By Jared Cummans
Alternative energy investing has surged in popularity in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last for the foreseeable future, there will come a time when our energy consumption will have to look to alternative, renewable resources. The investment thesis behind any of the several alternative energies can be thought of as a play against crude oil, or as one of a natural evolution that we will have to face sooner or later. The timeline for our fossil fuel addiction running dry varies across the board, but it is generally accepted that this issue won’t come to fruition anytime soon.
With alternative energy still a relatively immature industry by global standards, the growth opportunities this sector presents are tremendous and worth a closer look for your portfolio. Below, we outline 25 ways to invest in the various forms of renewable energy:
Biofuels are energy forms that are derived from carbon-based organisms. There are a wealth of different options, including bioalcohols, biodiesel, green diesel, vegetable oil and many more. The International Energy Agency has stated that biofuels have the potential to displace 27% of transportation fuels by 2050, effectively slashing greenhouse gas emissions by 2.1 billion tons per year. Already, a number of countries have mandates in place that force companies to blend biofuels with gasoline, giving these various fuels high growth potential.
1. Archer-Daniels-Midland Company (ADM) – The company produces a number of commodity products, namely in agriculture. While it isn’t a pure play, the company has a fair amount of their operations based in the biofuel industry.
2. Amyris Biotechnologies Inc. (AMRS) – Amyris is technically in the healthcare sector, which may make it a surprise as far as this list is concerned. But consider that it focuses on the production of a chemical called Biofene which is used in cosmetics, detergents and most importantly, diesel.
3. The Andersons, Inc. (ANDE) - Another agriculture-based firm, Anderson’s contribution to the biofuel sector comes from its significant ethanol production. ANDE has total assets of nearly $700 million and pays out a dividend yield of 1.2%.
4. BioFuel Energy Corp. (BIOF) - This company, which is based in Denver, focuses its efforts on the manufacturing and sale of ethanol. Investors should note that this is a penny stock, so it will be subject to wild volatility, and is probably only meant for active traders or those who seriously buy into its strategy.
5. Methanex Corp. (MEOH) - Methanex engages in the production and sale of methanol, a chemical which, among other things, is a popular blending agent with gasoline. Methanol is also a key component of biodiesel. MEOH pays out a handsome dividend yield of 2.6%.
While not as popular in the states, hydropower has established itself as a powerful renewable source around the world. Hydropower, of course, is generated by moving forms of water and is most often utilized at major dams and rivers. Though it has a long history of use in farms, hydropower is one of the least popular alternative energies. This may make it a great growth opportunity, or simply an asset class that you will want to avoid. Note that U.S. exposure to these stocks is hard to come by.
6. China Hydroelectric Corporation (CHC) - This stock engages in the acquisition, ownership and development of hydroelectric power in the People’s Republic of China. CHC has assets of just $77 million and an ADV of about 18,000.
7. Alterra Power Corp. (MGMXF.PK) - This pink sheet security focuses on renewable energies of all kinds, though it does have a significant portion of its business in hydro facilities based in British Columbia.
8. Zhaoheng Hydropower Ltd. (ZHYLF.PK) - Another pink sheet, Zhaoheng is based in China and generates its power primarily in the southern and midwestern regions of the world’s most populated country.
Nuclear has been in the spotlight for the majority of the year, as the Fukushima tragedy caused many to question the safety of these plants, as well as Germany to completely abandon nuclear power. But with new facilities being much safer and more efficient than the Fukushima plant, investors should feel confident that this energy source still has considerable upside potential.
9. Cameco Corp. (CCJ) - This company is one of the largest uranium producers in the world. With uranium being a key element in nuclear production, this mining stock will align very closely with the nuclear industry.
10. Market Vectors Uranium+Nuclear Energy ETF (NLR) – This ETF is designed to grant exposure to companies around the world that are engaged in some aspect of the nuclear energy business. Top holdings include Exelon Corp, Uranium One and Areva.
11. S&P Global Nuclear Energy Index Fund (NUCL) - Another ETF, this product also tracks companies in the nuclear energy business, but top holdings feature a different set of names like JGC, First Energy and NextEra Energy.
12. Global Nuclear Portfolio (PKN) - Tracking the WNA Nuclear Energy Index, this ETF features a similar investment thesis to the previous two, but again, has a different set of holdings. Top names include Toshiba, Sumitomo and Duke Energy.
13. Uranium ETF (URA) – This ETF focuses on uranium miners, so while it is not a direct play on nuclear, its underlying companies will be heavily impacted by growth in the industry.
Arguably the fastest-growing renewable energy, solar has quickly grown as an investor favorite. The industry is still relatively small, but with an average growth of 39% annually over the last decade and robust predictions for the future, solar may be on the brink of a rapid appreciation. Note that China dominates the world’s solar space, and most companies will either be based in, or have significant operations tied to the emerging market.
14. First Solar, Inc. (FSLR) – This U.S.-based firm is one of the biggest names in the solar industry, though it has been in the news lately for all of the wrong reasons. After recently losing its CEO, the future for FSLR is not as bright as some investors might like.
15. JA Solar Holdings Co., Ltd. (JASO) – Headquartered in China, the company is in the business of development, manufacturing and sale of photovoltaic modules. Its stock is highly liquid, trading over 5.6 million shares each day.
16. JinkoSolar Holding Co., Ltd. (JKS) – Another Chinese firm, Jinko focuses more on individual components of PV modules than the entire product, giving investors a unique play on the solar space.
17. Market Vectors Solar Energy ETF (KWT) – This ETF invests in companies that, on a weighted basis, derive 90% or more of their revenues from the solar industry. Major holdings include First Solar, GT Solar and MEMC Electronic Materials.
18. Guggenheim Solar ETF (TAN) - This ETF seeks to invest in companies that are involved in the various aspects of the solar industry. Though it has similar holdings to KWT, it generally grants different weights to different firms as well as some entirely different securities.
19. Trina Solar Limited (TSL) - As a member of the semiconductor industry, Trinal Solar focuses on monocrystalline and multicrystalline PV modules and like so many other solar firms, is based in China.
20. Yingli Green Energy Holding Co. Ltd. (YGE) - Yet another Chinese company, Yingli and its subsidiaries are in the business of developing, manufacturing and installing PV modules throughout the world.
Wind power is one of the most prevalent forms of alternative energy in the world, as numerous countries have taken major steps toward weening themselves off of fossil fuels. Currently, wind power amounts to just over 2% of the world’s energy supply, but at current robust growth rates, this figure is predicted to hit 8% by 2018. Like so many other forms of renewable energy, wind stocks on U.S. exchanges are hard to come by, but as this industry continues to expand, that will surely change.
21. Broadwind Energy, Inc. (BWEN) – This company, based in Chicago, has its hands in a number of different aspects of the wind industry, making it a nice all-encompassing play. Note that the stock has just $44 million in assets, though its ADV of nearly 1 million still allows for liquidity.
22. ISE Global Wind Energy Index Fund (FAN) – This fund invests in stocks that have their hands in the wind industry. Those companies that are exclusively in the wind business are given a higher weighting than those with a more broad business model.
23. Iberdrola SA (IBDRY.PK) – This utilities company, based in Spain, receives a large amount of power from wind production, making it a nice indirect play. While not on any domestic exchanges, its ADV of over 32 million more than ensures its worldwide popularity.
24. PowerShares Global Wind Energy (PWND) - Another ETF, PWND also dedicates itself solely to wind power. Top holdings in this fund include China Longyuan Power, Vestas Wind and Hansen Transmissions.
25. Vestas Wind Systems A/S (VWDRY.PK) – Based in Denmark, this stock makes its way onto a number of major benchmarks in Europe. The stock has an average volume of nearly 1.9 million as it is one of the largest wind turbine manufacturers in the world.
Disclosure: No positions at time of writing.