2 for Tuesday: Fire Up Some Methanex

Gains in fuel cell technology could ignite this methanol producer.
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I'll have a wood alcohol straight up.

Not to drink, mind you. I'm not quite that wild and crazy. No, what I'm talking about is a chemical called methanol. Right now it's used primarily to make plastics and paint. But it's also being considered for use in cars, as an alternative fuel. And with the world's oil supplies dwindling, methanol may soon be an important fuel for all of us.

That's where


(MEOH) - Get Report

, the world's largest producer and distributor of methanol, comes in.




and a range of other automakers are developing prototype cars that use fuel cells powered by methanol. Just a 1% or 2% penetration into the auto market could seriously boost demand for the fuel, whose prices have sunk recently amid the economic downturn.

Methanex is cheap. At its recent price of about $5.40, the stock trades at just 72% of book value. And it has $3.62 a share in cash. These numbers suggest that the economy's weakness has already been more than factored into the stock, and that even a moderate economic recovery could send methanol prices, and the stock, markedly higher.

Meanwhile, the company keeps cutting costs. During its third quarter, Methanex shut down a plant, saving roughly $10 million a year in maintenance and fixed costs.

Few people have had any dealings with methanol, but that doesn't mean it won't catch on. President Bush has repeatedly advocated the use and development of alternative fuel sources, including methanol. Although its widespread use as an alternative fuel is likely to be minimal over the next several years, its future prospects are limitless.

I think this is a $10 stock in a year's time.

(And hey -- if you want more valuable ideas like this one, be sure to check out my newsletter,

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In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Curtis welcomes your feedback and invites you to send it to

Glenn Curtis.