Clean Energy and Alphabet
Dear Mr. Berko: My stockbroker and friend for the past 41 years just advised me to sell my 20 shares of Alphabet Inc., which I bought in 2010 at $233 a share. He thinks Alphabet has finally topped out and insists that I sell my shares and take my $12,000 profit; it now trades at $834 a share. He has researched a company called Clean Energy Fuels Corp. and is strongly recommending this stock. He wants me to use $10,000 of my profit from this trade to buy 4,000 shares of Clean Energy because he says this stock could triple in the next two to three years. I’m not sure about selling Alphabet, because I think its self-driving cars will be a big success, but I might be persuaded to sell 10 shares and buy Clean Energy with those funds. Your opinion would be appreciated. — TG, Columbus, Ohio
Dear TG: Alphabet (GOOG-$910) is up 76 points since you wrote this letter!
Clean Energy Fuels (CLNE-$2.48) sells compressed natural gas, liquefied natural gas and renewable natural gas as alternative fuels for buses, light and heavy-duty trucks, taxis, and delivery vans. CLNE also builds, manages, services and maintains 570 service stations for over 1,000 fleet customers, which operate 43,000 natural gas vehicles in 42 states and Canada. CLNE came public at $12 a share in 2007 with $117 million in revenues. This year, CLNE expects to generate $440 million in revenues. Not once in the 10 years since CLNE came public has the company been able to make a profit; however, management has been able to accumulate over $800 million in losses, plus an additional loss of $27 million this year. During those 10 years, CLNE’s losses have been mitigated by a congressional sop called the Volumetric Ethanol Excise Tax Credit, which expired at the end of last year. The VTEEC has been extended retroactively on several occasions, though considering the mindset of the Trump administration, its position is precarious. Legendary investor T. Boone Pickens (who sometimes wears a coonskin hat) sold 4 million shares in December at $3.50 a share or so, though he still owns 13 million shares.
I think there’s a 33 to 39 percent chance that CLNE can survive and move higher. Its book value ($3.10) is 62 cents more than its stock price. Its balance sheet continues to improve, and management has funded its capital expenditures and paid off a chunk of debt over the past two years by issuing 80 million new shares. But your longtime broker friend must think that Tinkertoy is a high-tech stock, proof that it’s easier to get older than smarter. Don’t sell Alphabet, and don’t buy CLNE unless you can afford a loss.
I think Alphabet, the parent company of Google, has a lot of zip-a-dee-doo-dah left in its stock price, and if you hold on to the world’s leading internet search engine for another seven years, you may be able to double your $13,740 profit. I think GOOG will show double-digit top- and bottom-line gains this year and for a few years. With sound net profit margins of 25 percent, GOOG’s net income, which was $20 billion last year, should increase to $26 billion this year. There’s even a rumor that GOOG’s board may split the stock, making it easier for investors to own 100 shares.
Waymo, GOOG’s autonomous car development company, has just sent 500 Chrysler Pacifica Hybrid minivans to Phoenix so that the public can ride in them. I think Waymo (dumb name) will be a flop just like Google Glass, which, if not dead yet, should soon be. (GOOG created the most sought-after sci-fi-looking gadget that everyone wanted to wear at least once. Its hands-free picture taking and head tracking were visions of the future. But like the Apple Watch, Google Glass, especially at $1,600 a pair, won’t make it.) Frankly, we’re not ready for driverless cars, which will represent less than 5 percent, at most, of auto production for a dozen years or more. GOOG should stick to its knitting — generating revenues from the delivery of targeted advertising. Perhaps GOOG will come out with a self-driving bike and protect our children!
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