Wall Street love affairs are often rocky and volatile, and invariably a mistake.

Take Zoltek Co., a St. Louis-based maker of carbon fibers. Last year, it was the subject of one of those torrid Wall Street romances as eager investors bid up its stock price more than 300% to a 2006 high of $39.74 from its 2005 close of $8.78.

But then, in a frequent Street occurrence, love quickly turned to hate as the stock tumbled about 50%, which reflected a series of disappointments, among them revenue and earnings shortfalls, problems involving the issuance of a convertible bond, and deferred orders.

In the past two trading sessions, though, the love affair was renewed as the stock jumped more than 13% and closed Friday at $23.13.

If you’re about to ask who needs such an ulcer-producing rollercoaster stock, scrappy money manager Joan Lappin says you do.

Maybe so, but she wasn’t too happy December 15 when Zoltek, one of her holdings, ran into a selling blitz and quickly plunged about 19% after it reported a fiscal fourth-quarter loss of $22.9 million, which included $23.1 million of litigation charges.

While some investors threw in the towel, Ms. Lappin held firm. “The sellers blundered. Zoltek is a stock to own and it’s my no. 1 pick for 2007,” she tells me. “I think their problems are behind them.”

Zoltek, which in its most recent September 30 fiscal 2006 year posted a net loss of $65.8 million on sales of $92.4 million, manufactures carbon fibers that can be used in a variety of applications due to their lightweight, high strength (stronger than steel) conductive and corrosion-resistant properties.

These fibers are most commonly used in aircraft brakes, but Zoltek has been employing them in composites for sporting goods such as golf clubs, tennis rackets, and ski equipment; electricity-generating windmills; photographic tripods; and automobiles (BMW uses the fibers in bumpers on its M6 model). Zoltek is talking of further expansion in offshore oil and gas development, such as usage in pipes.

Ms. Lappin, skipper of Gramercy Capital Management, which has assets of about $20 million, views Zoltek as a major player in a dynamic growth business that’s still in its infancy and “an exciting company in the development stage that’s evolving into one with real sales and customers.”

Her projected 2007 bottom line calls for earnings of between $0.80 and $1.10 a share on sales of $140 million to $150 million. Earnings, though, will be offset for several years by a large tax-loss carry-forward. Ms. Lappin notes that without a breach of contract lawsuit, which the company is appealing, Zoltek would have earned about $8 million last year.

With demand outstripping supply for carbon fibers and the company raising prices to more than $10 from $9 a pound because of growing demand, Ms. Lappin says the only growth limitation facing Zoltek would be an inability to increase its capacity by adding more production lines.

Currently, she points out, carbon fibers have an addressable $880 million-a-year market, which is expected to grow about 20% to 25% annually to more than $2 billion by 2010.

Ms. Lappin, an incisive thinker who posted a mid-teens gain in 2006 and is up roughly 19% so far this year, notes that since we’re in a period of slowing economic growth, investors need to find companies that have something going for them aside from economic growth. Likewise, she adds, it’s hard to find a company that loses money one year and can make $1 a share the next year. Zoltek, she believes, fits the bill on both counts.

Ms. Lappin figures that Zoltek’s shares offer about a 50% gain to $30 over the next 12 months and a further rise to about $40 by the end of 2008.

However, to make it all work, she stresses, Zoltek has to be able to execute its program of growth and put an end to its string of disappointments.

Ms. Lappin is by no means alone in her enthusiasm. Some big institutional investors also hold hefty Zoltek stakes. Among them are Fred Alger Management and Next Century Growth Investors, each of which, recent filings show, owns a million shares of the stock.

Some other big holders include Oberweis Asset Management (665,000 shares), Winslow Management (826,000 shares), and PowerShares WilderHill Clean Energy (806,000 shares).

Meanwhile, skeptics abound, as evidenced by the interest of a growing number of short sellers, or pros who bet that a stock price will fall. The view from this camp is that Zoltek’s stumbling and selfdestructive management is sure to produce more disappointments. Interestingly, Ms. Lappin acknowledges such a possibility, noting, “Even management will be the first to admit that it’s its own worst enemy.”

Efforts to get Zoltek’s point of view were unsuccessful. The company didn’t respond to several calls seeking comment.

dandordan@aol.com