Taking Stock: Metabolix

Dear Mr. Berko:
My broker has recommended that I buy 600 shares of Metabolix, a company that makes biodegradable plastics. I would like to have your thoughts on this company as a long-term growth stock.
L.P., Joliet, Ill.
   
Dear L.P.:
Metabolix (MBLX – $13.92) is a bioscience company that has developed a proprietary microbial fermentation system which produces a group of polymers known as “polyhydroxyalkanoates,” which I think is an Icelandic word meaning “a lot of water and yellow oats.” 

MBLX, a stepchild cast off by MIT, has developed a plastic that is durable, resists extreme heat and is 100 percent biodegradable. Subsequent tests show that “stuff and things” made from PHA will completely decompose in soil or water after several months. In fact, plastic toys, bottles, utensils, etc., can be so pure that they may be used as compost for your flowers or vegetable garden. 

MBLX will begin shipping PHA (MBLX commercialized the name to Mirel) from its plant in Iowa to Newell Rubbermaid (NWL – $15.25) in several months. While the cost of the green pellets is about twice as much ($2.45 a pound) as comparable non-biodegradable plastic, NWL will begin using it in their Paper Mate Pens. The pens use very little plastic, but NWL will reduce its gross profit margins by 2 percent to keep its prices stable. 

As MBLX’s volume increases and as costs decline it may not be long ‘til we’ll be using Mirel plastic in throwaway plates, utensils, cups and soon in larger commercial products. MBLX has joint ventured its future with Archer Daniels Midland (ADM – $28) a $70 billion revenue company.

This small-cap company ($560 million) that still makes its home in Cambridge, Mass., opened its doors in 1992. It came public in late 2006 at $15 per share, and a year later, just before the meltdown, MBLX traded as high as $30. MBLX has 110 employees, who produced 2008 revenues of $700,000, $1.4 million in 2009, an anticipated $4.4 million this year and projected revenues of $13.4 million in 2011. MBLX doesn’t expect to be profitable until 2012-13, but expects revenues to continue their upward climb as enthusiasm for the Green Revolution begins to reach the boardrooms of American Industry. 

MBLX has 27 million outstanding shares, 2 million of which are held by insiders, while 6 million shares are owned by institutions such as BlackRock, Fidelity, Alger and Putnam to name a few. Meanwhile, Piper Jaffray, Cantor Fitzgerald and Jeffries have analysts who have published reports on MBLX.

I believe MBLX looks like a good long-term, speculative buy and would fit well in a wisely managed, aggressive growth portfolio. So I applaud your broker’s recommendation of 600 shares. Give him a gold star and treat him to lunch in the executive dining room at McDonald’s.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com.
© 2010 Creators Syndicate Inc.

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