Natural Gas: Booming In The Beltway

Washington, D.C. – The natural gas industry has been turning up the heat this summer in the nation’s capital. Advocates are explaining to lawmakers that while oil is expensive, scarce and imported, there’s enough natural gas in the U.S. supply to last more than 100 years.

One example: Aubrey McClendon, Forbes 400 member and chief executive of Chesapeake Energy (nyse: CHK – news – people ), the second-largest independent producer of natural gas in the country. Speaking at a Congress hearing Wednesday, he sounded more like someone in the business of political snake oil.

“Imagine if tomorrow you could announce a new energy plan that would in one stroke cut your constituent’s gasoline bill in half, reduce our oil imports, improve our air quality, enhance national security, strengthen the dollar, reduce greenhouse gas emissions and create tens of thousands of new jobs in the U.S,” McClendon said. “I believe your upcoming reelection chances would be even higher than they already are.”

Smooth. McClendon and other panelists at the hearing, convened by the House Select Committee on Energy Independence and Global Warming, want Congress to know that natural gas can have a more prominent role in America’s energy future.

Several lawmakers seemed convinced, describing natural gas as “a precious resource,” a bridge to a renewable energy future–and a replacement for coal.

Full story at Forbes.com

Political Risk Watch: Nanotechnology

In print and online, Forbes has chronicled the amazing potential of nanotechnology, or the ability to see, manipulate and manufacture things that are as small as one-billionth of a meter.

At a Wednesday event in Washington, D.C., a panel of experts didn’t play down that potential.

“The future of nanotechnology is extraordinary,” said J. Clarence Davies, a former Environmental Protection Agency (EPA) official who now serves as a senior adviser to the Project on Emerging Nanotechnologies at the Woodrow Wilson Center in Washington. “When you start crossing it with synthetic biology and artificial intelligence and so on, science fiction looks very pale in comparison.”

Lately, however, the market has not shared in the enthusiasm, at least when it comes to pure-play nanotechnology stocks. In the table below, we show four that have dropped more than 45% from their respective 52-week highs.

Uncertainty stalks these companies. Altair Nanotechnologies (nasdaq: ALTI – news – people ), Nanophase Technologies (nasdaq: NANX – news – people ) and Nanosphere (nasdaq: NSPH – news – people ) have never turned a profit, and security analysts project that all will lose money for their current and upcoming fiscal years.

Another source of uncertainty, although not necessarily a negative, is regulation. Thicker red tape surrounding nanotech is practically inevitable, say Davies and colleagues, who have released a 28-page regulatory agenda for the next administration.

Full story at Forbes.com

Report: Deal Making Will Stay Aloft In Aerospace

Washington, D.C. – Over the past 12 months, valuations have plunged in the aerospace and defense sector. Last July, for example, U.S. aerospace and defense stocks traded at an average 23 times trailing-12-month earnings, according to an aggregate compiled by FactSet Research Systems. The average price-to-earnings ratio presently: 13.

Despite the compression in the average earnings multiple, it is not easy to be bullish here, as business has turned nasty for commercial aerospace customers. Tuesday, the Air Transport Association, the airlines’ trade group, announced that first-quarter expenses for airlines grew at the fastest pace since 1980. The biggest culprit: a 51% year-over-year increase in the average price of aviation fuel.

Beyond pure contrarianism, do bargain hunters have any reason to jump into aerospace and defense? One may be consolidation. As some investors retreat from these companies, corporate deal makers remain interested, according to a report released Monday by PricewaterhouseCoopers. The accounting firm says the sector saw $31 billion worth of aerospace and defense acquisition activity worldwide in 2007, the most since a peak of $46 billion in 2000, and forecasts significant merger and acquisition activity for the next one to two years.

Full story at Forbes.com

Seven Cheap Global Stock Picks

Raymond Mills can’t talk about the job he held before signing on to T. Rowe Price. Literally. With a doctorate in aerospace engineering from Stanford University, he worked on some sort of national security-related program until a decade ago. “It was classified,” is all he’ll say.

Less spooky is the way the manager of T. Rowe Price’s $1.5 billion (assets) Overseas Stock Fund picks stocks. Some of Mills’ selections are household names. Others are practically unpronounceable. All, in his view, offer above-average earnings growth–thanks to superior products, market dominance or exposure to fast-growing economies–at reasonable prices. For investors, that adds up to a way to ride out and profit from the market’s current volatility.

Toyota Motor (nyse: TM – news – people ), a Mills favorite, is a good example. “Honda and Toyota are leaders in hybrid technology and fuel efficiency,” he says. “They’re going to be winners over time.”

Long-term promise aside, Toyota shares are down 20% from a 52-week high amid the malaise in the global auto business. That has left the stock selling at nine times latest-12-month earnings, versus a five-year average of 13.

“Maybe we don’t think it’s going to be a great stock for the next year,” he says of many of the shares he tucks away, “but we think it’s going to be a great story over the next two to three or five years.”

Full story at Forbes.com

Defensive Defense Stock: Saab

With rising energy prices threatening commercial aviation, aerospace and defense stocks haven’t fared well in the global equities downturn. Year-to-date, according to an index tallied by FactSet Research Systems, the stocks of aerospace and defense companies worldwide have dropped 19% in dollar terms, versus an aggregate decline of 14% across all sectors globally.

At least one aerospace and defense stock, however, has bucked the year-to-date trend: Saab, the Swedish maker of military aircraft, aviation components and command and control systems. The share price for the Stockholm-headquartered company, not to be confused with the auto brand now owned by General Motors (nyse: GM – news – people ), is up 17% so far in 2008.

Even with the uptick, Saab still looks cheap. Its Stockholm-listed shares sell for just 10 times the average analyst estimate for 2009 earnings per share. Contrast that with equivalent multiples of 12 for Lockheed Martin (nyse: LMT – news – people ) and 13 for Raytheon (nyse: RTN – news – people ). Those interested in international investing should put Saab on their radar screen.

“In this turbulent time, we believe investors will appreciate this type of company more and more,” says Mikael Laséen, a Stockholm-based analyst at Kaupthing Bank, speaking of Saab. “It is of course a political risk, but clearly you don’t have to worry about the business cycle and consumer spending that much.”

Full story at Forbes.com

Tough Times Spawn Opportunities For Washington VCs

Washington, D.C. – The U.S. venture capital business has been slogging through a rough patch. The first quarter of 2008, according to the National Venture Capital Association, saw just five initial public offerings by venture-backed start-ups. Meanwhile, just 56 venture-backed firms were sold or merged, down from 82 and 104, respectively, in the first quarters of 2007 and 2006.

The principals of RedShift Ventures, a Washington, D.C.-area venture capital firm, don’t gloss over the problems. “It was just brutal,” says general partner Mark Frantz, of the first quarter. “I don’t see a lot of indicators on the horizon that are going to change that,” adds Richard Harris, another general partner and RedShift’s founder.

But from RedShift’s view, the tough outlook for making money on the back end hasn’t dampened entrepreneurial activity on the front. “We see a tremendous amount of deal flow,” says Harris.

Paradoxically, Harris suggests one reason for all this opportunity is corporate skimping on research and development. “In this economic environment,” explains Harris, “large companies seem less interested in funding cutting-edge research than they are just shoring up their core businesses.”

Full story at Forbes.com

Hybrid Trucks Drive Through The ‘Valley of Death’

As we noted recently, use of hybrid engine technology in commercial trucks remains very much in its infancy. Expect that infancy to last a while, even with diesel prices soaring. A hybrid big rig costs 50% more than a conventional one, too rich a premium for most consumers. The federal government, while interested in promoting more efficient trucks, isn’t a likely savior here.

All this was up for discussion at a Tuesday Capitol Hill hearing, held by the House Committee on Science and Technology’s Subcommittee on Energy and the Environment. “The truck industry is due for a major technological shift, said Rep. Nick Lampson (D-Texas), the subcommittee’s chair, “but advances in this sector don’t come easily.”

Full story at Forbes.com

Aerospace’s Bullish Hawk

Thirty years ago, before he jumped into securities analysis, Richard Whittington paid his dues working in the bowels of the U.S. Department of Defense and the Rand Corp. (a think tank catering mostly to the U.S. government). He ran budget analyses and worked over different Cold War scenarios, like what kind of troop levels were sufficient to block a Soviet thrust into Western Europe.

Now at JSA Research, an independent equity research boutique focused on aerospace and defense, Whittington has a worldview that remains very much informed by those Cold War days.

“There is an emerging threat,” says Whittington, 58. “China is spending an increasing sum of money on its military, including frontline aircraft.” He also points to China’s moves to secure energy supplies, a historically rich source of global conflict.

Full story at Forbes.com

Credit Suisse’s Robert Spingarn

Analyst: Robert Spingarn

Firm: Credit Suisse

Industry: Aerospace-Defense

Rank: 1

Robert Spingarn, aerospace and defense analyst at Credit Suisse (nyse: CS – news – people ), ranks first among all his peers on Wall Street in Forbes.com’s 2008 survey of America’s best stock analysts. Spingarn earns the award with solid judgment, as measured by our data partner Zacks Investment Research, in both forecasting earnings and picking stocks over a three-year period.

In the latter category, Spingarn benefited especially from bullish calls on BE Aerospace (nasdaq: BEAV – news – people ), Precision Castparts (nyse: PCP – news – people ) and Armor Holdings (nyse: AH – news – people ). From mid-May 2005, when Spingarn put positive ratings on the stocks, through the end of 2007, each clocked triple-digit gains. Click here for more on the methodology underlying our rankings.

Full story at Forbes.com

Rough Road Ahead For Highway Bill

Washington, D.C. – As we’ve regularly reported on Forbes.com, the road building lobby in Washington makes a loud and skillful case that federal spending on highways–$41 billion for fiscal 2008–is inadequate and that the nation’s infrastructure is facing a crisis.

This week, several hundred industry folks descended on Capitol Hill for their latest lobbying offensive.

“It’s a severe situation,” said David Bauer, senior vice president for government affairs at the American Road & Transportation Builders Association, Tuesday. “It’s probably as severe as [any during] the 11 years that I’ve been at ARTBA.”

Why so severe? One reason is the legislative outlook, as discussed by a panel of Democratic and Republican congressional staffers that ARTBA had summoned for a briefing Tuesday. The consensus among them: reauthorization of the nation’s multi-year transportation spending law, enacted in 2005 with a $287 billion price tag, could prove much trickier than the last go round. A new administration and new environmental issues will complicate already contentious issues of funding America’s infrastructure.

Full story at Forbes.com