Landec Corp. is a play on the hype surrounding alternative energy. The concept of renewable energy really intrigues people, so naturally we want to profit from it. An emerging technology that has gained much media attention is ethanol, a fuel made mainly from corn. Unfortunately, ethanol is not a mature enough industry to be directly invested in, but Landec is poised to profit from this increased attention.
Landec Corp. is a company that manufactures specialty polymer products for food and agriculture. Their food division has a pretty neat little technology that allows packaged foods to "breathe" and maintain freshness longer, but we're not too concerned with that division. Their agriculture division is where the potential for the ethanol play lies. The company is partnered with Monsanto, another solid choice, and they provide two specialty polymer coatings for corn, one that allows farmers to plant their corn 3-4 weeks earlier, and the other reduces risks associated with weather to the crop yield. These two technologies improve both yield and efficiency for corn farming.
Now, even though ethanol isn't ready yet to be deployed on its own, there is an increase in research and development for the technology, and consequently, an increase in demand for corn. Since Landec is poised to capitalize from this increased demand, we can look for earnings that beat the analysts expectations and hopefully a corresponding run of the stock. We've already started to see this materialize, as Landec beat analyst expectations on their most recent quarter, and the growth should continue to growth as the ethanol industry finds its footing.
Bottom Line: Speculative play that benefits from the emerging ethanol industry without being directly tied to the production and distribution of ethanol. One to watch.
$13.1 (04/11/07)
