Fuel System appears to be well-positioned to benefit from Congress' proposed extension of tax incentives and credits for natural gas vehicles and infrastructure. The proposed bill also mandates that 50% of the U.S. government's vehicle covert to natural gas in the years ahead. The First Call FY2009/FY2010 EPS estimates for FSYS are $1.61 to $1.97.
Veteran energy expert Daniel Yergin, co-founder of Cambridge Energy Research Associates, has said, "The biggest innovation in the energy business in past 30 years has been unconventional natural gas or unconventional gas."
In theory, natural gas can be a game-changer in U.S. energy use patterns -- particularly if a large portion of the vehicle fleet converts to it. But every year, or with each energy crisis, something appears to prevent natural gas from making substantial inroads versus oil/gasoline.
Hence, I'm putting a tight Sell/Stop Loss on FSYS: the business model is viable, and the customer base, in theory, is large, but that won't feed the bulldog if energy/fuel system conversions due not occur at an adequate rate. FSYS remains a high-risk stock, so it's to avoid it if you're a low/moderate risk investor.
Stock Analysis: Fuel Systems Solutions is a high-risk stock. I'd consider buying a 25% position in FSYS now; then another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of your FSYS position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $18.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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