Six Stocks to Take Advantage of Soaring Green Sector

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 |  Includes: CSCO, GE, HON, IBM, JCI, SIEGY
by: Bill Paul
Nobody knows the alternative energy landscape better than Clint Wheelock, whose firm, Pike Research, generates in-depth research on everything from smart meters to carbon capture and sequestration.

Now here’s a forecast deserving of far wider attention than it has so far received: by 2020 total revenue generated by energy services companies (ESCOs) could hit $37.7 billion, up a monstrous 573% over 2009’s $5.6 billion. At a minimum, Wheelock expects ESCOs’ revenue to hit $19.9 billion by 2020, a 255% increase.

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In an exclusive interview last week, Wheelock explained that as much as demand is already growing for services that cut a commercial building’s energy and operating costs, he’s starting to see what he called a “shift in mindset” by building owners that promises to send ESCO demand into the stratosphere.

Building owners are starting to “see energy as an asset to be managed, not as a cost,” Wheelock said. They’re starting to realize that improving lighting, HVAC and other energy-consuming building systems both decreases operating costs and, in an ever more eco-conscious society, increases the value of the building. “A big difference,” Wheelock added, is that building owners are increasingly willing to accept a two-to-three-year payback on their efficiency investments, compared with only 12 to 18 months previously.

To be sure, Wheelock’s 573% ESCO revenue growth forecast comes with caveats, most notably that the still-nascent trend of counties and other government entities selling bonds that help pay for energy-efficiency improvements in buildings catches on, which he thinks will happen over the next few years. Right now, he said, ESCO demand is concentrated in single-tenant buildings owned by government, educational institutions, etc. With so-called PACE financing (short for property-assessed clean energy), Wheelock sees ESCO demand spreading throughout the commercial sector and even penetrating the residential sector.

And so we come to the drum roll: if Clint’s new forecast is spot on, which companies could give investors the most bang for their buck?

He agreed with me on the usual suspects, namely: Johnson Controls (NYSE:JCI), Honeywell International (NYSE:HON) and Siemens (SI). (For more on Siemens, see If I Could Own Only One Alternative Energy Stock, It Would Be . . ..)

Then, citing the growing interconnect between energy efficiency and information and communications technology, Wheelock offered up three untraditional “green” choices: Cisco Systems (NASDAQ:CSCO), IBM (NYSE:IBM), and General Electric (NYSE:GE).

Disclosure: No Positions