Alternative Energy Plays for the Long Term

As a Long Term Investor I rarely focus on short term trading opportunities. Research has shown time and time again that heavy trading more often than not creates less than stellar results. In this spirit, I want to discuss two companies that I believe offer great long term prospects based upon their unique technologies, demographics, growing resource shortages and / or constraints, and economic trends. The first company is Sasol. For the purposes of disclosure, I own shares in this company.

Sasol is an energy company based in South Africa. For those of you who do not know, the history of the modern South African State is unique and bears mentioning. After South Africa gained independence from Great Britain, the minority population (Whites) imposed a harsh and degrading system of rule upon the majority population (Blacks) known as Apartheid. Because of this, many nations imposed economic sanctions against South Africa. As a result, the country could not be sure of its ability to meet the energy needs of its population and turned to local resources to alleviate the situation. South Africa, however, possesses little oil and could not produce any where near the amount of diesel, gasoline, and other petroleum products needed by their economy. Fortunately, for them, South Africa is rich in coal and using a technique developed by the Germans in World War II, they were able to synthesize all the fuel and chemical feedstock they needed. Sasol is the company that was created by the South African Government to carry out this task. Today, it is a private enterpise and is a global player in the alternative fuels market. The company is currently expanding its operations in South Africa, building two Coal-to-Liquids plants in China, a Gas-to-Liquids plant in Quatar, and developing several other smaller projects. Fundamentals on the stock are good. Low debt to equity, strong balance sheet, excellent earning growth, and a dividend yield north of 3%. Oh, I forgot to mention, the process Sasol uses to make its fuel and feedstock are profitable as long as oil is north of$30 according to most analysts. Anyway, for those of you that are interested in a highly profitable alternative asset play that does not rely on government subsidies such as ethanol or solar, check this one out (the ticker is SSL).

The second company in the alternative energy arena that I recommend strongly (although, only on dips) is American Superconductor. The ticker here is AMSC and I do not own any shares as of yet. This company, like the name implies, makes products based upon 2nd generation superconducting technology. With everything from ship propulsion engines to fault current limiters to inter connectivity solutions to superconducting cables this company has it all and is a winner. Most importantly, AMSC has a strong balance sheet and enough cash to last until projected profitability (management recently stated that profitability would be achieved in 2009 once production of its 344 superconducting wire reached commercial scale. Given the current congestion on the power grid in the United States, developed Europe, Japan, and South Korea this company could be the next big thing. Again, Check it out.