Having a Cold One? Look at These Small Brewers, Vintners and Spirits Distributors

It seems that with the 4th of July and the All-Star break upon us, even SmallCapWorld ought to acknowledge that it is summertime.  That means solar panels will work pretty well, air-conditioners have probably been turned on at least from time to time, and in New York, the Public Theater is performing Shakespeare’s “Twelfth Night” every night in Central Park, and giving all the tickets away free.

It also means that Americans are finding it congenial to cook out, go out, picnic — and perhaps sample a bit of a libation from time to time.  In this article we are going to look at some of the smallcap suppliers of said libations, just in case our readers like to invest in the things they understand (or perhaps want to understand the things they invest in).

A Red Tail Ale van -- Drop me off here, please

It goes without saying that most of the beer, wine & spirits consumed in this day and age are supplied to us by megacorporations, and we are not going to cover those here, so this is definitionally NOT a balanced survey of the alcoholic beverage market.  We are looking at small companies — a couple of craft brewers, an excellent producer of Oregon pinot noir, and some scrappy small distributors with new brands and a lot of chutzpah. 

Start off with a company whose brands most beer drinkers already know: Boston Beer Co Inc (NYSE: SAM, http://www.bostonbeer.com/), the producer of Sam Adams, Samuel Adams, Twisted Tea and HardCider brands among many others.  SAM brews are served up all over the country, although we assume mostly in urban markets, and at least the headliners need no introduction to those who appreciate a cold one on a hot day (or a cold day, for that matter).  SAM shares have been hit in the downturn, and may be worth evaluating if you like their beers.  They closed before the holiday at $29.77, vs a 52-week high of $54.15, for a market cap of $424 million, and on average volume of about 83,000 shares a day.

Taking a step down in market cap, but perhaps not in quality (you taste it, you decide), have a look at Portland OR-based Craft Brewers Alliance (Nasdaq: HOOK, http://www.craftbrewers.com/), whose brands also include boutique beers that are fairly well known to aficionados: Redhook, Widmer Brothers, Goose Island and Kona Brewing, with small breweries from sea to shining sea and in Hawaii as well.  You can tell from the stock symbol which brand came first and is best known.  If you visit their website, click through to the websites of the individual brands — they are very entertaining (you are 21, right?).  HOOK definitely looks like it deserves some due dili to me, having closed at $2.02 on July 2, vs a year-high of $4.89, a market cap of $34 million and piddly volume of 18,000 shares.  Careful bidding would probably pick up some shares here, and — hey — buying your own beer is almost an investment then, right?

But if you prefer a really small brewer, have a look at Ukiah CA-based Mendocino Brewing (EBB: MENB; http://www.mendobrew.com/), makers of birdbrands like Red Tail, Blue Heron and Black Hawk, as well as a specialty beer, Kingfisher.  I have done some close inspection of these brews, and I have to say they pass muster.  If the market for shares is as smart as the market for beer, this company will do well.  But for now, MENB closed at $0.16 on Thursday the 2nd, for a market cap of, umm, under $2 million on almost insignificant volume.  If you read their financials, they have come through a difficult year or so, but they sure do have some good beer. 

OK, so much for beer.  If I have a plate of something hearty, I want some resveritrol with my meal.  It keeps a body young, or so I am told.  And the best source of resveritrol is red wine.   So have a look at Turner OR-based Willamette Valley Vineyards (Nasdaq: WVVI, http://www.wvv.com/).  WVVI has a list of wines as long as your arm, but one thinks first about a luscious and delicate pinot noir first and foremost (hey, it’s Oregon).  WVVI dropped from its year-high of $5.54 to less than $2, but it closed Thursday at $3.21, well on the road to recovery.  Market cap is just under $16 million, though, and trading is “by appointment.”  Still, you buy wine to cellar it if you like it — and you might want to cellar some WVVI along with it. 

Finally, you might want to look at some scrappy distributors who have scoured the country and the globe for the next Grey Goose.  Two very small ones are North Hollywood CA-based Marani Brands (EBB: MRIB, http://www.maranispirit.com/) and NYC-based Castle Brands (Amex: ROX, http://www.castlebrandsinc.com/).  Marani seems to be concentrating primarily on vodka under the company name (maybe it will be the next Grey Goose, it could happen), and Castle Brands is carrying several “premium” (i.e., higher-priced) brands including Gosling rums, Tierra Tequilas and Pallini liqueurs, as well as some bourbon and Irish whiskey.  My father told me you should buy stocks of companies whose products you use or understand — and if you go to the websites of these two companies, you may see a new or old friend.  MRIB closed at $0.08 on Thursday, a far cry from its 52-week high of $2.25, with average volume of 244,000 shares.  ROX closed at $0.20 vs a year-high of $0.85 on average volume of about 97,000 shares.

We’re not suggesting investments here – just writing about companies and stocks we find interesting and newsworthy.  Do your own diligence and consult your own financial advisors.  But you might want to put some of these on your screen (or in your cooler).

Consolidation Could Throw Wrinkle Into Aesthetic Laser Market

In the 1980’s, a commercial that seemed to run incessantly featured an aging woman – a Linda Evans type – saying the tag line, “I don’t intend to age gracefully. I intend to fight it every step of the way.” It turns out that the rest of us huddled masses also want to fight the ravages of Father Time, even in a recession. According to an annual survey by the American Academy of Facial Plastic and Reconstructive Surgery (AAFPRS), approximately 80 percent of board certified facial plastic surgeons reported an increase in non-invasive cosmetic procedures within the past year among consumers looking to delay the effects of aging and more costly surgeries. Medtech Insight estimates the market for energy-based aesthetic devices (read: lasers) will surpass the $1 billion mark by 2011, double its 2006 level of $510M. http://www.medicaldevicestoday.com/2008/07/energizing-the.html

One might be wrong to view cosmetic treatments merely as a nod to one’s vanity. Many believe that looking younger is as an investment in one’s career. The same survey showed that 75 percent of plastic surgeons said they had treated patients who requested facial plastic surgery to stay competitive in the workplace. The trend applies to men as well as women and is not limited to the U.S. London has named the trend the “City severance surgery,” and The Financial Times wrote of laid-off bankers using their severance packages to rejuvenate their appearance to boost the chance of finding a new job.http://www.ft.com/cms/s/0/cf6420a6-fde6-11dd-932e-000077b07658.html

Of course, improving one’s marketability in the workforce sounds better sounds better that admitting surgery to improve one’s marketability in the dating world, and that could bias the survey sample. Taken with a grain of salt, the survey demonstrates that the the market for highly discretionary cosmetic procedures is not as correlated to the recession as one would think.

Earlier this month, the aesthetic laser market had a big moment. Burlington, MA-based Palomar (NASDAQ:PMTI)  received FDA approval to market its wrinkle removing device to the home market. The stock jumped roughly 60% the day of the news and hit a one time, 52 week high of $18.94, before settling to its current $15 price. The Company also markets laser treatment for body contouring, acne, warts, hair removal, tattoo removal and likely countless other epidermal imperfections one could think of. The at-home market could add anywhere from $12.5M to $40M in revenue for 2010, according to a Maxim Group analyst.

Palomar maintains that the market for the do-it-yourself wrinkle removal market could be in the billions of dollars, but there will be plenty of competition. The industry seems ripe for consolidation as very little seems to separate the leading players, allowing for for merger(s) of equals. Palomar, with a market cap of $267M is the largest “pure play”, but the profiles of the next largest four companies are striking in their similarities.

Cutera, INC. (Nasdaq:CUTR). Average Daily Volume 115K shares. Market Cap $114M

Syneron Medical (Nasdaq:ELOS) 114K shares. $198M

Cynosure (Nasdaq:CYNO) 106K Shares. $98 M

Solta Medical (Nasdaq:SLTM) 75K shares. $75M

Solta Medical, formed from last year’s merger between Thermage and Reliant, was expected to lead to other deals. In covering the deal for In Vivo,  Mary Stuart wrote that “Sales and marketing account for the biggest costs of medical aesthetic companies, and because a number of the newer one-product companies now find themselves bumping into their competitors in physicians’ offices and at trade shows, consolidation in the industry appears to be in order.” http://sis.windhover.com/buy/abstract.php?id=2008800128

It made sense then and it makes sense now.

Recession? Hmm. Is the Talk Shifting to Recovery?

The most eye-catching headline I came across this weekend was titled “Is the Recession Over?” Authored by Paul LaMonica, it was on money.cnn (http://money.cnn.com/2009/06/19/markets/thebuzz/index.htm?postversion=2009062008).  Mr LaMonica consults various credentialed people and presents a fair case for both yes and no answers, and then observes with his experts that for most people the question is not whether the recession has ended, but when the pain will end.

Of course for us at SmallCapWorld, we are pretty interested in the stock market, especially the smallcap stock market, which has had its own pain cycle over the last 10 months.  We tend to suspect that the market can be an early indicator of recovery, especially when indicators are broad, and reach most of the major segments.

At the same time, in a more optimistic universe, Motley Fool’s Adam Wiederman was looking for “The Best Stocks for the Next 4 Years,” the sort of headline (and article) that presumes that the sun’ll come out tomorrow.  He even quotes Sir John Templeton about investing at “points of maximum pessimism,” which, aside from calling up the spirit of Benjamin Graham, is about as close as you can get to scripture-reading for investors.  http://www.fool.com/investing/small-cap/2009/06/20/the-best-stocks-for-the-next-4-years.aspx.  Not to ruin the suspense, but the 4 stocks that people he talks to have picked are (1) Insmed (Nasdaq: INSM, a development stage biomed company headquartered in Richmond VA), which closed Friday at $2.47 vs a 52-week high of $2.57, and a market cap of about $309 million; (2) Satyam Computer Services (NYSE: SAY, a diversified software and services company in Hyderabad, India), which closed at $3.65 Friday vs a year-high of $3.71, and a market cap of just over $1.2 billion; (3) Allied Irish Banks (NYSE: AIB, as you might guess headquartered in Dublin), which closed Friday at $5.35 vs a year-high of $32.48, but up from $1.44 on March 30, 2009; and RF Micro Devices (Nasdaq: RFMD, from Greesnboro NC), which closed Friday at $3.69 vs a 52-week high of $3.98 and with a market cap of about $980 million.  Note the lack of niche industry orientation and broad geographic interest.

Of course Wiederman also quotes a bear saying the bottom could fall out –  to keep things well balanced.

No one seems to have an unqualified opinion about whether we are still headed down, whether we are sitting on the bottom, or whether we have started back up.  There are numerous favorable indicators, like a drop in overall unemployment claims; a slight revival of housing prices in a few areas that may be bellwethers like Orange County and San Diego, CA; more buoyancy in the market in general; more roadshows and more deals (though most are still PIPEs, registered-direct and discounted sales to PE investors — and a dizzying array of warrants are being issued). 

Monday morning Apple announced that it sold 1 million new iPhones over the weekend, twice what it expected — impulse purchases every last one.  And bring on more media stories about the best car under $18,000 and how to refi your mortgage at these low rates.  I was particularly amused this weekend with stories that bigname luxury stores are stocking cheaper merchandise –  who knew?  And there was a network news story on WalMart’s aisle endcaps showing a one-cup coffee brewing system for $109.95.  I beg your pardon?  Payback period on that, please?

Either the price of oil going up is good news (increased demand) or bad news (gonna hit the consumer at the pump), but it is definitely a sign that one industry is beginning to move again.  The same is true of the general fascination of the press with greentech issues — many of which are beckoning investors to rather small companies with rather sketchy performance histories (but interesting IP, of course).

BioMedReports.com issued a report on adult stem cell companies, a bit esoteric, but right in the middle of the policy liberalizations of the Obama administration with regard to biotech research.  If that interests you, have a look at http://biomedreports.com/articles/most-popular/1423-next-big-boom-adult-stem-cell-stocks.html for commentary on 5 stem-cell companies we can almost guarantee you have never heard of (but may want to know about). 

We are not investment advisers, and it’s a good thing, because the wobblies might have come even sooner if people had invested in everything we wrote about.  We write about interesting and newsy companies, many not even publicly traded, not just stocks we think will surely go up.  But we have the feeling that the market, while it operates to a certain extent on hard, quantifiable things like news and earnings, interest rates, currency movement, energy &  commodity prices, same-store sales, etc — is equally a critter that moves on instinct.  Isn’t “consumer confidence” an essentially fake extrapolation expressed as a percentage to make us trust it more? 99 and 44/100ths percent pure.

So when we saw an article with the title “Wall Street Looks to Refuel Rally in Week Ahead” on Sunday morning, it made the coffee taste a whale of a lot better: http://money.cnn.com/2009/06/21/markets/sunday_weekahead/index.htm?postversion=2009062107.  It is for SURE not a cockeyed optimist’s view of the world, but it is an almost 180-degree switch from headlines we got used to seeing in the cold, cold winter of our 2008-2009 discontent.  The more people ponder whether the worst has passed, the more likely it may be — it seems to us untutored folk — that attitudes may be able to act as a self-fulfilling prophecy.  Many of the companies we have written about over the last 6 months have done really well, and very few have missed big on something important (yes, there is always a laggard here and there — HURRY UP NOW, KEEP UP WITH THE CLASS!).

Point being that it seems that the basic palaver has changed from “how bad can it get?” to “how soon can it get better?”  And that may signal more to us than the basically historical numbers that we hold our breath for every week.

SmallCaps That Count. Literally.

Audience measurement technology has been around almost as long as electronic media. Arthur Nielsen purchased a tool called the audimeter in 1936 to track radio audiences in 1,000 homes. In the early 1950’s, he developed a similar technology for television that, when combined with data from diary keeping “Nielsen Families”, formed the basic ratings system as we know it. In 2008, American television brought in $68.9 Billion in ad revenues, and it was distributed largely on the data captured from those diaries (now around 20,000.)

One would think the invention of the remote control decades ago would have led to more refined measurement, but Nielsen is a mutlibillion juggernaut that has kept upstarts at bay, much to the frustration of the advertising industry. One complaint is that Nielsen meaures potential reach, not actual impressions. Also, there is no sliding scale and so its model assumes that every commercial in a show gets the same audience. In a 1 hour show, it is logical to assume that more people are there in the beginning than at end after all. http://www.multichannel.com/article/279305-Cover_Story_Thinking_Inside_the_Box.php

Irony at its most cruel, Aliso, CA – based TiVo (Nasdaq:TIVO), www.tivo.com, might offer the best alternative to Nielsen ratings. Yes, the bane of advertisers for having made it easier for millions of Americans to skip commercials altogether also knows the exact viewing habits of millions of viewers to the second. Thought it might kill them inside, advertisers need that information, and it explains why the Company’s Audience Research and Management Division is as important to growth as is DVR sales. Even though TiVo has reached the pinnacle of pop culture – it is used as a verb after all, – it is still a smallcap by most definitions ($1.1B) and nearly ½ of that came from a one day move in reaction to a settlement with EchoStar in late May.

Portland’s Rentrak Corporation (Nasdaq:RENT), www.rentrak.com, measures movie sales through box-office receipts, Blu-Ray and DVD sales and Video-On-Demand.  Its VOD business analyzes over 70 million set-top boxes for the Top 25 multi-service providers, and it has provided the entry for their nascent linear television measurement business. It also has mobile and Internet measurement ambitions and today announced a partnership  with video technology firm Concurrent Computer Corp. (Nasdaq:CCUR), www.ccur.com. The two claims the joint effort will be the industry’s first 3 screen analytics solution. The companies are likely familiar with each other from the VOD market. While Rentrak owns the VOD measurement niche, Atlanta’s Concurrent “creates and supports the operation of everything that happens after a cable customer hits the VOD button on his or her remote”, according to a Seeking Alpha blog by Steve Andrew. http://seekingalpha.com/article/140382-ccur-unknown-stock-huge-opportunity?source=yahoo

ComScore of Reston, VA (Nasdaq:SCOR), www.comscore.com, might be best known for its ranking of top visited web properties, but it is also the definitive source of online consumer behavior. More than 2 million consumers have given ComScore permission to confidentially capture their browsing and transaction behavior, including online and offline purchasing. ComScore panelists also participate in survey research, which captures and integrates their attitudes and intentions. The Company provides custom digital audience measurement and analysis to companies from a wide spectrum of industries.

Columbia, MD based Arbitron (NYSE:ARB), www.arbitron.com, is synonymous with radio audience measurement. Known in the industry as “The Book” it has been deemed responsible for countless format changes and firings of on air talent since its inception. It more or less had the radio industry to itself, until Nielsen re-entered the market last November after a 45 year absence. The Company confirmed in its first-quarter earnings report that the defection of key radio broadcasters to Nielsen for diary-based ratings services in will adversely impact revenue by about $10 million per year starting in 2010. http://industry.bnet.com/advertising/10002074/will-radio-broadcasters-tune-out-arbitron/

Public Charging Stations. Now a Drop. Next a Trickle. Then …. ?

Public charging stations are vital for mass adoption of plug-in hybrids because most people do not have access to a garage to do overnight charging. IBM’s Vice President for Energy & Utilities reminded attendees at a recent grid- to- vehicle conference  that only a fraction of vehicle owners park their car in a garage that they own overnight – especially urban dwellers whose short commuting distances are a perfect fit for plug-ins. http://earth2tech.com/2009/05/28/think-plug-in-cars-will-charge-up-at-home-think-again/. Not to mention that Americans want to drive where they want, when they want and will not accept being limited to the area of a single charge. So either public charging infrastructure develops in concert with the rest of the plug-in market or we build cars with trunks big enough to hold really, really long extension cords.

The automated battery quick switch from Project Better Place got a lot of digital attention when it was unveiled in March. http://www.betterplace.com/company/video-detail/better-place-battery-switch-technology-demonstration/  Its cool factor is unquestionable – but maybe its technology is ahead of itself. A steady drumbeat of public battery charging, not replacement, projects has come over the last few months.

Typical deals involve an electric car developer and a cleantech company banding together to push the market a little bit forward. Portland General Electric (NYSE:POR) looks to be one of the more forward thinking utilities as it has installed over a dozen charging stations throughout Oregon.  It makes sense – Portland has the highest per capita hybrid vehicle ownership in the country. It has partnered with Mitsubishi to promote EV use throughout Oregon.  Tiny Ecotalilty of Scottsdale (ETLY:OB) www.ecotality.com, is working with Nissan to do the same for Arizona. The Company’s ETec subsidiary specializes in powering airport ground support equipment (baggage trolleys, carts, belt loaders) and can easily make the transition to autos. It also markets  a de facto public affairs consultancy, The EV Micro-Climate program, to provide municipalities a blueprint for a comprehensive EV infrastructure system and provides detailed action plans for its successful execution and continued maintenance.

Bright Automotive, developer of plug-in light vehicles for office and government fleets, recently announced a deal with Envision Solar to develop solar powered charging stations. Envision develops photovoltaic embedded parking canopies that turn parking spaces into mini solar plants. Axion Power, (AXPW:OTC) www.axionpower.com, will provide the critical storage component. Nissan and AeroEnvironment of Monrovia, CA (Nasdaq: AVAV), www.avinc.com, have recently announced a partnership to bring 100 electric vehicles cars and 100 charging stations to the official Washington D.C public fleet, resulting in around $250K in revenues for the smallcap maker of energy systems and military drones. http://www.cbsnews.com/video/watch/?id=5003800n%3fsource=search_video. The Company’s PosiCharge™ EV fast charge is a descendant of the GM Impact, an electric vehicle designed by Aero in 1989.

Evergreen Solar (Nasdaq:ESLR), www.evergreensolar.com, of Marlboro, MA inked rolled out a solar power station in Frankfurt this past April.  Its solar station provides six free battery charging units for small-scale electric vehicles including Velotaxis, electric bikes and scooters. It produces approximately 21 kWh per day or enough to power a scooter for approximately 420 miles.

El Dorado Hills-based Premiere Power (PPRW:OTC) http://www.premierpower.com, has built dual-purpose solar canopies on the  roofs of parking garages outside of Trenton, NJ. Amtrak station to power up 110v docking stations of plug-in and electric vehicle riders.

Hybrid/electric vehicle charging might be in the Pong stage, but we could be at the Space Invaders stage before you know it.

Save China. Save The World.

When it comes to global warming, China has more or less been treated as the naughty kid brother of the industrialized world. Excuses were made for its dismal environmental planning because its economy was young and growing, and the government was still trying to make sense of the modern world.

But that slack has been reined in. Developed countries with bruised economies are less empathetic towards China’s growing pains, and it has been become obvious that any discussion to stem global warming is worthless without China’s participation. Though not part of Kyoto Protocol because of its developing nation status, China is expected to deliver an emission reduction plan when meetings begin in December on Kyoto’s successor. The Chinese government refuses to mandate specific emissions caps because they believe more developed countries have been polluting longer and should pick up more of the slack. But they have gotten a bit of the message. Zhang Lijun, vice minister of environmental protection, said collecting environmental taxes from polluting enterprises would be part of the country’s tax reform. http://www.shanghaidaily.com/sp/article/2009/200906/20090606/article_403213.htm

 A number of smallcaps in the pollution & treatment control industry are well positioned to land some Chinese contracts and companies that mitigate the impact of coal use may very well be best positioned of all. A 2008 report in the magazine Science found that China was building the equivalent of two coal-fired power plants per day. China has to build urban infrastructure and create urban jobs for a new, relatively poor city of 1.25 million people every month, and that will likely continue for the better part of the next two decades. Coal currently provides about 70% of China’s energy, and there is no serious alternative to coal for many decades to come, according to The Brookings Institute.  http://www.brookings.edu/testimony/2009/0604_china_lieberthal.aspx

Fuel-Tech Inc. of Warrenville, IL (Nasdaq:FTEK), www.ftek.com, develops emissions reduction technology for utility and industrial applications. Its is partnered with Chinese industrial giant ITOCHU Corporation to market an injection called Fuel Chem™ that will enable coal-fired generation boilers to run cleaner. Selective Catalytic Reduction (SCR) has long been a common means of reducing nitrogen oxide (NOx) emissions from industrial power generation equipment, with ammonia as the most common reagent. As new power plants are constructed with NOx-reducing SCR systems during the next several years, Fuel Tech’s  NOxOUT ULTRA process is believed to be a leading candidate for the safe delivery of ammonia, particularly near densely populated cities, major waterways, harbors or islands, or where the transport of hazardous anhydrous ammonia is a safety concern. It recently landed a $4.6 Million contract for its NOxOUT ULTRA system®, a nitrous oxide (NOx) reduction technology, to be used by a coal-power generation site. The Company has been a darling of the small business press, having landed spots in Fortune and Forbes’ list of top small cap firms.

Nasdaq newcomer SmartHeat Inc (Nasdaq:HEAT), www.smartheatinc.com,  markets plate heat exchangers (PHEs) to facilitate heat capture and for the HVAC and industrial markets. It maintains that its PHE technology can heat 100,000 homes at 1/3 the coal consumption as compared to a traditional boiler. The Company also expects demand for its heat meters to grow as the movement towards private residential ownership has led utilities to mandate them. O.I. Corp. (Nasdaq:OICO), www.oico.com, of College Station, TX develops and markets systems that measure organic and inorganic carbon levels in ultrapure, drinking, natural, ground, waste, and process water, as well as soils and solids. Though no specific China plans could be found on its website, the Company recently announced the hiring of Manager for Asia Pacific Sales. You might also be on the lookout for future China contracts to be announced by Littleton, CO-based ADA-ES (Nasdaq:ADES), www.adaes.com,  a company that sells pollution control equipment to coal-fired power plants. ADA-ES has a family of proprietary flue gas conditioning (FGC) additives to provide utilities and industries with a cost-effective means of complying with environmental regulations on particulate emission.

Cincinnati’s CECO Environmental Corp. (Nasdaq:CECE), www.cecoenviro.com, is holder to a suite of subsidiaries that that provide pollution reduction and ventilation systems to industries across the globe. Last year, the Company acquired Fisher-Klosterman of Louisville. Fisher products aid particulate recovery in industries including petroleum refining, power production, petrochemicals and manufacturing. Its 40,000 sq. ft. sales and manufacturing facility in Shanghai was the crown jewel in the deal as CECO plans to use it as a beach head to expand its China operations.

Hybrid Buses May Be Pioneers When We Look Back in a Few Years

2004: The first GM hybrid delivered to Seattle, looking very much like a traditional bus (http://editorial.autos.msn.com/article.aspx?cp-documentid=435202)

The municipal authorities around the United States — bus systems and school systems most obviously — have been way out in front of the breaking wave of interest in greentech, emissions control, carbon footprints.  The general public is mostly still driving internal combustion-driven vehicles, in spite of the rising sales of hybrid electric vehicles like the market-dominant Toyota Prius.

By early 2008 GM was delivering its 100th GM-Allison hybrid, this one to Las Vegas, and Seattle ordered an additional 500 such buses in May 2007. http://www.autobloggreen.com/2008/01/09/las-vegas-to-the-get-the-1000th-gm-allison-hybrid-bus-this-month/.  In October 2007, New York City announced it would acquire 850 hybrid buses for $435 million.

Of course a lot has happened since the first GM-Allison bus was delivered in 2003.  Now Allison is owned by The Carlyle Group, having been sold by GM for $5.6 billion in the good old days when automobiles were still selling and car companies still looked like they had a chance of being viable.   And, of course, GM sucked up a lot of federal stimulus money and still declared bankruptcy, was dropped from the NYSE, and is now a Pink Sheets small-cap (Pink Sheets: GMGMQ,  http://www.gm.com/),  with a market cap of about $528 million as of the close of the market on Friday, and a stock price of $0.78.  A deal was announced to sell the Saturn division to Penske Automotive Group (NYSE:PAG, http://www.penskeautomotive.com/), itself arguably a small cap with a market cap of only $1.3 billion, and a closing stock price of $14.65 vs a 52-week high of $23.58.

But in the meantime, evolution has been a strong force in municipal buses and school buses, with some small players emerging as interesting companies to watch.

Proterra All-Electric Clean Bus in San Jose

The  all-electric clean bus by Golden, CO-based privately held Proterra (http://www.proterraonline.com/)  , with batteries probably from Reno-based Altair Nanotechnologies (Nasdaq: ALTI, http://www.altairnano.com/), presents one vision of the future, built entirely of composites to minimize weight, and streamlined beyond what the bus designers of yesteryear could have imagined.  ALTI shares are still somewhat down-and-out, closing Friday at $0.94 vs a 52-week high of $2.94, and a market cap a hair under $90 million, but average trading of 500,000 shares, which may make it easier to look at as a stock to be interested in.   Autobloggreen article on the Proterra bus: http://www.autobloggreen.com/2009/02/08/proterra-touring-california-with-fast-charging-electric-bus/.

Given Germany’s reputation as a leader in greentech, it is also worth noting that Puchheim, Germany-based Proton Motor Fuel Cell GmBH (http://www.proton-motor.de/ )  has teamed up with Czech partner, Pilsen-based Skoda Electric, and announced last month a bus on a standard chassis with no internal combustion engine at ALL — just a combination of fuel cells, batteries and ultracapacitors.  http://www.proton-motor.de/fileadmin/documents_pm/press_releases/20090508_TripleHybridBusPreview_EN.pdf

Proton-Skoda Pure Electric Fuel-Cell-battery-Ultracapacitor Bus

Torrance, CA-based Enova Systems (Amex: ENA, http://www.enovasystems.com/)  has teamed up with Navistar’s IC Corporation to build a plug-in hybrid diesel that is now operating at the top of the western hemisphere in Alaska’s Denali National Park.  The bus is claimed to use 70% less fuel than a conventional bus. http://gas2.org/2008/07/30/plug-in-hybrid-bus-at-denali-np-uses-up-to-70-less-fuel/

Enova-IC Corp bus for Denali Natl Park

ENA shares have been largely ignored by the market, closing Friday at $0.83, up $0.08 on a very light 24,000 shares.  The year-high was $4.70, and the market cap is a very low $17 million, but it may well be a diamond in the rough.   It is also the go-to company behind the Hybrid Electric School Bus Project, in which it is partnered with Raleigh, NC-based state-sponsored Advanced Energy, which says it has delivered school buses to Austin, Napa CA, and two school districts in NC. http://www.hybridschoolbus.com/.

We should also point out Oak Park, MI-based Azure Dynamics (TSE: AZD and Pink Sheets: AZDDF, http://www.azuredynamics.com/).  AZD announced this year a 5-year pack with Johnson Controls to supply advanced li-ion batteries for its commercial vehicles and buses, including the Altoona.  AZDDF closed Friday at $0.23 and has an average volume of 115,000 shares.  It was formerly listed on AIM, but is no longer.

Azure Dynamics' Altoona CitiBus

As always we have no recommendations on these companies, nor is this an attempt to equably survey the hybrid bus market, which is also being supplied by very large companies that are completely outside our area of interest.  We write about companies that we find newsworthy.

Get Out Your Shades! The Ramius-Cowen Sun Is Shining on Small I-Banks

The announcement today that privately held Ramius LLC will merge with (and basically buy) Cowen & Co (Nasdaq: COWN, http://www.cowen.com/) , the mid-market investment bank that was spun out by Societe Generale fairly recently — there was a fairly active feeding frenzy, and at the close, COWN was priced at $6.58, up $1.74, on about 2.1 million shares, raising the market value of COWN to a bit over $99 million.  According to coverage, the Ramius buying group will end up with 71% of the combined entity. http://www.reuters.com/article/marketsNews/idINBNG40601720090604?rpc=44

Assuming that the Ramius-Cowen deal is done, and that if you missed it, you missed it — what other small broker/dealers should you be keeping your eye on, or even placing a bet here and there to see who will get snapped up at a premium?  At any rate, it would not be surprising to see some of the comparables gain some points in the afterglow.

So here are few to put in the corner of your screen and keep an eye on.  First of all, we know that NY-based Rodman & Renshaw Capital (Nasdaq: RODM,  http://www.rodmanandrenshaw.com) is horny for a deal, because they tried to buy Cowen themselves a few weeks back — the classic minnow-swallows-whale pipe dream.  But Rodman & Renshaw has been a powerhouse in the PIPE and PE markets for years, has a well-regarded research effort, and is probably undervalued in any rush to find a good broker-dealer to buy.  Their shares were up in today’s rally, and possibly in a bit of sympathy with their one-time dreamgirl, Cowen.  RODM closed at $0.90, up $0.16, on 212,000 shares (vs a normal average of 47,500).  Still ,it is way off its 52-week high of $2.99, so there may be more play in it yet.

In some ways the prettiest girl at this dance is San Francisco-based Merriman Curhan Ford (Nasdaq: MERR, http://www.merrimanco.com/).  MERR has a thriving SF-style tech practice, and a very strong greentech presence, having done deals for some of the increasingly common greentech names.  They also have the largest number of PAL relationships on the OTCQX, a high-grade segment of The Pink Sheets where a broker-dealer like MERR can lend a hand to an ADR issuer and collect a hefty fee for the services provided.  MERR shares closed today at $0.50, up $0.08, to arrive at a market cap of just $6.4 million, on a trading volume today of 139,000 shares vs a normal volume of 22,000.  Year-high on the stock was $2.15.  The stock seems to have gained a little luster from the COWN deal.  Ya think? 

Miami-based Ladenburg Thalmann (Amex: LTS; http://www.ladenburg.com/) has been an acquiror, having taken on NY healthcare i-bank, Punk Ziegel — but there is nothing to keep a deep-pockets suitor from bidding for LTS itself.  Founded in 1879, LTS can claim to be one of the oldest names on Wall Street, and it has historically dominated a variety of markets.  It is active on both the buy- and sellsides, as well as in capital markets, so in some odd way it could be valued as a company whose parts were worth more than the whole.   LTS closed up $0.01 today at $0.80, vs a 52-week high of $2.59.  It is probably not getting the rays from the Ramius-COWN deal, but may be worth examining on its own merits.

Finally on a quick survey, you may want to have a look at Houston-based Sanders Morris Harris (Nasdaq:SMHG, http://www.smhg.net/) SMHG has historically had an energy orientation, not surprisingly since they are based in Houston.  But they have done some savvy hiring in healthcare, medical devices, and other broadening segments, to give it access to a wider spectrum of deals in its capital markets operation.  It has launched some newsletters and blogs, and is also making a run at doing some PAL work on ADRs, though not many companies have publicly joined the SMHG stable yet.  SMHG closed today at $5.90, vs a 52-week high of $11.07, on volume of 49,000 shares for a market cap of about $166 million.

If you want to move up and out of the small cap arena, we hear that there is strong nuptial rumor-mongering about some of the midcap banks like BB&T (NYSE:BBT), SunTrust (NYSE: STI) , and Fifth Third (Nasdaq: FITB), but those are outside our bailiwick. 

As usual, we do not recommend stocks; we just write up those that seem newsworthy to us.

What Do Tobacco, Stem Cells and GAD65 Have in Common? Diabetes Research

LATE NEWS: Check out Science Daily article on U of Pennsylvania and McGill U research on metformin as a T-cell growth stimulant, published 6-4-09, after this article was posted: http://www.sciencedaily.com/releases/2009/06/090603131433.htm

Diabetes is a chronic disease of the pancreas that is characterized by insulin deficiency, inability to metabolize carbohydrates, excessive sugar in bodily fluids, thirst and constant hunger.  It is a serious disease, a lifelong problem once it is established, and can cause a lot of side effects including blindness, loss of limbs and death, if not treated properly.  That’s not a proper medical description, just a note to frame this article. 

It seems from a search of the available information, that much of the current research on diabetes is concentrated on diagnostic issues and the easier administration of insulin, which has always been self-injected by most diabetics who use insulin.  I am sure there are many programs seeking to prevent or cure diabetes, but there seems to be much more being invested in ways to measure blood sugar and ways to administer insulin transdermally without a needle or through the membranes of the nose.  Ads on TV concentrate on lifestyle issues, and there is even a glucose monitor that comes in fashion colors.

Thinking outside the box, Prof Mario Petzoti at the University of Verona (Italy), has published an article in Biotechnology advocating tobacco for the autoimmune type of diabetes, usually called Type 1 (http://www.diabetestab.com/?p=1907).   He is not suggesting that diabetics should start smoking Gauloises or Marlboros, but a genetically modified tobacco plant that contains a strong dose of interleukin 10 (IL10).  “The tobacco plant is fantastic,” Prof Petzoti is quoted as saying, because it is easy to modify and it is easy to grow a whole plant from a single cell.  Not surprisingly, it has attracted the attention of a company not noted for health interests: Philip Morris (NYSE: PM).

Mentioned in the same article is an even more impressive research & clinical effort that is currently in two concurrent Phase III trials, one in Europe and one in the US: Stockholm-based Diamyd Medical AB (Stockholm: DIAM-B.ST or in the US the ADR is OTCQX: DMYDY, http://www.diamyd.com/).  The Stockholm quote is in Swedish currency, but the ADR closed yesterday at US$13.44, at the upper end of its 52-week range, reflecting optimism regarding its vaccine that the company claims has been proven to “significantly slow down the disease process.”  ADR volume is quite low and irregular, but since it is sponsored by the Bank of New York Mellon, one assumes that a bid would get filled with newly converted ADRs at some point.  Diamyd has operations in the US, and the US comprises at least half of the projected world market for its vaccine.

Privately held Charlottesville, VA-based DiaKine Therapeutics Inc is set to proceed with tests of its drug, Lisofylline (LSF), which has been shown in animals to prevent diabetes, and to reverse it when administered with a growth hormone (http://www.vabio.org/diakine-diabetes-drug-set-for-human-clinical-trials/).  The trials are being conducted under an IND approved in early May.

Some stem-cell researchers are focusing on diabetes, now that the new US administration has loosened the strictures on stem cells.  BresaGen, which is part of San Diego-based Novocell, has changed its focus from Parkinson’s to diabetes, at least partly because the end points are easier to define.  http://www.ajc.com/services/content/printedition/2009/05/17/upclose05171.html

Dr Denise Faustman at Harvard believes she may have a drug to cure many Type 1 diabetics, based on work in mice. http://www.fumento.com/biotech/diabetes.html  There are 850,000 to 1.7 million people in the US with Type 1 diabetes.  Dr Faustman’s work centers on adult stem cells found in the spleen, long thought to be a superfluous organ, which, she believes, can be stimulated by injecting drugs that release tumor necrosis factor, a protein that has been shown to be helpful in autoimmune diseases such as Crohn’s Disease and rheumatoid arthritis.

Also from Stockholm, privately held iNovacia AB (http://www.inovacia.se/index.htm)  has partnered with privately held Glucox Biotech (http://www.glucoxbiotech.se/)  to develop a drug to help Type 2 (”adult onset”) diabetics regulate their insulin by increasing glucose uptake in muscle, which improves insulin response.  Type 2 is a far larger market with an estimated 23 million people affected in the US.

Carmel, IN-based privately held Marcadia Biotech (http://marcadiabiotech.com/news.html)  was founded in 2005 to help obese people deal with diabetes and other metabolic diseases. In these stimulus-oriented days, the local paper took a “show me the money” look at Marcadia (http://marcadiabiotech.com/images/Startuphelp_051908.pdf), wondering if Indiana can become a hub for biotech investing. 

Meanwhile on the pure research front, the University of Lund (also Sweden) and the Swiss firm, Novartis (NYSE: NVS), have completed a genome map of genes related to Type 2 diabetes and related metabolic disorders.  http://www.biotech-weblog.com/50226711/the_diabetes_genetics_initiative.php

BDI Surges — Why You Should Care

The Baltic Dry Index (BDI) has surged recently, recording an up day each of the last 20 consecutive trading days.   Frank Ahrens explains the significance in “The Ticker,” a web service of The Washington Post (http://voices.washingtonpost.com/economy-watch/2009/05/obscure_baltic_dry_index_soars.html?wprss=economy-watch).  Basically this 350-year-old index, updated daily at London’s Baltic Exchange, serves two purposes: (1) it serves to fix rates for marine transport of “dry” cargoes — cement, ores, grains, scrap metal, etc; and (2) it gives investors a valuable trend line for judging the value of shipping stocks.  Incidentally, since this surge in the BDI seems to be largely a result of China importing ores to make steel, etc., it may be a leading indicator of economic activity in the world’s most populous nation.

Bloomberg says the BDI is up 25.4%, to its highest level since September last year.  http://www.bloomberg.com/apps/news?pid=20601080&sid=azoASPlWemMc&refer=asia (see the subhead “Baltic Dry” ).

This article from a Wikinvest article in March explains more about the BDI — which is a closely watched trend indicator for sophisticated investors in international commodities: http://blogs.wikinvest.com/dailyangle/2009/03/understanding-the-baltic-dry-index/

If a real-world investor wanted to use the BDI trend to help identify potential investments, perhaps he/she would first look at some of the obvious candidates.  Clearly Athens-based Diana Shipping (NYSE: DSX, http://www.dianashippinginc.com/), one of the least leveraged of the big shipping companies, might attract early attention.  DSX is trading Monday morning at $18.70, vs a 52-week high of $35.73, recorded when the BDI was still stratospherically high.  DSX may be one of the most conservative shipping stocks in a time when cash is king and debt is damned.  On the other hand, there are numerous sellside analysts following DSX, so its recent gains and relatively better recovery may be the result of sponsorship, which may also mean that it is hardly “undiscovered.” 

Drybulk vessel ASTRALE, photo courtesy TOP Ships

Athens-based TOP Ships* (Nasdaq: TOPS, http://www.topships.org/) has had an up-and-down history as a stock, and is by the numbers primarily a tanker company (oil & petroleum products cargoes for the most part).  But they have taken delivery of 5 new bulker vessels, all of which are on long-term charters (mean is 23 months).  At its last results announcement, on April 2, TOPS reported $1.01 per share for 2008, vs $4.09 for 2007.  But with its shares at $2.05 vs a year-high of $9.33, it may well be worth keeping an eye on.

Athens-based Excel Maritime Carriers Ltd (NYSE: EXM,  http://www.excelmaritime.com/), which refiled some of its financial results recently to reflect new accounting standards.  But for the first quarter of this year, it reported $2.42 per share excluding the one-time gain from the sale of a vessel, up from $1.76 last year.  Obviously since the shares are at $11.25 today vs a year-high of $53.84, the point of interest is whether earnings can keep up at the $2.42 pace — which would make the price a tad more than 1x earnings.  Hmmm.

Danish shipping giant, Copenhagen-based TORM (Nasdaq: TRMD,  http://www.torm.dk), has seen a similar price correction over the last year, and is selling for $10.41 vs a 2-week high of $37.97.  TORM operates a fleet of 130 vessels, many of which are pooled with other companies, but operated by TORM.  TORM ships are primarily tankers, but historically have included a large proportion of bulkers, many of which were scrapped over the last year.  TORM has guidance quoted in its most recent results that it expects US$100MM to US$140MM in net profit for 2009.  TORM’s primary trading is on the Copenhagen exchange, but its ADRs trade on Nasdaq.

One of the most recent shipping IPOs, Athens-based Ocean Freight Inc (Nasdaq: OCNF, http://www.oceanfreightinc.com/), has taken one of the steepest declines, possibly due to an allergic reaction on the part of shipping investors to leverage.  Shares of the pure bulker company, which operates 13 vessels of varying sizes totalling 1.2 million dwt, are trading today for $1.76 vs a year-high of $26.96.  Clearly a drop of that magnitude must make screenwatchers pause and wonder if there is more to the story than meets the eye.  But it’s also possible that, OCNF being one of the smaller entities, it is simply falling off the bottom of lists and missing the visibility that other, larger companies may get.

*client of Allen & Caron, publisher of this blog