Pollution Control Could Prove Profitable

We considered recently the environmental control investment theme as one with real staying power over the next few decades. I firmly believe that corporations in this sector have great potential over the coming years as governments and industrial customers spend billions to clean up their own operations.

At the very least, increasingly stringent environmental legislation means that customers in the utilities sector will have to spend all kinds of money just to keep up with the minimum standards of law.

So, not only do the fundamentals for the environmental control sector look great, investor psychology is rallying around the idea. People want to invest in companies that help the environment. Now, the stock market’s appetite for companies in this sector is really strong.

A favorite small-cap company operating in this sector is Fuel-Tech N.V. (NASDAQ/FTEK). This company makes pollution control products that sell around the world. The company is headquartered in Stamford, Connecticut, and its products specialize in reducing nitrogen oxide (NOx) pollution from stationary combustion sources such as boilers, furnaces, and incinerators.

I just can’t wait until the company reports its latest set of financial results. Previous quarters showed excellent growth in the company’s operations and there’s no reason to think that this growth will abate.

Fuel-Tech’s stock price was hit hard in the recent market correction, falling from over $18 per share to its current level between $11 and $12 per share. There wasn’t any change in the company’s fundamentals, only the broader market’s weakness that affected the stock.

If the company’s second quarter earnings are solid and its outlook is robust, I think a good entry point would present itself with this stock. Frankly, this little company is one of the best in the pollution control business. Oh, and did I mention that it is expanding in China?