EcoGeeks: Invest Out of Knowledge, and Be Careful of What You Admire

As lovers of green gadgets, EcoGeeks probably know as much about what's new in clean technology (a.k.a Cleantech) as anyone on the web.  So if you're an EcoGeek thinking about investing in companies which make the technology you know and love, you will probably take comfort in the old adage that you should invest in what you know. 

An EcoGeek investing in clean technology companies will have an advantage understanding how a company makes money, and what is a needed innovation with a large  market,  and what is simply a bizarre curiosity.  More importantly, an EcoGeek knows that any maker of EVs will have to cope with endless competitors, and they're the first to know when LED bulbs are bright enough for general use.

While knowledge of cleantech is the great strength of the EcoGeek investor, this knowledge most likely arises from a love of clean technology.  Just as "geek" implies technology expertise, it also connotes an obsession with technology which might interfere with the geek's social life.  Unfortunately, an obsession with cleantech has the potential to blind the unwary EcoGeek investor to the pitfalls of investing in a cool technology which might not turn out to be such a great investment.

Investing in what you know is not the same as investing in what you admire.  People who invest in something just because they admire the brand often find themselves buying at the top.  Our aspirations and wants are in large part cultural, and others will be excited about the same things we are, at the same time.  When many investors are all buying at once, none are likely to get a good price.

To the extent that EcoGeeks are ahead of the curve with fashion, we can get in ahead of the crowd.  The rising popularity which follows can work in our favor, driving the price higher as other investors pile in.  To the extent that we live up to the geek stereotype, and what we think is great turns out to be hopelessly un-cool, we'll find ourselves investing in things which never catch on.  Many innovations which help the environment are also quite unpopular, so it is very difficult to know if we're blazing a path for others to follow (as turned out to be the case with hybrid cars), or simply lost in the woods (think Segway.)

That said, the EcoGeek who decides to invest in cleantech need not end up going EcoBroke. The trick lies in distinguishing between when we're on the environmental cutting edge, and when we're on the environmental lunatic fringe.  Most people on the lunatic fringe think that they're the only sane ones, and the rest of the world is confused.  That may well be the case.  After all, those of us who were worried about Climate Change before 2003 or so were on the lunatic fringe, even though most people now accept that we were right.  But if we were investing in cleantech companies back then, we probably had a lot more losers than winners.  Anyone remember Astropower?  Or, if you're impressed by the recent successes of Capstone Microturbine (CPST), you probably didn't buy it in 2001.

The key to EcoGeeky investing is to know that we're investing out of knowledge, rather than just buying a stock because we're excited about the company's green technology.  In the end, the key to all successful investing is to know ourselves at least as well as we know the companies we're investing in.

DISCLOSURE: Tom Konrad owns CPST.

This story is cross-posted on EcoGeek.org.

Comments

[CLH]

An interesting post. I stay away from "green" investing. Scientifically they make no sense. Its entirely based on government money and who knows what the govenment will do tomorrow. When the subsidies go the investment is gone.

[joyfulalternative]

Green has reached consumers who want to cut their soaring costs for energy, despite the current lack of government subsidy. A friend's buying a homeowner-size windmill for her mountaintop home!

[paulk8756]

A most interesting and thought provoking post. Thank you!

[paulk8756]

It appears now that wind will indeed become a Green leader as time goes forth. IF it's really only 4 cents a kw, ALL costs included, AND it doesn't develop some serious new problem with the Green regime, we'll see tens of thousands of more windmills on the horizon in coming years.

Solar is more difficult to figure. It's had plany of opportunity to become a major contributor to our electric grid, but we've always been left waiting for the NEXT "breakthrough&quo... for it to prove itself economically worthwhile. Indeed, the contrast between wind and solar is an excellent example of your thesis.

[fireball]

the only thing i disagre with is the majority of ecogeeks still need the old definition: biting the heads off chickens to sucker you into entering their tent to watch their show. good advice to look for profitable green stocks and be careful what you buy. HI PAUL.

[User 10755]

I admire the Green technology of many of the small to micro-cap stocks such as:

SATC
CPST
CPTC
ZOLT
PWR
HYGS
ESLR

It's hard to believe that any one of these Green companies won't hit a home run somewhere in the near future, you think???

[fireball]

JOYFUL i have been considering both solar and wind for my home. anybody got a line on something affordable?

[joyfulalternative]

Fireball, I've just bought an old (1960) solid brick ranch with oil heat and will be installing geothermal, not the kind that goes to the molten core but the kind that goes a couple of hundred feet down to 50 degrees F and circulates. I'm supposed to wind up with all-electric at 25% of the electricity of standard all-electric.

Thing is, every HVAC contractor says they can do it, and then for their written estimate, they try to talk you into a nice, new, energy-efficient oil burner at only half the price of the geothermal. Hah! But I've found two experienced contractors who've done a lot of these, and I've sold some investments to pay for it. So as soon as we get the final formal estimate from the second contractor, we're good to go. (BTW, both say they've got more work than they can handle. The other shoe dropping in Tom Ridge's electricity deregulation in Pennsylvania will push prices up, maybe way up, in 2010.)

My friend who's getting the windmill had the same problem. She contacted a bunch of contractors whose advertising said they install windmills, and then they tried to push her into solar (on her 10 acres of heavily forested mountaintop in the Poconos, i.e., no sun). Finally, she thinks she's lined up someone who can and will do what she wants.

Regarding solar, my husband's been following it closely for a couple of years (stockwise and personally) and figures solar shingles of some sort will be workable about the time our home inspector predicted we'd need a new roof, 5 to 10 years. Our neighbors intended to install solar panels for hot water last year, but decided it was too much of a capital expenditure for too little return. YMMV if you live someplace constantly hot and sunny.

We're looking at under $20,000 for the geothermal; I don't know what my friend is spending for the windmill or what my neighbor decided was too much for solar hot water panels.

[fireball]

JOYFUL thank you. i doubt tva would allow me to go geothermal and i dont know if it is possible since my home is beside a lake. my sun exposure is pretty good, wind is good sometimes. the mountains around here stop a lot of it. i had not even thought of geothermal. at least you set me thinking outside of wind and solar. my roof is metal. a friend who does some construction seems to think it will outlive me or i will be tottering around by the time it needs work. still if solar shingles get cheap enough maybe other areas of solar will too.

[fran]

JOYFULALT--

what are your cost assumptions for evaluated alternatives to GEOTH? what is your anticipated payback date? what is your contingency on GEOTH? have you visited several sites your vendors have installed? how long in business? what other lines of business are they successfully performing?

[joyfulalternative]

Fireball, some types of geothermal systems work by utilizing ponds and lakes. I don't have one, so I didn't pay much attention, but I think they're cheaper. Like nuclear power plants located by a river to cool the reactors, maybe. Look around online.

[joyfulalternative]

Fran, $4.25/gallon for oil and rising at last fill. No NG lines available. Electric poised to jump in 2010, thanks to former Gov. Ridge.

Too many variables to bother with realistic payback dates. One in the literature was 6-8 years---but that was with $2/g oil! So will it be $3 or $5 next year? Dealers, having been burned, don't sell guaranteed annual contracts anymore.

Contingency? Do you mean continuing with oil?

No, I'm not into site visiting. Both prospective installers are established HVAC contractors recommended by the manufacturers.

(And now I'd better go make a little money!)

[fireball]

JOYFUL thanx again. if it is green tva may even encourage it. who knows maybe i will get one of those subsidies i disapprove of.

[fran]

JOYFULALT--

something in your description seems odd. what heats the 50 degree earth source to your winter room comfort level?. seems like you could get same result using the 50 degree air in basement, but still require warming air. would you buy a $25,000 auto without diving?

a pair[or single] independent consultants might be worthy $1,000 investment before you spend $20K plus with no known successes. do you invest this way?

have fun.

[fireball]

FRAN ithought the temperature difference would be used to turn some kind of small turbine. i am guessing. but that would make air conditioning in the summer easy and it would not take much depth. until today i did not even know that geo could be used in a small way. i really do not care about the green part i just want to find ways to save money and still enjoy my humble lifestyle.

[joyfulalternative]

Fran, you warm (and cool) the air beyond 50 degrees with electricity. Please Google.

Why would I pay "independent consultants" with no known successes to advise me? And, yes, that's how I invest. I do not pay any investment advisors, just that $7/trade with my online broker, and I've done quite well, thank you.

[ohm]

Great article and posts. I was in energy R & D for 20 years and now do electrical contracting. The bottom line is: if you have a lot of wind, lot of sun, access to a deep lake or cool stream, fast water or tidal currents, lots of wood etc. use them. Don't rely on the goverment to make your investment to make your project viable, that can change every election. Conserve, insulate and think it through, which is what you all seem to be doing!