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June 4, 2006

SpeculatingStocks.com Stock Pick: Pacific Ethanol, Inc. (PEIX)

Stock Price: $28.01


Pacific Ethanol Inc. is a marketer and producer of renewable fuels. The company's product line emphasizes clean-burning, corn-based ethanol.

PEIX generated revenue of $87.59 million in 2005 with a net loss of $9.9 million. There are many ethanol companies out there, but few generating as much revenue as PEIX.

The company just had a PIPE investment of $138 million with a group of investors acquiring 5.5 million shares at $26.38 per share. Generally, PIPE's are bad and can lead to a decline in share price. However, PEIX is using the money to aggressively expand its processing technology and to accelerate the completion of five new ethanol production facilities within the next 18 months.

The main story behind ethanol stocks is the idea of E-85 being offered across the United States and cars being able to use it. E-85 is a blend of 85 percent ethanol and 15 percent gasoline. Right now, only about 5 million cars can use E-85 and the fuel is only offered by just over 600 retailers nationwide. These retailers are mainly independent and not chain gas stations. This trend may change very soon as Wal-Mart considers offering E-85 at its 383 U.S. gas stations. The government is pushing ethanol as well and looking for ways to help Wal-Mart in this effort. Other major chains will follow Wal-Mart into offering E-85 alongside unleaded gasoline.

PEIX is risky and overvalued with 23.90% of the float being shorted. However, it's a great time to play PEIX as it is far from overbought right now after being sold down from $44.50 in just one month. PEIX is now bottoming and can move quickly from here with all the ethanol excitement out there.

PEIX is one of the most well known ethanol stocks if not the most well known.

 
     
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