This year, I published a list of 10 clean energy stocks I thought people should buy, and, because of readers' requests, also published a list of ten speculative clean energy companies. For the most part, these speculative companies were chosen because they have compelling technology or manufacturing capability, but were not profitable or were only marginally profitable, and they had been beaten up because they would likely all need to raise money this year.
That means that if the financial crisis eases quickly, these companies should be able to raise money on favorable terms. If the crisis continues or worsens (which has so far turned out to be the case) the stocks will continue to fall. This is why they are gambles; as a whole, the portfolio is really a gamble on a quick resolution to the credit crunch.
Performance So Far
Until the recent market rally, spurred by Treasury Secretary Geithner's relatively clear plan for the financial sector, and the FASB's relaxation of mark-to-market accounting, all these stocks were down for the year. I'm a bit surprised that the FASB rule change has had such a salutary effect on the market. After all, one of the major problems is that we don't know how to value the murky mortgage-backed securities. Giving banks more leeway to muddy the waters even further seems like a lousy idea to me (at least in the long term.) I feel it's more win-the-battle-lose-the-war thinking, and will hurt markets in the long term by undermining investors' confidence with increased uncertainly.
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The recent rally has been very good for alternative energy companies as a whole, and this portfolio in particular. As of a month ago, all these stocks were down for the year, but now half of them are showing positive returns.
In January, I made two predictions about this portfolio:
- The portfolio as a whole will fall, unless financial market conditions improve rapidly.
- All of these stocks have a chance of spectacular returns.
Prediction #1 has so far been spot-on: financial market conditions have not improved rapidly, and the portfolio as a whole is down. Prediction #2 is still difficult to judge. None of these stocks have produced "spectacular returns" (although stay tuned for my quick clean energy mutual fund tracking portfolio update coming at the end of May.) Nevertheless, "spectacular returns" tend to come from quick up-moves of stocks, and most of these stocks will require an improvement in financial markets to take off.
I've provided two Clean Energy ETFs as benchmarks: The oldest such ETF, the PowerShares Clean Energy ETF (PBW) and my preferred global clean energy ETF, the iShares S&P Global Clean Energy Index, (ICLN). So far, the portfolio as a whole is slightly below the average of the two (see table). This performance is neither impressive nor horrible, but since I never intended these stocks to be purchased as a portfolio (see prediction #1), what really matters to readers will be if they bought one of the five that is up or one of the four that is down much more than the market as a whole.
I personally still have small positions in Raser (RZ), Axion (OTCQB:AXPW), Emcore (EMKR), and Zoltek (ZOLT), which is mostly a function of the fact that I've sold calls on my positions, and they have not yet been assigned. I'm a bit down on these positions (even counting the gains from the call premiums) over the quarter.
DISCLOSURE: Tom Konrad has positions in AXPW, EMKR, RZ, and ZOLT.