Five Sustainable Companies for Your Kids This Holiday

 |  Includes: ABB, CREE, GE, ORA, SHCAY
by: Tom Konrad, CFA

A Carbon Conundrum for Christmas

Do we have to choose between happy kids this Christmas, and a happy future for those kids? Practically everything we buy has a negative environmental impact. If green consumption is an oxymoron, so is green giving. Are we left with only greener giving? It often seems that the only way to be truly green is to be like the Grinch (before his heart-enlargement) and not give anyone anything. And skip the tree while you're at it.

It's a hard decision, and while there are many Green Shopping Advisories telling us that we can buy and still feel we're doing something good for the planet, it usually ends up being "less bad" and the green claims are not always as strong as we would hope.

The Gift of a Bright Green Future

The sad truth is, as successful investors know, we nearly always must choose between immediate gratification and long term gain. The whole debate about Global Warming is basically a choice between long term well-being and instant gratification. If you come down on the long term well-being side of the debate, prepare yourself for sighs and disappointed looks from the little ones, and give the gift of stock in a sustainable company that's working to make the place they live a better place to be.

Which stock to choose? Here are a few criteria I think are important:

  • Stability: We should probably stay away from companies aren't likely to be in business when the kids grow up.
  • Greenness: As I noted last week, investing in green companies, like buying presents is often a compromise between greenness and practicality. The profit motive can make a company less brown, but it is unlikely to make it very green (at least until we have stronger environmental regulation.)
  • Educational: Most people give stocks to kids hoping to teach them about the market. This will probably work better if the company they own also has a brand they'll see on a regular basis.

For the stocks I've picked below, I rate them on each of these factors on an A-F scale, to help you pick the one or ones you think will be best for your soon-to-be environmentally aware kid.

Top Five Stocks for a Green Christmas

#5. Cree, Inc. (NASDAQ:CREE),

Stability C, Greenness B, Educational C.

You may have never heard of Cree, but they are a world leader in making ultra-bright LED lights, as well as high current power controllers which can significantly increase the performance and efficiency of products that incorporate them. I call LED's the Compact Fluorescent light bulb of the future (they're still too expensive for most residential uses,) but they are getting rapidly brighter and cheaper. Although the company is profitable, they have been the subject of takeover rumors, and if they were bought for cash, it might be profitable for your little munchkin, but the lesson in green investing would probably be over.

On the other hand, if you also use energy efficient LED Christmas lights, you might just have the company's products on hand at the moment of gift-giving (if the LEDs involved happen to be made by another company, who is to know?) Cree will also provide effects lighting for the Beijing Olympics.

#4. The ABB Group (NYSE:ABB)

Stability A, Greenness C, Educational C.

ABB is a bit less fun than Cree, but they're in great shape in terms of long term profitability, and their expertise in efficient electricity transmission and distribution make them a good long term hold. While they don't have a lot of consumer awareness among us grownups, I bet your little one will have a lot of fun playing "Spot the ABB logo" in back alleys. I bet you'll be surprised at how often you see it yourself (see my profile of ABB for details.)

#3. General Electric (NYSE:GE)

Stability A, Greenness D, Educational A.

It's hard to beat GE for consumer awareness, and the strong marketing push behind their EcoMagination initiative is sure to keep the company in the little one's mind, even if they missed an entire week of green programming on GE's NBC TV Network. On the other hand, GE is so gigantic, they get less than 10% of their revenues from EcoMagination products (despite the apparent 90% of their marketing budget devoted to Green.) Nevertheless, I believe that Jeffrey Immelt is serious about green, so green revenues are likely to grow quickly in the future.

#2. Ormat (NYSE:ORA).

Stability B, Greenness A, Educational F.

I know, you've never heard of Ormat (unless you've been reading the recent spate of articles about Geothermal Power, including the one I wrote.) Ormat is widely recognized as a leader in Geothermal, both in technology, and their ability to run plants well. They are also just about as Pure-Green as any consistently profitable company I know of in the Renewable Energy space. On the downside, you'll probably never see one of their power plants, although you can always take the kids on a trip to Yellowstone and talk about all the untapped geothermal potential there (long may it remain untapped.)

#1. Sharp (OTCPK:SHCAY)

Stability A, Greenness C, Educational B.

While you may not associate Sharp with Greenness, they are the world's largest manufacturer of photovoltaic panels. The electronics they are more known for seem, from my unscientific sampling, to have a larger proportion of Energy Star qualified products than other manufacturers. I give them the top slot here because photovoltaic solar panels are the first type of Renewable Energy most people think of, and while many of the pure-play PV manufacturers will survive, any particular one could go broke or be bought out in the near future.

DISCLOSURE: Tom Konrad and/or his clients have positions in all the stocks mentioned here: CREE, ABB, GE, ORA, SHCAY.