, he says, geothermal plants are typically self-sustaining and can work uninterrupted for years once operational.
"Wall Street is hardly paying them any mind, with the result that the industry as a whole is relatively undervalued," he says.
According to Fitz-Gerald, the company is sitting on two geothermal sites. There's the Raft River site (8.2 square miles), which is about 200 miles south of Boise, Idaho (formerly a geothermal test site for the Carter administration), and the Neal Hot Springs site in eastern Oregon (8.5 square miles).
Both projects, he says, will be constructed in phases. Raft River Phase I is set to yield 13 megawatts (enough to power over 10,000 homes) and will be operational within the quarter. Phase II of Raft River and Phase I of Neal Hot Springs will achieve full operating capacity as early as 2009.
Technically speaking, Fitz-Gerald says, "The company is pretty small with a market cap of just under $200 million, but we're willing to overlook that because its shares are trading on decent and accelerating volume—and we define that as exceeding the 13-week average of 198,186 shares. This suggests to us that there's good liquidity."
The advisor highlights his four top reasons why speculative investors should consider these shares:
• After several years of development, U.S. Geothermal plans to begin power production within the quarter. Not only is this going to generate earnings immediately, it will also bring the company to the attention of millions of dividend-hungry investors.
• Even though the company has been in the developmental stage, it's already inked deals for its output with both Idaho Power and the Bonneville Power Association. This means that the moment U.S. Geothermal flips the switch, it's got revenue.
• U.S. Geothermal has, for the most part, already recognized its expenses. This means the geothermal-power firm won't sucker-punch shareholders with nasty surprises in the form of ongoing development costs. Indeed, there's very little in the way of nasty surprises that could upset the firm's future profit potential once it goes operational.
• As far as its shares go, UGTH is an “orphan.” It's largely undiscovered by investors and has little following on Wall Street. That means the proverbial herd hasn't latched onto its potential—at least, not yet.
Fitz-Gerald also says that the company began trading on the TSX, Canada's senior equity exchange, on Oct. 1. "This listing raises the company's profile and also boosts its liquidity," he says.
"We believe there's still plenty of room for the shares to run as the story gets out. And it will. The company is in the right place at the right time,” he says. “It's well-funded and is making all the right moves as it transitions from start-up to operational status."
Overall, Fitz-Gerald says, "Revenue will be strong from the outset, and will gain in strength and magnitude as conventional energy prices continue to rise and the need for alternative energy grows in the months and years to come."
