As we were scouring the market for low-risk ‘green’ stocks to suggest in Saturday’s newsletter “Green Investing for Non-Speculators“ we came across several stocks that looked compelling, but didn’t quite fit our low-risk criteria.

Since some of them will still be of interest to many of you though, we’re going to highlight the best of those best anyway knowing they’re a little speculative. One of the best of that bunch comes from the biofuel world.

One of biofuels’ best-kept secrets is Syntroleum Corporation (SYNM). It shouldn’t be a secret though - the company is not only profitable (sort of), but owns key patents on the process used to convert coal and biomass to an energy-yielding gas as well is to liquid fuel, in addition to the patent on the process to convert animal fat to diesel and jet fuel.

Moreover, the technology works.

Yes, Syntroleum is also profitable when looking back, though we would caution you against reading too much into those numbers now. The bulk of those revenues came from technology licensing sales, engineering services, and reimbursement of development expenses. Those revenue sources won’t persist forever, but….

…. the plant that will be able to commercialize the production of Syntroleum’s biofuels is expected to be up and running by the middle of 2010. Between now and then, the revenue and income numbers may not reflect anything meaningful at all.

We say it’s the market’s best-kept secret for a handful of reasons, the biggest of which is a lack of analytical coverage… not that we blame the analysts. It’s difficult - if not impossible - to make any kind of forecast when the revenue-bearing operation isn’t up and running yet. With the first plant about 3/4 of the way done though, analysts should have a clear idea of what it will mean pretty soon; EPS estimates should follow. Investors, on the other hand, may not want to wait that long.

Is this a technology/marketability bet? Yes, though the technology is proven, and the company’s projected revenue based on 5000 barrels of synthetic fuel per day (with oil priced around $80/barrel) are plausible.

However, based on the partners Syntroleum has found, the term ‘bet’ may conjure up the wrong idea.

Were it just another fly-by-night biofuel concept dreamed up by a couple of guys in their garage, sure, SYNM may be a mere bet. Tyson Foods (TSN), however, is a 50/50 partner in the biofuel venture. Iit’s hard to imagine a company like Tyson getting involved in something like biofuels without knowing it was going to go somewhere profitable.

Chinese energy company Sinopec (SHI) also thinks highly of Syntroleum’s patented technology…. so much so, that they bought the rights to the technology for use in China. This sale of the technology to other energy companies not only points the way to other potential revenue sources (either licensing or outright sales), it also points to the power of the patented technology itself.

Bottom line? Though the line between ’speculation’ and ‘calculated risk’ can get blurry at times, SYNM actually falls pretty far on the ‘calculated risk’ side of the spectrum despite the fact that we’ll not see operational revenue until late in Q2 at the earliest. The company website offers a robust investor overview for those interested in doing a little more due diligence. In the case of Syntroleum Corporation, it’s a story worth that trouble.

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