Walter Nasdeo, Ardour Capital, Discusses Alternative Energy Stocks, Part II

This segment was taped at the American Stock Exchange, which offers trading across a full range of equities, options and exchange-traded funds.

Walter Nasdeo, director of research at Ardour Capital, discusses where the technology and investment opportunities in alternative energy are headed.

Mike Norman, HardAssetsInvestor.com [HAI]: Welcome back for the second half of my interview with Walter Nasdeo, who is a managing director and head of research for Ardour Capital. We’re talking about alternative energy and alternative energy investments.

Walter, your firm actually has an index, an alternative energy index, and there is an ETF traded on that index, correct?

Walter Nasdeo, Ardour Capital (Nasdeo): That’s correct. We have the Ardour Global Alternative Energy Index. It’s about 115 alternative energy companies: It’s global, it’s pure play, and it’s inclusive. We have companies from Europe, Asia, South America and North America in the index. All of the major areas of alternative energy are represented.

Off of that we’ve got something called the Extra Liquid Series, which is the 30 most liquid companies in the index, and off of that we have an ETF. Van Eck Global has licensed it and produced an ETF with the ticker symbol GEX; it’s called the Market Vectors Alternative Energy Index. That’s been out for almost a year now and has done very well. It has increased up and down in value, but it’s still doing quite well at this time. There are also other things going on in that area too as far as other indexes and opportunities in there.

Norman: Your firm is an investment banking boutique. You go out there and you actually raise capital for companies in the alternative investment space. Where do you see the money coming from? Is it global interest? Is it coming principally from the United States? From China? Where do you see the money coming from?

Nasdeo: It’s global, first of all. Huge amounts of money are in Europe. The United States is ramping up dramatically also. Interestingly enough, in the early part of this decade, there were a number of European investment firms that were mandated into sustainable, renewable, socially responsible types of funds. That’s what they were in. So they had to find investment opportunities in this area. They were kind of the early standard bearers for investments in this space.

What ended up happening a couple of years ago was, especially with the solar companies, [they] really started to get some commercial sales going. They started to build up capacity; revenues were growing; and it really became interesting investment opportunities. When that happened, we started to see the U.S. investors get excited about it.

We’ve had solar and we had ethanol really stand out as the two major alternative energy investment plays over the last couple of years. We’re starting to see other things get exciting now. The whole concept of energy efficiency is very important; energy storage is very important; things like flywheels, ultra-capacitors, advanced batteries, the way you have efficient lighting and the software-generated brains to run a building. When there are three people in the room, you don’t need as much heat running as when there are two people. When all three people leave the room, the lights automatically shut off. The energy savings—and concurrent to that, the cost savings—are tremendous when you start layering this in.

We have other things called building integrated photovoltaics. The photovoltaic solar companies are making their products resemble building materials: bricks, adobe roofs and things like that.

Norman: They can actually be incorporated into the structure.

Nasdeo: Where they are totally unseen by anybody standing on the street. So this is the type of development that we’re seeing happen in this space. We’re seeing advanced materials and a lot of work being done in nanotechnology coming into this space. Carbon fibers and nanotubes and things like that are really playing into alternative energy. They’re a little further out on the development continuum, but as you look at this, you start to see a space that’s commercialized now and growing rapidly, but also has a lot of future opportunity that is appealing to people that like to be in pure-tech types of investments.

Norman: It’s clear from the private sector point of view that the profit opportunity [is] out there now, particularly with the high oil prices. Do we need to see more public sector government involvement in the form of, let’s say, tax rebates, tax incentives, maybe direct research [subsidies]? And do you think that’s coming?

Nasdeo: I think it’s coming. We have some now; I think more will come. This is another area that’s kind of touchy in a lot of areas, because you’ll talk to people who will tell you that alternative energy wouldn’t even exist if not for government subsidies and government help. I would counter that by saying that oil and other traditional sources of power and fuel in this country are subsidized to tremendous levels, [including] over $80 billion a year of direct subsidies into the oil space. The alternatives get around $10 billion. If you start to look at that and come back on it, you’ll see that there is a dramatic amount of opportunity there, and I think we’re going to start seeing it going forward.

Norman: All right. Well there you have it folks. Not only high price of oil, but also new technologies driving investment in alternative energy. We’ll be back once again very shortly with another installment of our interview series here on HardAssetsInvestor.com.

Be sure to check Part I of our interview with Walter Nasdeo.

Comments

[Piggybank:]

"We’ve had solar and we had ethanol really stand out as the two major alternative energy investment plays over the last couple of years."

Nonsense, if there is 1 alternative energy type that really played out in the last years, then it's wind energy, and it's not even mentioned here.

Wind energy now has a far larger segment of the alternative energy market than solar and biofuels, and in addition wind energy is growing still faster than these other 2. Wind energy is also expected to reach grid parity faster than solar.

Im not saying Solars are a bad investment, au contraire. But wind energy is IMO even a tad better. Biofuels however, atleast those that use food as input, should be made illigal, it's self destructive idiocy, food prices are rising fast due to it and food shortage's are beginning to surface in certain poorer country's.

2008 Apr 09 05:28 PM

[Clearlead:]

I have to agree with piggyback; one only need look at the trend of utilities buying wind farms to meet state-imposed renewable portfolio standards. For me, I want to own not only suppliers of wind turbine technology, the wind farm developers (particularly those affiliated with transmission owners) but also those that supply the transmission technology.

2008 Apr 10 10:07 AM

[tinyhedge:]

Following up on piggybank's well informed and educated reply, I would also like to add my thoughts on Mr. Nasdeo's ludicrous and, I believe, intentionally misleading statement (you may call them omitted truths).

Piggybank pointed out with accuracy the immense growth and deployment of wind energy which I do not need to repeat; it makes me wonder, Mr. Nasdeo, being a man of sound judgement and certain prognosticative abilities as Director of Research at Ardour... could he have indeed missed Wind Energy altogether? I think not!

To even list ethanol at this stage of the game as a viable investment opportunity is ludicrous, and hopefully you see the light of the freight train at the end of that tunnel as I will not take the time to address that here. Solar, indeed, has been and will continue to be viable and lucrative. Mr. Nasdeo then goes on to say...

"We’re starting to see other things get exciting now. The whole concept of energy efficiency is very important; energy storage is very important; things like flywheels, ultra-capacitors, advanced batteries, the way you have efficient lighting and the software-generated brains to run a building."

He leaps from solar and, lord help me, ethanol to... can you believe it... flywheels and advanced batteries?! Yes, Mr. Nasdeo, lets fail to address the elephant in the room. How could a highly educated Investment Capitalist miss Wind Energy?! He hasn't.

I assert, (yes call me a conspiracist) that Mr. Nasdeo, like many others in his position, are and will continue to leave Wind Energy on the back burner until they have amassed monumental quantities into their firm's portfolio and are poised to profit like kings when "Oh looky here energy from wind" promos hit and the media moguls flood the market with wind stats and random info and everyone goes Wind Crazy!

Can you offer a sound rebuttal of this theory? No, you cannot. Wind Energy is the "quiet" alternative energy, both in the physical sense and the media hype sense.

Would it be in Mr. Nasdeo's best interest, or others of his caliber and position, to "alert" us to the incredible investment potential that all facets of Wind Energy has to offer for the coming years? Not right now it wouldn't. Oh sure he would get the official "pat on the back/saw that one coming" nod from the princes but why risk hundreds of millions in profit by "letting the cat out of the bag".

I'll take money over recognition any day of the week, and so would you... and so would Mr. Naseo and Ardour Capital.

Hoarde, amass, gather into your storehouses... and when the media is finally released, sit back... relax... and enjoy the "windfall" right along with Mr. Nasdeo and Co. :)

2008 Apr 11 12:59 PM

[tinyhedge:]

lol, I am still laughing... "flywheels and advanced batteries" ... thanks for sending me down that rabbit trail with my metal detector Mr. Nasdeo while you're scooping up gold coins with a shovel!

2008 Apr 11 01:09 PM

[Mark Henwood:]

You might take note that VanEck has filed for a solar ETF using an Ardour index.

2008 Apr 13 02:45 PM