From his MSN column:Buy Zoltek Cos. (ZOLT, news, msgs).Just about everything that could go wrong has gone wrong, so I think it's time to add this maker of carbon fiber -- used for wind turbine blades, cars and other products where greater strength and lower weight are critical -- to Jubak's Picks. I expect wind power, a new and growing market for Zoltek, will be one of the big winners out of the current round of energy initiatives from Europe, the United States and the developing world. What has gone wrong? A St. Louis jury found the company in breach of a fiber supply agreement and told the company to pay $36 million in damages. Sales plunged when a major customer went bankrupt. Earnings fell even further short of Wall Street estimates when the company's new method of revenue recognition delayed the recognition of some sales. Delays in expanding manufacturing capacity took another bite out of sales. It's actually amazing, given this news flow, that the stock is down only 35% from its May 2006 high. Maybe that's why future revenue growth looks so promising. The company has just entered the market for wind turbine blades, where the larger size of new turbines requires greater use of high-strength carbon fiber. Wind power megawatts shipped is projected to grow by 12%-15% compounded annually through 2010, but growth in carbon fiber should be even faster as turbine blades increase in size as wind companies look for higher efficiencies and lower costs. A jump in blade size to 61 meters from 39, for example, requires the use of 30% more carbon fiber, according to RBC Capital Markets. Zoltek estimates the company's two current wind power customers, European market leaders Vestas and Gamesa, will account for $250 million in revenue in the next three years. But wind power isn't the only growth area for Zoltek. The company has partnered with BMW to produce a new M series vehicle with the ultimate target of using 100 pounds of carbon fiber per car to reduce weight and increase fuel efficiency. As of Jan. 23, I'm adding Zoltek to Jubak's Picks with a December 2007 target price of $30 a share. (Full disclosure: I own shares of Zoltek Companies in my personal portfolio. I will be adding more shares to my personal holdings three days after this column is posted.)
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