Why invest in "green" companies?

I feel quite strongly that we all need to be conscious of how we treat the planet we call home. Pollution is making breathing the air and drinking the water dangerous to our health. Modern “big agriculture”, using antibiotics and hormones as staple ingredients of animal feed, has made eating a pork chop or a chicken breast the equivalent of taking a prescription drug(no prescription needed). The systematic use of chemical fertilizers and pesticides in the fields has done the same for commercial vegetable and grain crops. All of these chemicals, along with all of the OTC and prescription drugs and vitamins that pass through everyone’s toilets, go on to become part of our drinking water supply.

This is why I think it is important for everyone who invests in the stock market to take a long, hard look at “green” investing. Companies that are trying to minimize the damage done to the earth deserve to be supported. It is not a hardship: there are thousands of publicly trades companies on the U.S. stock exchanges involved in the “green” movement. Plenty of diversity can found and more companies are turning up every day.

I take a fairly wide-angle view of what is “green”. My current watch list of companies that I will invest in numbers slightly over 200 and grows daily as I discover new opportunities. Industries on my list include: batteries, solar energy, wind energy, geothermal energy, water power, wave power, electric vehicles, fuel cells, kinetic energy storage(flywheels), smart grid, LED lighting, rare earth mineral mining(necessary for semiconductors), wireless network & storage(necessary to smart grid), water treatment/recovery/efficiency, ocean transport(more efficient than flying), organic/sustainable agriculture, green packaging and a few more. There are also many tech companies that supply needed components to solar, wind, water and other industries. I also list cleaner, more efficient current technologies such as internal combustion engines designed to run on natural gas or natural gas turbine engines designed for vehicle use.

Many of these “green” technologies have been lagging the general stock market. This is not because the companies involved have bad management, or lack sales revenues or solid profits, or do not have ample opportunity for future expansion. The reason their stock prices are lagging is because people do not yet believe in them enough to put their money into company stock. This needs to change. If we believe in the products we need to believe in the companies making the products.

The situation seems to just be reaching a tipping point. As word of China’s stranglehold on rare-earth mineral production reaches a greater audience, previously little-known companies like Avalon Rare Metal Inc. and Great Western Minerals Group are seeing more interest and slow, steady share price increases. A123 Systems Inc., a maker of lithium-ion rechargeable batteries, announced the opening of a new production plant in Livonia, Michigan dedicated to batteries for electric vehicles and the $7.36/share stock shot up $0.65/share in one day. When Westport Innovations, designers of natural gas conversions for commercial diesel engines, signed a partnership agreement with Cummins to build heavy truck and equipment engines their shares saw a substantial and maintained price increase.

“Green” companies are the wave of the future. The writing is on the wall and there is really no choice. Companies like Walmart are using hydrogen and fuel cell fork lifts and more-efficient semi’s and Frito Lay is using an electric truck delivery fleet in New York City and the U.S. military is installing solar and wind power on its bases. The only real question is: how long will you wait before investing in these companies? Why not get in now while there is maximum upside and the support will make a real difference to the company? I invest every dollar with the intention of that dollar making me more money and it is certainly possible to do that within the “green” sphere of companies.

My Personal Investing Strategy Ingredients

I have overhauled my stock investing strategy and portfolio to better reflect my environmental and political beliefs and the realities of the current investing market. Investing in what you know and are comfortable with, I still strongly believe, is the way to success. I know the technology and energy sectors and environmental science issues. Intense self education let me shift from my former “buy & hold good undervalued companies” to my current “buy when it’s down and take reasonable profits before it goes farther down”.

Converting the portfolio is an interesting and ongoing process. I developed a list of several hundred companies that fit my criteria. These companies are directly or peripherally involved with: solar power, wind power, geothermal power, “next-generation” nuclear power, fuel cells, batteries, flywheel energy storage, electric vehicles, hydrogen/natural gas vehicles, smart grid, organic agriculture, sustainable aquaculture, water treatment and supply, waste management, and a variety of other earth-friendly fields. There are plenty of companies to choose from in all of the above listed areas. These companies are diversified enough to not leave me vulnerable to a crash of one market sector. These are definitely growth industries on a global scale and are also geographically diversified.

Converting the investing strategy is more difficult, but it is obvious to me that the days of buying shares of a good company at a bargain price and knowing that they would be worth much more in five or ten years is a thing of the past. This is very much a mental adjustment for me. In today’s stock market investors must be light on their feet. Investors must keep well informed about business/investing and larger global issues. Investors, to be successful, cannot become emotionally attached to the companies in which they are investing.

I am benefiting from these changes. I feel good investing in companies that improve the situation for everyone. I am more confident and more successful for specializing in the “green” niche: I can know the companies in greater depth, have a better “feel” of the business issues involved and better see things in context. I was formerly a generalist but now understand the advantages of being more specialized as an investor.