Biofuels for Beginners

Biofuels Digest recently published its "30 Hottest Companies in Renewable Chemicals and Materials" list, giving a glimpse into the wonderful world of clean tech. I didn't know much about biofuel companies and figured this list was a great place to start my research.  The No. 1 and No. 5 companies, Genomatica and LS9, are both private, so I'm going to focus on the others that round out the top five.

The rankings were determined by three voting pools composed of a panel of 58 international selectors, members of the Digest online community, and subscribers to Biofuels Digest.

2. Solazyme (Nasdaq: SZYM  )
The subscriber portion of the Biofuels Digest poll actually ranked San Francisco-based Solazyme as No. 1. The company just went public at the end of May but is a leader in the field, counting Unilever (NYSE: UL  ) , Dow Chemical (NYSE: DOW  ) , and the U.S. Navy among its clients. Best known for using micro-algae to create oil, the company also has a line of anti-aging products available in 12 countries, including the U.S. Check out what Fool Alyce Lomax has to say about the company here.

3. Amyris (Nasdaq: AMRS  )
Amyris was ranked No. 1 by the international selector pool. The company turns sugars into hydrocarbons and can produce industrial-strength lubricants, polymers, and fuel. Though it missed analyst expectations on second-quarter earnings, Amyris has inked a partnership with Total SA (NYSE: TOT  ) to commercialize diesel. Total would fund research and development expansion at Amyris and provide the capital necessary for production expansion. Analysts have a favorable outlook on the company for the long term.

4. Gevo (Nasdaq: GEVO  )
Gevo is based out of Englewood, Colo., a Denver suburb. The company turns corn into isobutanol, which in turn can be processed into various products like jet fuel and synthetic rubber. Similar to Amyris, Gevo also missed analysts' estimated earnings in the second quarter but is positioned for future success after signing a commercial deal with Sasol (NYSE: SSL  ) . The chemical company becomes Gevo's first isobutanol customer and will utilize most of Gevo's production capacity into 2013.

Foolish takeaway
Lists are everywhere these days, and when they come from reputable sources like trade magazines and industry journals, they often provide a great beginning for investment research.

Interested in biofuels? Click here to add these companies to My Watchlist to stay on top of the most recent updates and analysis.

Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. The Motley Fool owns shares of Amyris Biotechnologies and Solazyme. Motley Fool newsletter services have recommended buying shares of Sasol, Unilever, and Total. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 23, 2011, at 8:49 AM, titus77 wrote:

    In the near term, these companies are going to struggle. On paper, they seem to be biotechnology companies and they have achieved some rich and optimistic valuations since that is what is typical in the biotech space.

    In reality, they are chemicals and fuel companies that are penetrating a very old and slow-to-change industry. Their margins are going to be thin and at least for AMRS and GEVO they are relying on corn as their sugar source. Unless they can start using alternative feedstocks for their alternative fuels there are going to be considerable challenges.

    For a company that has gone down a similar path, take a look at MBLX. They are not in the fuel business, but make plastic using bacteria and when they IPO'd they were perceived as a biotech company. Early on they had a very rich valuation, but ultimately the market figured out that they are a plastics company and the stock price is now reflecting that reality.

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