Sustainable Energy Indices Fall, Commodities Up 4.9% (Wk Ending 6/6)

Author: Mark Henwood

Broad market indices (Emerging Markets, EAFA, S&P500) all fell this week. Camino’s PurePlay Indices followed the broad markets and all indices fell. Commodities (DJP) rose 4.9%.

 

Solar fell 1.9% even after the 63.3% premium Robert Bosch GmbH is paying for control of ErSol. Without this transaction, the Solar index would have been down 3.3% for the week. The commentators that continue to try to link solar stock performance to oil had to be disappointed this week with the two moving strongly in opposite directions. This week's movement knocked the 30 day correlation of Solar and the OIL ETN from .39 down to .20.

Renewable Electricity, despite its low beta (.18 over the last 100 days), followed the broader markets lower. Nothing has changed for the companies in this sector due to the broader economic concerns and I expect the index will continue its YTD out performance of Camino's other indices. EarthFirst Canada [EF.TO] had the largest decline of any company in Camino's indices falling 19.1%. With not reported events to drive this change, the company's low daily trading volumes probably were a factor in the big drop.

Biofuel ethanol producers Verasun (VSE), Pacific Ethanol (PEIX), and Aventine (AVR) all had declines greater than 10% this week. Verasun led the way down declining every day of the week after it announced Monday it had closed a USD 125 million credit facility to be used for "general corporate purposes". This followed Pacific's financing last week, Bill Gates reducing his holding in Pacific, rising corn prices, and volatile ethanol prices.

 

For the year the sector is down 32.2% and obviously hasn't been helped by high oil prices. With more capacity coming on line this year it's hard for me to see how the economics for the sector can improve much without some basic change.

 

 

Mark is the founder of Camino Energy, an information provider specializing in globally traded sustainable energy stocks. He also is an investor in sustainable energy stocks and has positions in Renewable Electricity. He has a position in EF.TO