Aventine is valued at about $1.40 per gallon of ethanol capacity, while VeraSun trades at the equivalent of about $1.50 per gallon. It costs about $2 per gallon to build a new ethanol facility, or $200 million for a plant that produces 100 million gallons a year. If valued at replacement cost, Aventine's stock would trade at 12, or more than twice recent levels; VeraSun would trade at 11, nearly twice its recent price. Pacific Ethanol, which recently raised $28 million in a dilutive equity offering, trades slightly below replacement cost -- because it operates in the more protected West Coast market.

Ethanol producers VeraSun Energy, Aventine Renewable Energy and Pacific Ethanol are trading below book value. All could rally in the coming year.

Ethanol stocks trade at a discount to their book value. Aventine and VeraSun have book values of $8 a share, while Pacific Ethanol's book is $7. Cascade Investment, which runs money for Microsoft's Bill Gates, was a large early investor in Pacific Ethanol, but it lately has been selling large blocks of the stock, depressing the shares. The stocks aren't cheap based on earnings, however. Aventine fetches 19 times projected 2008 operating earnings, and VeraSun, 21 times estimated profits. Pacific Ethanol is expected to operate at a loss this year.