A Risky, But Exciting, Nat-Gas Play
Published: Monday, 4 Jan 2010 | 8:03 PM ET Text Size By: Tom Brennan
Web Editor, Mad Money

Cramer has always recommended speculation as a way to keep stocks interesting. Poring over 10-Ks and balance sheets can get, well, boring, so buying a company with the potential to pop makes the process more fun. Sure, there’s risk involved, but many times that is how the big money’s made.




Keeping with his natural-gas theme for Monday’s show, Cramer offered up Westport Innovations [WPRT 12.99 1.03 (+8.61%) ], a spec play on the mass adoption of that commodity. He has predicted that the US will soon come to favor natural gas more and more for its energy needs. And it’s a logical choice, because it’s cleaner than coal and crude, and America is sitting on vast nat-gas reserves.

Cramer likes Westport because it makes engines that run on natural gas and liquefied petroleum gas, as well as the equipment needed to make it possible for existing diesel engines to do so. The technology is just catching on in the States, but it has a bigger foothold overseas. Westport, earning 84% of sales from North America, but selling to more than 50 commercial vehicle manufacturers in 19 different countries, benefits from both.

But make no mistake: This is a very risky stock. In fact, Cramer called Westport “perhaps the single most speculative way to play” natural gas. The company lost 28 cents a share last quarter, and as of Sept. 30 the cash flow from operations had been negative for the previous six months.

There’s also the fact that Westport is hugely dependent on its strategic partnerships. And the cash from a recent $55 million offering has been funneled into growing the company’s heavy-duty truck business and other partnerships. If the analysts’ earnings estimates aren’t met, Cramer said, Westport may be forced to raise capital again.

“If you believe in natural gas as a bridge fuel and you’re willing to take the risks, and boy are there a lot of them with this one,” Cramer said, “the underlying long-term story here could be incredible – and I want to emphasize the word ‘could.’”


Buck