10 Green Energy Gambles for 2009: 3 Month Update

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.

Ticker	Price (1/9/09 close)	Price (4/9/09 close)	Percent gain
BCON	$0.46	$0.47	2.17%
AXPW.OB	$1.20	$0.85	(29.17%)
VLNC	$1.77	$2.23	25.99%
CPTC.OB	$0.30	$0.23	(23.33%)
EPG	$0.86	$0.34	(60.47%)
EMKR	$1.43	$0.84	(41.24%)
UQM	$1.72	$1.70	(1.16%)
CZZ	$4.18	$4.45	6.46%
RZ	$3.62	$4.13	14.09%
ZOLT	$7.47	$7.98	6.83%
Portfolio	$1,000	$900.20	(9.98%)
ICLN	$22.05	$19.40	(12.02%)
PBW	$9.01	$8.55	(5.11%)

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.

Benchmarks

In January, I made two predictions about this portfolio:

1. The portfolio as a whole will fall, unless financial market conditions improve rapidly.
2. 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 (AXPW.OB), 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.

Comments

[Tom Konrad:]

CLNE is not green enough for my taste (natural gas is a fossil fuel.) If youw ant to understand why I choose to use PBW and ICLN as benchmarks, as opposed to PZD, read my article on clean energy etfs.


On Apr 13 03:23 PM Freya wrote:

> Interesting selections. How about PZD and TBoone's CLNE?

Apr 14 01:16 AM

[Tom Konrad:]

Link to ETF article:
www.altenergystocks.co...

Apr 14 01:17 AM

[billp37:]

"Why did my generation fail to develop wind and solar? Because our energy choices are ruthlessly ruled, not by political judgments, but by the immutable laws of thermodynamics. In engineer-speak, turning diffused sources of energy such as photons in sunlight or the kinetic energy in wind requires massive investment to concentrate that energy into a form that's usable on any meaningful scale. ...

Now, I was told back in the 1970s the same that you're being told today: that wind and solar power are 'alternatives' to fossil fuels. A more honest description would be 'supplements'. Taken together, wind and solar power today account for just one-sixth of 1% of America's annual energy consumption today. Let me repeat that statistic - one-sixth of one percent -- .0016. "

home.comcast.net/~bpayne37/pnmelectric...

Apr 14 09:27 AM

[Ames Tiedeman:]

If you are writing about BCON you should also be writing about ACPW.

Apr 14 09:41 AM

[keithfeather:]

Thank heaven there a few engineers left who will speak out. Wind and solar have a place where one cannot connect to the grid economically, but overall they are but a convenient mental diversion until new nuclear plants can be completed.


On Apr 14 09:27 AM billp37 wrote:

> "Why did my generation fail to develop wind and solar? Because our
> energy choices are ruthlessly ruled, not by political judgments,
> but by the immutable laws of thermodynamics. In engineer-speak, turning
> diffused sources of energy such as photons in sunlight or the kinetic
> energy in wind requires massive investment to concentrate that energy
> into a form that's usable on any meaningful scale. ...
>
> Now, I was told back in the 1970s the same that you're being told
> today: that wind and solar power are 'alternatives' to fossil fuels.
> A more honest description would be 'supplements'. Taken together,
> wind and solar power today account for just one-sixth of 1% of America's
> annual energy consumption today. Let me repeat that statistic - one-sixth
> of one percent -- .0016. "
>
> home.comcast.net/~bpayne37/pnmelectric...
>

Apr 14 09:51 AM

[jimarb:]

LETS GET REAL - wind, solar and geothermal are VERY SMALL part of electrical generation and Expensive and will not provide the increase we need in electrical generation - there are still in the first generation of developement - our only road to " KEEPING UP WITH DEMAND " is to increase COAL and NATURAL GAS production of electricity - it will take at least 12 years to overcome the political and " NOT IN MY BACK YARD " resistance to nuclear plants and another 10 years to get a nuclear plant built and in operation - we are like the family of a person who is dying waiting at bedside for the new cure to appear - put ALL THE FACT TOGETHER before you buy the answers the talking heads put out

Apr 14 01:53 PM

[jimarb:]

OH I FORGOT - when the sun don't shine and the wind don't blow where are you ? up the stream without a paddle

Apr 14 02:03 PM

[Chris B:]

Nuclear would not be economically competitive if it wasn't massively subsidized by taxpayers. Taxpayers cover the vast majority of expenses for security, research, safety assurance / inspections, fuel and waste transport, and fuel and waste storage - which is the biggie, hundreds of billions of dollars sunk into Yuca Mtn. Add the taxpayer expenses together and nuclear becomes a very expensive energy source.

Oil is subsidized too. When's the last time Exxon sent an army and navy to the Persian Gulf to protect oil supplies or sent billions of dollars in foreign aid to area regimes? A "free market with no government interference" price for oil would be at least double the current levels.

The effect of all these direct and indirect subsidies is that part of our national energy cost gets billed to us through payroll taxes and the national debt.

Of course, this creates the economic incentive to freeload and use as much energy as you can, because much of the additional cost will be paid by the government, not by you directly. I suspect we're nearing the end of the financial sustainability of this tax-paid-energy model.

Maybe instead of looking for "green" energy solutions, we should start looking for "economically sustainable" energy sources that reduce our economic dependence on depleting fossil fuels but don't depend on an invisible flow of tax dollars to sustain them. Geothermal, wind, and even some forms of solar energy are rapidly approaching that point. Costs for each of these energy harvesting systems have dropped exponentially in the last 20 years and will continue to do so as economies of scale and fresh technologies are realized.

For example - the one-off, custom built binary geothermal generators used in 1970's research projects have recently been replaced by off-the-shelf modular units from United Technologies (UTX), Ormat (ORA), and others.

The people who in the 1970's said that computers were too expensive for home use made the mistake of underestimating the scale of industrial production and improvement. However, computers in the 1970's weren't competing against taxpayer-subsidized typewriters, slide rules, and graph paper.

Apr 14 02:03 PM

[John Singapore:]

This is proving NOT to be a gamble strategy but a very effective one, if you have spare cash to invest in high risk area. Thank you!

Apr 29 05:40 PM

[Freya:]

I just ran across an article from Subaru's parent, Fuji Heavy. They will begin selling EVs in Japan this July to their corporate customers and local Governments, Lithium with a 80 Kilometer range no other specs given, thats about 50 miles.

I also ran across the following Website: www. electricity4gas, they have a Tom Hanks video.
Anyone know anything about it?

Apr 15 03:39 AM

[Freya:]

Interesting selections. How about PZD and TBoone's CLNE?

Apr 13 03:23 PM