Did you ever think you would receive investment advice in a Tikkun publication? I have never come cross such advice here, but Tikkun was willing to entertain such an article because global warming is here. It is a very serious problem. The concentration of greenhouse gases in the atmosphere has risen 20% since 2000. The World Bank projects temperature increases of up to four degrees centigrade by 2100.
I became passionately interested in this issue twenty-five years ago. At that time I sold all the stocks in my IRA and reinvested the proceeds in alternative energy companies. Each year after that I have added to these holdings. Though the investments have not made me lots of money, I have been proud to own companies that are part of the solution. You might be interested in a similar investment strategy. What follows below are profiles of some of the best companies in the alternative energy space.
The solar industry has been devastated in the last three years by excess supply, declining demand, and falling prices. The good news is that several recent bankruptcies have helped the supply problem. The recent price declines have also helped to make large solar farms more price competitive with coal and natural gas for generating electricity.
There is one U.S. company that is a shinning light in this industry. First Solar (FSLR) is a leader in the manufacture of thin film semiconductor material to convert sunlight into electricity. Over the last six months its stock price has doubled, but it is still cheap by historic standards. The company sees sales and earnings increasing in 2013, and the company has a current sales backlog of over a billion dollars.
The wind industry faces similar problems of intense foreign competition, reduced demand for towers, and price-cutting. The safest investment is General Electric. The problem with investing in GE is that you are really buying a mutual fund, a huge multinational conglomerate with several divisions that may sell products that are ethically troublesome.
The one American company that excites me is Broadwind Energy (BWEN). Broadwind produces and sells towers, gears, and component parts for wind systems. It also has a division which services installed wind systems. This division should prosper as more towers are installed. Finally, the company produces and sells gears for a wide variety of engines, which provides some diversification. The company is optimistic about its tower business for 2013, but caution is in order. The company is small, and is not making a profit.
Ormat Technologies (ORA) builds and operates geothermal energy plants in the United States and throughout the world. It is the leader in this sector of the alternative energy industry. It earns a profit, and pays a small dividend. Several analysts have recently upgraded its prospects for 2013.
Investing in companies that make batteries for hybrid electric cars is risky. Two companies I know well recently declared bankruptcy. There is one standout, however. Johnson Controls (JCI) is involved in three business – auto parts; heating, ventilation, and air conditioning; and batteries for hybrid cars. The battery business is growing rapidly, and the heating/air conditioning division should benefit from an increased interest in energy efficiency. Johnson Controls was one of Fortune Magazine’s ten top investment ideas for 2012, and is a current favorite of several Wall Street analysts.
The safest investment in alternative energy is natural gas. The next twenty-five years will most likely become the age of natural gas. There are three types of investments in this industry.
The first is in natural gas production. EQT Corporation (EQT) explores for and produces natural gas. It also distributes and sells natural gas to residential, commercial, and industrial customers. A purer play in this space is Western Gas Partners (WES). Both companies are financially healthy, and pay generous dividends.
The second way to invest in this industry is with pipeline companies. These companies transport and store natural gas. Some also sell natural gas to residential, commercial, and industrial customers. My two favorites are Spectra Energy (SE) and South Jersey Industries (SJI). Both companies are profitable, and pay generous dividends.
The last way to invest in this space is newer and more speculative. Compressed natural gas is now being used to power public transportation vehicles, taxis, trash trucks, and trucks used locally. Clean Energy Fuels (CLNE) builds and operates compressed natural gas fueling stations in the United States and Canada. Westport Innovations (WPRT) develops and markets engines and fuel systems that run on compressed natural gas. Both companies are growing rapidly, but they are small, speculative, and are not currently earning a profit. Caution is again in order.
It is important to end this survey on a note of caution. I am not certified to make stock recommendations, and I have not become rich on these investments over the last twenty-five years. (And of course, it should go without saying that Tikkun does not in any way endorse the companies profiled above).
On the other hand, if you read this magazine, there is a good chance you organize your life around your heart. I love owning companies that are part of the solution to this very serious problem. If the next twenty-five years are not better for these companies, there is little hope for the planet. So you might consider taking the plunge and owning one or more of these companies, but only make your decision after consulting an investment advisor with whom you trust. Good luck!