What should investors in the Alternative Energy sector be doing, Pearce Hammond, Director of Institutional Research, Simmons & Co. International has some ideas;

Mr. Hammond: “I think my overall advice to investors right now with this sector is number one, be cautious. This is a sec­tor that’s driven a lot on momentum and press releases, and lot of stories, and that can move the stocks every now and then, but you have to really look at the fundamentals. And so my second piece of advice is just understand companies that have a better competitive position than the others. So for example, First Solar (FSLR) has a very good competitive position in the solar business. It’s a hyper-com­petitive sector; it’s a very volatile sector. I think you’re going to have a lot less risk by going into the sector via that stock than going in with a high-cost producer. And the equity is going to be moving very much like a weather vain as to how people perceive the solar sector, but cautious in not getting carried away. There are going to be some big winners in this sector over the next five and 10 years, and maybe some of the companies aren’t even public yet, but they will be big winners. And so kind of a constant diligence or keeping up with what’s going on in the sector is helpful too. These things change a lot. “

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In the most recent issue of TWST, we spoke with L. Farrell Crane of Energy Opportunities Capital Management, a portfolio management firm focusing on the Energy Sector. He talked us a little about where he feels the pressure on oil prices is going to come from, and when we’re going to start seeing things getting worse going forward:

Mr. Crane: In this recent economic downturn we have seen reluctance on the part of the oil producers to increase capital spending given uncertainty with respect to what they expect to receive in terms of oil prices going forward. That slowdown, again, is like stepping off the treadmill. If we doubled our spending and production fell, it is not difficult to predict what will happen to supply when spending is held constant or, worse yet, reduced. We expect that we are going to see some supply problems manifest themselves beginning in 2010 and more considerably so by 2011 and 2012. Obviously the specific timing of a supply crunch will depend on the extent to which we see an economic recovery or continued slowdown. Clearly any increase in global economic activity and a related increase in energy demand will only accelerate the timing and exacerbate the issue. I think, ultimately, the supply challenges are going to be the driving factor in oil prices going forward.

For the complete Investing Strategies report, including the full interview with Mr. Crane, as well as a variety of portfolio managers from across a wide range of strategies, click here. 

Our Oil and Gas Report featured an interview with Longdley “Lenny” Zephirin Chief Executive Officer, Director of Research and Senior Analyst at The Zephirin Group, Inc. Mr. Zephirin gave us insight into the sector:

“From a business perspective, fundamentally the sector is solid and, more important, we are avoiding a collapse in oil prices. Management has done a great job of scaling down, taking rig equipment out of service by either warm stacking rigs till the market improves in the short term or cold stacking rigs till oil prices and demand are showing signs of stability - avoiding a collapse of day rates.”

Investors should buy the more liquid names in the group, they should stay with the deepwater names and the premium companies. He would be wary of the laggers at this time. Overall, he believes that the recovery in share prices will probably be a W-curve recovery. He also recommended several companies but you will have to read those on TWITTER.

in our 7-27-09 Oil & Gas Report we spoke with Chris Pikul of Morgan Keegan & Co., Inc. and he gave us his outlook for the Sector and did have two companies he liked at this juncture:

Mr. Pikul: There’s a two-pronged approach here. As oil continues to provide strength to the group, I’ve been recommending some small cap levered companies, specifically Whiting Petro­leum (WLL) and Berry Petroleum (BRY). Both companies trade at a discount to what I think their net asset value is. Largely they were beaten up due to financing concerns, but both have since re­paired their balance sheets to a great extent.

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As part of our Oil & Gas E&P Report we spoke with Philip J. McPherson of Global Hunter Securities, LLC and he gave us his Outlook for OIL & GAS E&P and a unique play in the E&P market:

“When I look at the future and I look at the energy space, I still think it’s one of the best places to be in the long term and whether you want to believe in it because of the inflationary trade or the weak dollar, I just go back to the fundamentals of the amount of people who are increasing their energy consumption.”

Unique play in Oil and Gas -  Evolution Petroleum (EPM)

“Evolution Petroleum has a unique play in that they have a big partner in Denbury Resources developing a large oil field in Louisiana. The amount of oil in this project, assuming a $60 oil deck, is worth approximately $5 or $6 per share and currently the company is trading at $2.50 a share so I think you’ve got an easy double there just as an NAV play.”

2009 is a year when E&P companies are not getting paid to grow so maintaining a strong balance sheet and maintaining production rather than growing is actually being rewarded, more than growing simply for the sake of growth.

With banks failing is gold the way to go ? As part of our recent Gold Report we spoke with Jeffrey M. Christian of CPM Group.  

Mr. Christian: “If you look at the gold market itself, the single most important fundamental that’s been driving the price up has been very strong investment demand. Investors have been buying more gold in more parts of the world for a longer period of time than ever before in history. This is over the last eight years. “

Mr. Christian also forecasts strong investment demand for gold and a big shift on the part of central banks away from being large net sellers of gold to being large net buyers.

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In this  week’s issue of TWST we spoke to Heather Douglas  and Andrew Mikitchook of Thomas Weisel Partners Canada Inc. about Investing in Gold. For Heather it’s Kinross Gold that stands above the rest;

Ms. Douglas: Among the seniors, we have been recommending Kinross Gold. They’ve delivered two key projects in the last year, Kupol and Paracatu. They are in the process of delivering growth and now they are re-establishing an interesting pipeline with Fruta del Norte in Ecuador and Lobo-Marte in Chile. Kinross has a very nice operating margin, so their cash costs are quite attractive, and their valuation in our view is attractive relative to their peers

To unearth the full story be sure to read the entire 99 page report on Gold and Precious Metals which includes 1 analyst, 2 money managers, and 21 sector firms.  Also remember to follow us at Twitter at twst.com/wstranscript for exclusive content

As part of our special focus on Gold and Precious Metals, we spoke with analysts Heather Douglas and Andrew Mikitchook of Thomas Weisel Partners about the space. Their outlook for this space, for the near term  at least, was actually quite positive:

 Ms. Douglas: Our 12-month expectations are positive for gold. We are aware that the early summer months are usually a more sideways period for the commodity, and we view pullbacks as opportunities to re-enter. We’ve identified some interesting developers who, even if the gold price doesn’t move, have the opportunity of showing price appreciation as they advance their projects, have exploration success, and bring projects into production. So that’s our June 2009 view.

TWST: It sounds more positive than anything else.

Ms. Douglas: Still positive. For the generalists, I do recommend exposure to gold first and then extra work to look at the companies, to be familiar with the specific risks with each of the companies.

TWST: When you say gold first, how do you recommend they play it?

Ms. Douglas: It depends on the investor. The GLD ETF is obviously one way, but there are other ways for them to get only the gold exposure diversification they are seeking without the additional operating and country development risks associated with each of the companies.

For the complete Gold and Precious Metals issue, including a full interview with both Ms. Doulgas as well Mr. Mikitchook in addition to interviews CEOs of topic companies in the space, click here. 

We spoke with analyst Steve O’Rourke of Deutsche Bank in our special focus on Alternative energy this week. He had two picks  in the Solar Energy space that he thought we key players in the U.S. market:

Mr. O’Rourke: Two key [companies] here in the US are First Solar (FSLR) and SunPower (SPWRA). Each of those companies has clear technology differentiation, First Solar with cadmium telluride and SunPower with high efficiency crystalline silicon. They are the technology leaders in the industry, and often differentiation does come down to technology. All that said, I think they have sustainable competitive advantages that translate to a lower cost of energy all the way down the value chain. If a company can maintain that cost of energy advantage, and maintain a strong balance sheet, they can weather the storm and build upon an already strong market position. Leveraging technology and market-based advantages will drive market share gains and set up the company to come out the other side much stronger.

For the complete Alternative Energy report, including a full interview with Mr. O’Rourke and a roundtable discussion of the space, click here.  

In our special focus on Alternative Energy, we spoke with analyst Theodore O’Neill of Kaufman Bros., who talked to us a little bit about Investing in Green Technology. O’Neill felt that Solar Technology isn’t in a position to be economically feasible without subsidies any time soon. Here’s what he feels the industry would need to reach that:

Mr. O’Neill: If the solar industry is really going to get to parity, the production facilities that we have are going to have to improve pretty dramatically. Solar cells are semiconductors. If you look into a modern semiconductor factory, you see a process that is highly tuned to produce a particular yield in a particular product and the equipment used to tune the process is not in place at any of the solar manufacturers. So the solar industry is going to have to embrace bringing in a lot of the methodology and inspection equipment that you would find in a traditional semiconductor fab. Management will have to bring that into the solar business to really get to the professional level in order for this to become a real business.

For the complete Alternative Energy issue, including a full interview with Mr. O’Neill, other analysts in this space, and a wide variety of CEOS, click here.