Japan Finds the Downside to Nuclear Energy

About 5 years ago, I toured the Hamaoka nuclear power plant in Japan. Like all things Japanese, the mood and theme surprised me. Nuclear energy, I learned, is really fun!

First was the powerful “green energy” spin. Part of the tour included watching a show of robotic animation characters (similar to “Bear Country Jamboree” at Disneyland), singing and dancing about the joys of safe and green nuclear energy. There were nuclear games and activities for kids. There were clam-digging tours out back of the reactor. Clams and other shellfish thrive in the heated waters expelled by the nuclear reactor, so local residents dig for clams there. Paradise!

The Hamaoka Nuclear Power Plant's IMAX theatre is, at the time of writing this article, playing "IMAX Under the Sea," and advertising the upcoming Walt Disney flick, "Mars Needs Moms."

Yet, there were always reminders about the negative side of nuclear energy. Worker exposure to radiation makes the news regularly. My friend Mamoru, a nuclear safety inspector, was on NHK news one night explaining how a small crack in the retainer at one of the plants was nothing serious. Then there was the time I had to write diplomatic letters to the Kazakhstani government, asking them to allow human blood samples from radioactive fallout victims to be shipped to Japan via courier for study.

Yes, nuclear energy is a big source of power in Japan, and has thus far been relatively safe. We shall see if it stays that way. If you live on the West Coast of the United States, buy iodine just in case.

As for stock picks as a result of the disaster…Sekisui house (a Japanese homebuilder and Division of Sekisui Chemical) seems like a smart buy. Sekisui builds semi-prefabricated homes, and forms a large part of the new home market. Importantly, Sekisui has seismic test platforms in their factory, and they shake the living hell out of each new home design to make sure they stay together. No doubt, many people will be replacing their traditional homes (or destroyed homes) with Sekisui branded homes.

For obvious reasons, Tokyo Electric Power Company (TEPCO - the nuclear plant owner) is a “sell” until further notice.

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For further information, see:

Sekisui Earthquake Resistant Housing

Nuclear Power Plant safety measures

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Stocks I Like - Citigroup

Citigroup – the company that almost went bankrupt in the subprime credit crisis, that received billions of dollars in government aid, and whose management has been called inept – is on my buy list.

Collectively, mutual funds and other large retail investors cannot buy Citigroup, because their unit holders would go berserk with worry. After all, the news surrounding Citigroup has been nothing short of scandalous. This situation presents an opportunity for the astute investor. For those who invest using logic rather than emotion and who can think beyond the next quarter, the big “C” is a great buy.

First off, the price: $3.79 per share at last close. This puts Citigroup shares at well below book value. As I wrote at the end of May, “At the moment, you can buy $5.61 worth of Citibank assets for $3.81, and get all their clients, brand names, and worldwide businesses for free.” And what a franchise it is.

Outside of the US, I have used Citigroup banks in Delhi, London, Tokyo and Beijing. Citigroup is a global business powerhouse, and its image - though tarnished at home - is relatively unscathed elsewhere. Citigroup’s worldwide reach is enviable.

The price of C has been hovering at just under $4 for weeks, and will likely stay there until the US government finishes selling its ownership - 2.6 billion sold so far, with 5.1 billion more to go. So, there is certainly no rush to get in. However, once the government’s stake is gone, Citigroup’s price will likely move sharply upward.

In a couple of years, I would not be at all surprised to see Citi’s EPS rise to the $2+ range, which at a modest P/E of 10 would give the shares a price of $20. Nice.

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"If a person is not willing to make a mistake, you're never going to do anything right."

Sandy Weill, former CEO of Citigroup
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Disclosure
Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.

A Barrel of Reality

BP, formerly British Petroleum, has been making headlines for weeks with its outrageous 35,000+ barrel per day ocean-based spill. With President Obama calling for revenge (at least publicly), and congressmen berating BP executives while vainly attempting to maneuver them into admitting guilt, some say that the offshore oil market is finished. Others add that the rise of alternative energy vehicles is now assured. Still others say that BP is a great buy. This article is a dose of reality all around.

I am a big fan of alternative energy. Wind and solar power have come of age, and can successfully compete with traditional sources like coal and hydroelectric power for electricity generation. Alternative energy vehicles, however, are simply not at the same level.

Despite all the hype about alternative energy vehicles, how many recharging stations do you actually see on your way home from work? How many people do you know who run electric vehicles for personal use (not just for corporate image)? Major alternatives to electric, such as fuel-cell cars, have been “in the works” and “soon affordable” since I visited Ballard Power’s (BLDP) office 11 years ago.

Although fuel cell and electric vehicles hold great promise, they simply aren't ready. No one wants to wait 20 minutes to "refuel" their car. No one wants a low-cost commuter vehicle that goes 35 miles per hour. Nor does anyone want to pay a year’s salary for a car that goes the same speed as their existing car.

Like personal computers, alternative energy vehicles will truly take off once cost and functionality reach reasonable levels, and once the infrastructure to maintain them is in place. Until then, oil and its producers maintain a bright future.

As for BP, should you buy or sell? Although BP looks tempting at these levels, I should remind everyone that the inglorious well is still leaking thousands of barrels per day. Until it’s actually capped, my money is going into more reliable opportunities; like, for example, this disaster's beneficiaries, Chevron (CVX) and ConocoPhillips (COP).
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“Already those who have seen this new model are acclaiming it the finest car of any type yet produced for city and suburban use. You, too, will be delighted with it.”
Advertisement for the Detroit Electric Car Company, 1920.