Post-election "green" investing outlook

Tuesday saw the end of some market uncertainty with the defeat of California’s Prop 23. Enactment of this proposition would have been a real blow to alternative energy and alternative fuel companies in the U.S. Solar company shares, which gain most of the mainstream media attention, were hard hit during the past 1 ½ weeks but saw an across the board bounce today.

One of the few solar stocks not sharing in today’s gains was First Solar(FSLR), which saw a $13.00 one-day drop last Thursday and further loss on Friday. Most of these stocks will take a few weeks to regain their late October price levels, if not longer. With demand and production continuing to grow, many solar stocks seem destined for new 52-week highs before the end of the year.

Much uncertainty remains among green investors after the election. The Republican party is well known for its support of big oil and coal. They are equally well known for their lack of support for energy efficiency/saving measures and alternative energy sources. Look for federal support programs for everything except ethanol to be slashed, particularly funds coming from the Department of Energy. At least the military branches do not need direct congressional approval to continue spending on alternative energy.

If Republicans were really as patriotic as they like to claim they would be using the U.S. military alternative energy initiatives as an example for the entire country to follow. Our biggest national security issue is more likely energy-dependence on other(often unfriendly) countries than terrorism. And we don’t and never will be able to produce enough oil domestically to meet our current demand.

Obstructing legislation to reduce domestic oil demand, such as higher mpg standards, higher lighting efficiency standards, higher energy efficiency for household appliances, etc…, does nothing but extend and exacerbate an already bad situation. Blocking federal and state incentives for alternative energy installations only lets China and the European nations widen their lead over the U.S. in implementation of these technologies. When the real petroleum crunch does come, those countries with the greatest percentages of solar, wind, geothermal and nuclear energy production will have huge strategic advantages.

America needs to grow food, not fuel

The reason ethanol receives so much support in the U.S. is its reliance upon Big Agriculture. No biomass-based petroleum substitute can be produced in the quantities needed without massive amounts of fertilizer, pesticides, genetically-modified seed stocks and millions of miles put on petroleum-powered tractors, harvesters and trucks. We need an innovative alternative to the internal combustion engine, not a biological substitute for petroleum fuels.

When did the U.S. become afraid of innovation? When did maintaining the existing business status quo become more important than being the world’s technology leader? When did saving a few dollars or a few jobs today start to overshadow the very future of the country? Our political leaders from both parties are bickering about ideological irrelevancies while our credibility with the rest of the world evaporates. When did being a Republican or a Democrat become more important than being an American?

Alternative energies are here to stay. Private industry leaders and the military see the writing on the wall and are taking the initiative to break away from petroleum dependence. But the process would be much faster and more integrated if there were national leadership rather than just national lip-service. For investors, alternative energy and smart-grid companies remain the wave of the future no matter what happens in Washington.

The military takes the lead in renewable energy

The federal government, via the Department of Defense, is finally taking the lead in renewable energy. This will speed the “mainstreaming” of renewable energy technology. Action is taking the place of words and minor financial incentives at long last. More private-sector jobs are an important added bonus. The military obviously sees the immediate need to break its long dependence on oil(mostly imported from not-always-friendly countries). Hopefully this will help Congress and the Senate see the light and speed the country as a whole in this direction.

Sunpower Corp.(SPWRA) has signed contracts with the General Services Administration, the National Renewable Energy Laboratory, the U.S. Air Force and the U.S. Navy. New solar power installations for these government agencies will comprise a minimum of 20MW. Sunpower estimates creation of 1,000 new local construction jobs. Locations are in the west and mid-west, in Colorado, Indiana and Arizona and are expected to start producing power next summer. The U.S. Marines are also getting into solar power with suitcase-sized installations for field use.

Wind power is also in the picture. The U.S. Coast Guard installed a 2.4MW wind turbine at its Southwest Harbor Base in Maine. The Coast Guard is shooting for a zero-carbon footprint for housing at this base and also installed solar panels and solar hot water heaters. This closely follows the U.S. Army’s first wind project at the Toole Army Depot in Utah.

The Army has so far been focusing on geothermal energy production. The Air Force is moving forward on renewable biofuels for its aircraft.

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.