Corporate America wants to be green in 2008.
A host of major firms, including Wal-Mart Stores Inc., Kohl's Corp., L.L. Bean Inc., Best Buy Co. and General Electric Co., are actively promoting their companywide environmental sustainability initiatives.
Investors, meanwhile, may be most interested in firms that derive revenues and profits from alternative energy products or services. Stocks of several companies with serious track records are hot investments.
"I don't see anything to derail the global need for clean water, clean energy and safer products," said Rafael Coven, managing partner of Cleantech Indices LLC, whose index tracks 47 leading companies engaged in clean technology innovation and commercial use. "That need is accelerating, which is positive for the investment side of the business."
Even though what are considered to be green investments are often similar-sounding small companies with complicated technologies and considerable volatility, many have come of age in the past year.
For example, PowerShares Cleantech (PZD), an exchange-traded fund whose investment results emulate the Cleantech Index, had a return of more than 40 percent in 2007. The continuing success stories of green stocks and funds being propelled by government incentives and business interests have made them mainstream investments.
One of the stocks analysts recommend most is First Solar Inc. (FSLR), a producer of low-cost solar electric power modules. Using its proprietary thin-film semiconductor technology that doesn't require more expensive silicon, it has become the leader in the growing solar market. Its stock rose more than 800 percent in 2007.
Another favorite, Itron Inc. (ITRI), makes products for automatic and handheld meter-reading that are crucial for analysis, management and application of energy data. It has gained momentum as the efficiency of the nation's electrical transmission grids increased in importance. That sent Itron's stock up more than 80 percent in 2007.
"Green investing is benefiting from an upswing in public awareness and the added effort of businesses to obtain benefits of engaging in green efforts and projects," said Andrew Brengle, senior research analyst for KLD Research & Analytics in Boston, noting that public relations and cost savings are significant pluses for companies. "Climate change and energy dependence have captured a lot of imaginations."
Although it is fine to apply green attitudes to investment, Brengle said, be sure the companies you choose are in it for the long term. He believes First Solar is one of a number of firms with that potential.
"We're looking for an especially good year for solar in 2008, with pricing, volumes and earnings expectations ratcheted up," said Paul Clegg, senior research analyst covering clean technology companies for Jefferies & Co. in New York. "Our theme is to remain selective, however, due to economic uncertainty and the need for continued public subsidies to solar."
Jefferies & Co. recommends shares of China's Suntech Power Holdings Co. (STP), which makes solar power cells, modules and systems mostly sold in Europe. The world's fourth-largest manufacturer of solar cells is reducing its silicon use by using thinner silicon wafers. Driven by aggressive Chinese government policies and incentive programs, Suntech stock rose more than 150 percent in 2007.
Another suggestion is Energy Conversion Devices Inc. (ENER), which holds patents on several energy technologies. Its solar panels use thin, flexible film that may be the best solution for a rooftop that can't bear a lot of weight, Clegg said. The company is a turnaround situation, and its stock was up just slightly in 2007.
American Superconductor Corp. (AMSC), a maker of products used in electric power infrastructure to reduce costs and conserve resources, is another Jefferies choice. It is also a play on wind energy, licensing its turbine technology to China for wind power generation. The stock gained more than 200 percent in 2007.
"In Europe, Canada, the United Kingdom or Japan, you don't have to make the case that green investing can be profitable, because people there assume it," said Matthew Patsky, co-manager of Winslow Green Growth Fund (WGGFX) and lead manager of Winslow Green Solutions Fund (WGSLX). "You do need to make that case in the U.S., because Americans assume the opposite."
If a green-oriented fund doesn't have good returns, it is because the portfolio manager is not performing, and not just because it is green, Patsky said. Leave the fund but not the concept, he said.
His $376 million Winslow Green Growth Fund, which invests in the stock of companies that are environmentally responsible and have solid growth potential, gained 23 percent in 2007 and has a three-year annualized return of 16 percent. That "no-load" (no sales charge) fund requires a $5,000 minimum initial investment. First Solar is among its largest holdings.
In November, Winslow Management went a step further by launching the Winslow Green Solutions Fund, which invests globally in companies that derive their primary revenue from green products or services. Up slightly since its inception, this $6 million no-load fund requires a $2,500 minimum initial investment.Because betting on the future is never a sure thing and many of these companies are in their early stages, experts said, a fund with a batch of promising green stocks is probably the most prudent way to invest.
Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, AZ 85287-4702, or by e-mail at [email protected].