Northwest Airline Filling Holes In Pension Fund With Something Other Than Money
SERWER: When the Northeast power grid crashed last week, one building in Manhattan never lost power, and that building was the Central Park police precinct house, which happens to be powered by fuel cell technology. A lot of people think fuel cells are the way to go, not only for an alternative energy source, but also for a good investment. Joining us now to talk about that is Sanjay Shrestha of First Albany. And before we begin, we should mention that Sanjay and First Albany have no conflict of interest with any of the companies and stocks we're going to talk about. Sanjay, welcome to the program.</s>SANJAY SHRESTHA, FIRST ALBANY: Thank you.</s>SERWER: I guess if I could...</s>SHRESTHA: Thanks for having me here.</s>SERWER: You're welcome. Could we start off where you can just sort of describe what alternative energy is? I don't think a lot of people are familiar with that.</s>SHRESTHA: Oh, sure, sure. When we talk about the alternative energy, it's a pretty broad space. And essentially as, you know, pretty much like a concise way, it is essentially all of the technologies that are involved in the generation, the distribution, as well as the conversion of electricity. And that includes technology ranging from fuel cells, micro turbines, solar power, as well as some technology such as superconductivity that can essentially transmit electricity in a much more efficient manner and also includes some technology that can be used for the backup solutions such flywheels and a battery-based solution.</s>SERWER: Wow!</s>ROMANS: This is long-term, concept-type stuff. When you start talking about investing in this space, these are areas that are volatile, stocks that move very quickly, in some cases companies that are not profitable. But it's an idea that a lot of people are very interested in. We saw a lot of these stocks fly this week.</s>SHRESTHA: Sure.</s>ROMANS: Give investors a little bit of advice about how to carefully tread in this arena.</s>SHRESTHA: Absolutely, absolutely. That's a great point. I'm glad you brought that up, because one of the things that we are going to see here a lot is going to be volatility. An investor needs to be really careful about the fact that the early-stage companies are not going to make money anytime soon.</s>ROMANS: Right.</s>SHRESTHA: And given the recent event of what just happened here, it is our opinion that the prime beneficiaries are really going to be the guys who actually have the product in the marketplace today. However, having said that, we think, you know, essentially some of these fuel cell companies, you know, do have some solid long-term business plans, do have some cash position. And we would encourage investors to capitalize actually on volatility. Do not chase the stock. Buy on the weakness and focus on the companies that have a strong cash balance and who have the right business model in place.</s>LISOVICZ: So, Sanjay, for the investor who doesn't have a strong stomach, is there any place that an investor can put his or her money now, where you might actually see some returns in the short term, in the next, say, couple of years?</s>SHRESTHA: Sure, sure. I mean, you know, within the alternative energy, there are a couple of companies that are actually pretty established and that also have some profitability today. That would include some of the companies like American Power Conversion, some other companies like C & D Technologies. Those guys provide a battery back-up solution that can protect your critical data, as well as equipment. You know, however, I would not encourage people to chase the stocks. They have had a nice run here, given the recent events of last week. And, again, the stocks are going to be volatile, and you would potentially want to buy them cheaper.</s>SERWER: Sanjay, let me ask you, though -- I want to back up to this: What is alternative energy?</s>SHRESTHA: Sure, sure.</s>SERWER: Because you've got fossil fuels, you've got the sun, you've got the wind.</s>SHRESTHA: That's right. That's right.</s>SERWER: Tell me specifically what else is out there, and how viable it is?</s>SHRESTHA: Well, that's a great question.</s>SERWER: And nuclear, of course.</s>SHRESTHA: That's a great question. And the most important thing here is fuel cells do hold a lot of potential.</s>SERWER: And how do those work, just so we can understand it?</s>SHRESTHA: Absolutely. Essentially nothing more than a chemical reaction. Instead of burning a fuel, you have electricity going in. There's an electrolyte that splits into an electron, which electron is essentially electricity, and that gives you the power.</s>SERWER: Is it viable?</s>SHRESTHA: It is viable, but we need a significant subsidy from the government, because the way we see it is the most important thing for any early-stage industry to be a commercial viability, we've got to talk about the economics. That's the key driver. And right now, these technologies are not economical.</s>ROMANS: If you're bold -- if you're really bold and you want to take a very long-term look at it...</s>SHRESTHA: Sure.</s>ROMANS: ... what names are in the fuel cell arena?</s>SHRESTHA: I would definitely take a look at a company called FuelCell Energy, symbol FCEL. I do like their long-term business model. And I would also take a look at another company called Quantum Technology, symbol QTWW. That company is not the prime beneficiary of the recent event. However, I like that company, because that's probably going to be one of the first fuel cell companies to get to profit.</s>LISOVICZ: But, Sanjay, is it only because of the capital investment that Detroit is not embracing this? I mean, we've just been talking about these higher gasoline prices, which are really hurting a lot of Americans. Is it just Detroit's reluctance to invest that's really holding this technology back?</s>SHRESTHA: Well, I think obviously it's a little bit of that. But then, again, we've heard a lot of talk about how we need the backup solution and how we need to do something about the forward- thinking technology. But we really haven't seen some clear path from the government's side to really provide some sort of a clear incentive.</s>LISOVICZ: Sometimes it takes a disaster to...</s>SHRESTHA: That's right. That's right.</s>LISOVICZ: ... in fact, create something better. Do you think that blackout that was the worst in the nation...</s>SHRESTHA: That's absolutely right.</s>LISOVICZ: ... the situation that was called for -- or needed?</s>SHRESTHA: Well, essentially, this blackout, as you guys know, it's bigger than the 1965 blackout, and we hope that it certainly sends a message, a wake-up call to Washington and they would essentially start to provide some clear incentive program whereby this technology is going to be cost-competitive with the existing solution, potentially driving a mass adoption and bringing in the economics of scale, and whereby we can start talking about fuel cells as a viable industry instead of a concept.</s>ROMANS: Sanjay Shrestha of First Albany, thanks so much for joining us today.</s>SHRESTHA: Thank you so much.</s>ROMANS: Very interesting stuff. Just ahead, he can't trade stocks anymore, but former Solomon Smith Barney analyst Jack Grubman is still getting a nice paycheck. Find out how much and why coming up. And we'll get some of your e-mails and ask the e-mail question of the week. Our address is inthemoney@cnn.com. But, before we go to the break, Andy has got a quick lesson on hedge funds in this week's edition of "Fortune Fundamentals."</s>SERWER: Today, we're talking hedge funds. Hedge funds sound dark and mysterious, and while these investment funds are secretive, they really aren't that complicated. Originally, a hedge fund was a pot of money run by a manager who made hedged investments. For instance, a fund's manager would invest in stocks of companies he was bullish on, say airline stocks, and short stocks of companies that he was bearish on, say technology stocks. This kind of strategy is supposed to work well in both an up and a down market. Lately, the number of hedge funds has grown tremendously, and many of them don't actually hedge. Today, the term "hedge fund" has become a catch-all phrase that describes any unregulated investment fund, where a money manager takes a cut of any gains on top of an annual fee. Unlike mutual funds, hedge funds are generally not regulated. Usually, the minimum investment in a hedge fund is at least hundreds of thousands of dollars, and you must be qualified -- make that rich -- to play.