Westport Innovations (WPRT – Nasdaq)

Dear Bottarelli Research Member,

As we gear up for the presidential election, I believe that we have our small-cap ledger positioned extremely well. You see, no matter if the Democrats or the Republicans take the White House, alternative energy initiatives (such as solar and wind power) will be top priorities on each candidate’s agenda. This will offer a nice boost to many of the small-cap plays that we’re currently holding.

At the same time, it also sounds like the Chinese government is getting closer and closer to announcing some type of stimulus package to help the U.S. emerge from our current recession. As I’ve mentioned in these pages before, I feel that the Chinese markets are close to a bottom (noted by the FXI chart below). If I receive confirmation that a bottom has been set, that’ll open up another powerful alleyway of small-cap investing opportunities. More to come.

In the meantime, I want to add exposure to a company that will offer a strategic addition to the global LNG infrastructure build-out. Liquefied natural gas (LNG) is natural gas that has been converted into liquid form for easier storage and transport. LNG takes up about 1/600^th the volume of natural gas. Plus, it’s odorless, colorless, non-toxic and non-corrosive. (More on how these benefits will make you money below!)

This past week, I had the opportunity to explore an innovation that’ll change the way our trucking industry operates. You see, today’s newest pick has developed technology that operates engines completely on LNG. When you consider the fuel savings achieved by LNG, you’ll understand why these breakthrough engines are experiencing unprecedented demand across our great nation.

I personally drove in one of these rigs last week, and I must tell you, I was impressed by the engine’s power, the lack of noise, and the lack of odor. If you’ve ever been behind a bus or truck that’s throwing off heavy fumes, you know exactly what I’m talking about. My buddy, who owns his own rigs, recently implemented this technology. And he just told me that he cut his fuel cots by 30%. Imagine how much money a large trucking fleet would save by adopting this technology!

As I dug deeper into this investment opportunity, I learned that this technology is absolutely catching fire. After all, the unmistakable benefits of fuel cost savings and reduced emissions are helping this little gem carve out a powerful niche in every truck, fleet, and commercial vehicle operator across the United States (if not across the world). That’s quite a bright future!

Another reason I want to buy this company today is politically-driven. You see, no matter who gets elected in November, you better believe that they’ll support some type of legislation that pushes for cutting our dependence on foreign oil imports. I personally think our domestic natural gas reserves will be the centerpiece of this plan, as I’ve mentioned many times before. This further supports adding this stock to our small-cap ledger now.

Not only that, but earlier this week, it was announced that China National Petroleum is now the front-runner to develop Iraq’s Al-Ahdab oil field (which is an oil field that could produce for the next 20 years).

I don’t know about you, but I do not trust any oil-rich country as far as I could throw them. Iraq handing over their reserves to China is just another slap in the face. To me, it’s further proof that our newly-elected leaders better get their act together on alternative energy initiatives starting day #1 on the job. That’s why I’m so excited about adding this company to our small-cap portfolio today.

This company has partnerships with some of the world’s major players, including BMW, Cummins Engine, Ford, Energy Developments Limited, and Chian Yuchai (one of China’s largest engine manufacturers for buses and trucks). And by now, I’m sure you have seen T.Boone Pickens’ commercials about how natural gas can curb our thirst for oil. It’s only fitting that T.Boone’s company (called Clean Energy Fuels Corp) is also involved with today’s pick, further strengthening my bullish position.

Not only that, but this little gem also has their sights set on countries like China, India, and South America. Vehicle growth in China is expected to increase by 300% over the next 25 years, making a rock-solid case for this technology. In terms of consumption, we simply don’t have enough fossil fuels to meet this vehicle demand increase. And in terms of environmental issues, the earth simply cannot absorb this type of pollution. Put it all together, and you can truly wrap your brain around the enormous potential of this week’s pick.

I’ve been following this company for quite some time, and I must tell you, our timing could not be better. They just reported revenues of $25.5 million (compared to $15.7 million for the three months ended June 30, 2007). That’s an increase of 62%! And considering a backlog that’s growing stronger by the day, I have no doubt that this little gem is aimed right at the heart of solving our country’s oil dependence and greenhouse gas worries.

So on that note, let’s welcome our newest small-cap addition, Westport Innovations (WPRT – NASDAQ). I fully expect this pick to be a big performer over the next year. Shares are a buy under $12.50.

UPDATES

Titanium Metals (TIE – NYSE): They announced a quarterly dividend of 7.5 cents per share on their common stock, payable September 24^th to stockholders on record as of September 10^th. The stock has moved up since we called them “undervalued” at $12.00 per share, so please don’t forget why we entered TIE. This is an incredible stock to own at these prices, so maintain your position. Hold.

Huaneng Power International (HNP – NYSE): They reported operating results for the six-month period ended June 30, 2008. And I have to tell you, due to terrible snow and rain storms, I was worried about this earnings report. But as it turned out, my worries were quickly shoved aside as HNP reported a 32.81% revenue increase over the same period last year. The best is still yet to come, so let’s give HNP room to hand us our profits. Hold.

Metalline Mining Company (MMG – AMEX): In a President’s letter to share holders this week, MMG explained exactly what I have been saying about this company all along: The nature of their zinc resource at Sierra Mojada has changed appreciably since they started evaluating it in 2005. As a result of continued drilling, MMG now has a resource model that more than doubles the zinc metal content. They now plan on doing more drilling for silver, copper, cobalt, zinc, lead sulfides. Folks, I feel this little gem is the most undervalued junior I know of. They have proven the ore is there, and now it’s only a matter of getting it out of the ground. I urge you to hold MMG shares. It’s only a matter of time. Buy.

China Finance Online (JRJC – NASDAQ): They reported net revenues of $14.68 million, exceeding the high end of their previous guidance of $13.0 to $13.5 million. This number is dramatically above the $5.72 million for the same period in 2007 and $11.06 million for the first quarter of 2008. That’s up 156% year-over-year and 33% quarter-over-quarter! Talk about impressive numbers. They also expect the third quarter and full year 2008 to generate net revenues ranging from $15.5 million to $16.50 million , a 112% to 126% increase from the corresponding period in 2007. As the China economy recovers, JRJC will prosper. Stick with it. Hold.

NACEL Energy (NCEN – NASDAQ): Boy what a difference a week makes! I wanted to take this time and congratulate all of you who wrote me saying you defended this little gem and bought on the lows. This move increased your wealth 3-fold. Taking advantage of a misunderstood situation and “buying the panic” handed you a strong weekly return, but since I recommended shares just about where they are trading now, I will not count any profits yet. But I will say this: As their September meeting approaches, I bet I’ll be talking about across-the-board profits in my next write-up. Now that shares have bounced back strong, I smell a strong return coming our way. Hold.

Until next week, stay patient, stay focused, and be sure to give thanks for the abundance in your life.

Sincerely,

McCain or Obama? It Doesn’t Matter:
Alternative Energy Still Wins

I’d like to begin today with a quick look at the Russell 2000 Small Cap Index (RUT).As you know, the market hasn’t given investors much to cheer about over the last three months. But if you look at the RUT chart below, you can see some light at the end of the tunnel. Despite a very weak month of August, notice how the RUT has quietly moved above its 50-day moving average. No other major market index has experienced this technical pattern.

In fact, a look at the Dow and the S&P 500 shows you that each index is below their 50-day and 200-day moving averages.

Why do I bring this to your attention?

It’s simple. You see, from a historical perspective, small-cap stocks are a leading market indicator.And now that the small-cap sector is trading above one of its key technical levels, this could be an early signal that indicates that the major market averages are getting close to a bottom. If the small-cap sector is now moving above its key technical levels, perhaps the major market indices will soon follow? It’ll be something we keep a close eye on. And on that note, let’s dive into this week’s pick, Westport Innovations (WPRT – NASDAQ).

Due to the fact that WPRT just began trading on the NASDAQ on Monday, August 18^th, the stock is truly a Wall Street secret. But they won’t remain a secret for long.

You see, Westport Innovations is a global leader in alternative fuel and low-emissions transportation technology. As Mark mentioned, their proprietary technology allows engines to operate clean-burning fuels such as compressed natural gas (CNG), liquefied natural gas (LNG), hydrogen and biofuels.

As you read this, WPRT has a powerful joint venture with Cummins (CMI – NYSE), who currently manufactures and sellsthe world’s broadest range of low-emissions alternative fuel engines. Not only that, but WPRT also has a joint venture with Beijing Tianhai, who manufactures and sells LNG fuel tanks. Combine both partnerships, and WPRT has a strong foothold on this booming market niche.

But let’s back up a moment and ask a simple question: Why natural gas?

The quick and easy answer is that improved LNG technology has set the wheels in motion for a major global expansion. For example, due to their shortage of energy, Japan, South Korea, Spain, France, Italy, and Taiwan all import large volumes of LNG.

Plus, major international oil companies like BP, ExxonMobil, and Royal Dutch Shell also import large volumes of LNG. And no wonder. The International Energy Agency estimates that European imports of LNG from Africa and the Middle East will quadruple by 2030.

When you look at the benefits of natural gas, this powerful import increase becomes crystal clear. For example, natural gas is the cleanest of all the fossil fuels. Burning natural gas produces mostly carbon dioxide and water vapor, which are the same substances emitted when humans exhale.

Not only that, but as a vehicle fuel, natural gas produces significantly lower harmful emissions of nitrogen oxides (NOx), particulate matter (PM), and greenhouse gas (GHG) than oil-based gasoline or diesel. And most countries have abundant domestic natural gas reserves — making it a clean fuel that’s in ample supply across the globe.

When you apply these powerful benefits to vehicles, you get the cleanest, most practical solution for low-emissions transportation today. In fact, natural gas vehicles offer a real and immediate alternative to conventional diesel and gasoline vehicles, especially when you consider the stringent emissions standards that are now being placed on commercial transport companies.

A breakdown of these benefits are listed below.

Emissions Regulations Tightening: Tightening regulations make it more difficult for diesel engines to comply without the addition of expensive after-treatment systems, making a strong case for LNG.

Mandates and Incentives Making Financial Sense: The United States, China, India, Germany, UK, Egypt, the Philippines, Thailand, France, and Brazil all offer strong mandates and incentives for natural gas vehicles, giving global companies big incentives to adopt LNG technology right now.

Natural Gas Infrastructure In Place: Significant LNG infrastructure is already found in major markets such as the Argentina, Brazil, Pakistan, India, China, and the US. And looking forward even more, natural gas infrastructure is being developed around the world at a rapid pace.

Natural Gas Price Relative To Diesel: Natural gas prices (versus diesel prices) are attractive in most of the larger global markets such as the United States, China, India, Brazil, and most of Europe.

Now that the LNG benefits have been outlined, let’s look specifically at the technology offered by Westport Innovations. Their engine technologies combine the power, fuel-efficiency, and performance of diesel engines with the low emissions and operating-cost benefits achieved by replacing diesel fuel with natural gas. Their full product line is described below.

HPDI (High Pressure Direct Injection): Used for heavy-duty trucks and high horsepower applications. Westport HPDI natural gas engines on the road are producing 50% less nitrogen oxides (NOx), 80% less particulate matter (PM), and 20-25% less carbon dioxide (CO2) emissions than equivalent diesel engines.

CNG-DI (Compressed Natural Gas Direct Injection): Used in light to medium trucks and city work vehicles. Testing on prototype engines shows 20% less greenhouse gas emissions than equivalent diesel engines and 30% increased fuel efficiency over current natural gas engines.

H2DI (Hydrogen Direct Injection): Advanced fuel injection hardware are used to provide research and engineering support for BMW and Ford’s hydrogen programs.

HCNG (Hydrogen-Enriched Compressed Natural Gas): Calibrated natural gas engines operate on a blend of hydrogen and compressed natural gas called HCNG. HCNG buses (powered by Cummins Westport LBSI engines) retain the same power and torque of natural gas buses while producing 50% less NOx. In fact, Cummins Westport engines are designed to meet the most stringent emissions regulations. They have already passed the strict emissions standard regulations of the Environmental Protection Agency and CARB (California Air Resources Board).

Combine this powerful product line with the tremendous benefits for natural gas, and the investing case for WPRT becomes clear.

Then, add into the equation the fact that shares have just been added to the NASDAQ (making them a Wall Street secret) and the investment thesis gets even better.

After that, consider that WPRT will receive a strong political benefit no matter which presidential candidate gets elected in November.

And don’t forget about the powerful joint venture deals that WPRT has with some of the best engine companies in the world.

Add it all up, and the case for Westport Innovations is quite compelling. Therefore, let’s go ahead and add shares to our small-cap portfolio now!

PLAY: Buy shares of Westport Innovations (WPRT – NASDAQ) at or under $12.50, good for the week.

Sincerely,