Friday, October 29, 2010

Green investing now

Solar power, wind power, wave power and advanced battery technology for electric vehicles are all the future of green investing. All of these industries are dependent on rare earth elements.

The past few weeks have seen a lot of consolidation going on in the green investing market. Solar, wind, batteries and rare earths/lithium have all stalled or pulled back. It seems the companies enjoying the fastest share price growth since July have been the hardest hit in the second half of October. This is all expected to be temporary as demand for all products continues to grow, though parts of the wind power industry seem to be faltering.

I do not follow wind as avidly as most green sectors because share performance has been lackluster for years. A-Power Energy Systems(APWR) shares are at early May levels and have not varied more than +/-$1 per share since that time. Vestas Wind Systems(VWDRY), once the darling of green energy companies, has been on a long, multi-year decline and recently hit a new 52-week low with no recovery in sight. China Wind Systems(CWS) has been essentially flat since late January and also shows no signs of imminent improvement. There are plenty of new wind farms being built and on order but that activity is not transferring to share price.

The solar power sector has been a great performer since early June, with a few companies outpacing the pack. JA Solar(JASO), Trina solar(TSL), Renesola(SOL), SolarFun Power Holdings(SOLF) and GT Solar(SOLR) have all set new 52-week highs in the past month. Most of the rest of the sector have seen increasing share prices since mid-summer. The past two weeks saw a significant pull-back that I do not expect to last past the upcoming election next week.

Rare earth element and lithium producers have been steady performers. Trading volume and volatility have increased in lockstep with anxiety over China’s rare earth exporting policy. My favorite companies in this sector are Great Western Minerals Group(GWMGF), Avalon Rare Metals(AVARF), Hudson Resources(HUDRF) and Western Lithium USA(WLCDF). All have been slowly but surely increasing share price except WLCDF, which has been more erratic. These are all very solid and well established companies with a guaranteed and growing market for their product. I remain strongly bullish across the board.

Battery technology is rapidly improving and battery demand is growing even more rapidly. More and more of our “can’t live without” gadgets require batteries and electric vehicles will be taking a prominent place within the transportation industry during the next decade. My top picks in this sector are Advanced Battery Technologies(ABAT), Valence Technology(VNLC), A123 Systems(AONE), Power One(PWER), Ener1(HEV) and Hong King Highpower Technology(HPJ). These companies are all carving out their own piece of the battery market pie and will all be major players for years to come. Expect share prices to follow the integration of electric vehicles. Batteries will also play a large role in the integration of large-scale solar and wind installation with the commercial electric grid.

While most green stocks seem stalled right now, and solar shares have really tumbled, I am not discouraged. These are relatively young growth industries and there are plenty of growing pains left on the way to maturity. Growth is the key word. There is huge world-wide demand for the products produced by all of the companies named above and that demand is going to increase, not go away.

Time is on the side of green. As petroleum prices increase, alternatives will become increasingly cheaper. As infrastructure is upgraded to accommodate the new green technologies, their rate of adoption and integration will increase proportionally. Anyone who still thinks that solar and wind power and electric vehicles are passing fads is just not willing to face reality. It will take time to fully phase out petroleum and coal from transportation and power production but the writing is clearly on the wall and investors getting on the boat early will get the best seats and the most benefits.

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