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By Robert Rapier on Sep 25, 2007 with no responses

Ethanol Stocks Hit New Lows

Tags: investing

A buying opportunity?

Sector Snap: Ethanol stocks hit new lows

NEW YORK (AP) – Ethanol stocks fell Tuesday, with several hitting 52-week lows, as a Bear Stearns (NYSE:BSC) analyst rehashed concerns which promise to plague the industry in coming months.

Among stocks hitting their lowest point in a year were US BioEnergy Corp. (NASDAQ:USBE) , which fell 73 cents, or 8.2 percent, to $8.20; Aventine Renewable Energy Holdings Inc. (NYSE:AVR) , which fell 67 cents, or 6.1 percent, to $10.30; Pacific Ethanol Inc. (NASDAQ:PEIX) , which fell 44 cents, or 4.9 percent, to $8.76; and Verasun Energy Corp. (NYSE:VSE) , which fell 50 cents, or 4.4 percent, to $10.75.

Bear Stearns analyst Ann Duignan noted supply and demand concerns facing the renewable fuel in a note Tuesday that outlined a conference call with several ethanol players.

To answer my opening question, no, I don’t think it is a buying opportunity. There might be a short-term bounce as investors do come in bargain-hunting, but I don’t think long-term this is a place you want to be. And I am only interested in long-term.

Are we going to use more ethanol in the future? Yes, it is mandated that we must. But no company is in a position to gain much of an advantage in that marketplace. Unlike some of these analysts just now jumping off of the bandwagon, I warned you about this over a year ago:

The Ethanol Bubble Has Burst

Of course now that ethanol values have fallen by 60-70%, some analysts suddenly start issuing warnings. Nice call.

Disclaimer: I don’t directly own any ethanol stocks (it is possible that one of my mutual funds contains some ethanol stocks) nor have I shorted any ethanol stocks.