Oil prices may be down over the last few weeks, but that doesn't seem to be translating to lower prices at the pump so far. And that means that alternative fuel sources are still looking attractive. As the only alternative with a chance to make a dent in gasoline consumption in the next few years, let's take a look at what companies could play a role in natural gas becoming a viable transportation fuel.
Making fuel and building fueling stations
If you want to see the start of a natural gas revolution, you don't have to look any further than Clean Energy Fuels
In the first quarter, Clean Energy Fuels' revenue grew 67% to $65.3 million and the momentum doesn't appear to be stopping. On the company's conference call, management pointed to diesel prices near $4.50 per gallon, and comparable liquefied natural gas from Clean Energy at $2.27 as a driver of momentum for the entire sector.
Building vehicles to make the transformation happen
Everyone in the trucking industry is taking notice of natural gas, starting with manufacturers. Cummins, Navistar, and Volvo are building new engines to run off natural gas to meet customer needs. With fuel prices putting pressure on profits, trucking companies and buses are naturally the first step to make the transition to natural gas.
A similar story is playing out in the fuel conversion business at Fuel Systems Solutions
Clean Energy Fuels subsidiary BAF, which designs vehicles systems and conversion technology, is working with Ford
These companies all show a lot of promise but investing in them can be tricky because there is very little profit between them.
Investing in the transition
Knowing where a company stands in the transition to natural gas is key to investing in the space. Right now, buses dominate the LNG and CNG landscape while trucking is following fast. Passenger vehicles may be a great idea, but until the fueling infrastructure is built out, I would be wary of companies that rely too heavily on this space.
My pick right now is Clean Energy Fuels because of their focus on fleets and their role in expanding infrastructure. I would like to see the company grow more quickly before I make a real money investment, so for now I will add the company to My Watchlist and give it a thumbs up on My CAPS. Westport is an interesting story and a Motley Fool Stock Advisor pick but I would like to see a move toward profitability before jumping into the stock.
Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.
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