5 Sustainable Investments Everyone Should Consider (Plus 1 Honorable Mention)

I was inspired by the concept, if not the execution, of Dividends4Life’s recent Seeking Alpha article detailing three stocks for infinity. Without arguing the merits of the actual picks, suffice it to say I tackle the issue from a different angle. Firstly, there are no “stocks for infinity”. All investments have a timeline depending on the individual investor’s personal situation. Secondly, selecting companies that are unable (or unwilling) to practice sustainable business practices in part or whole are destined for inevitable failure.

While I titled this article five sustainable investments everyone should have, I consider them five indispensable investments for the long term investor to consider, sustainable or not. While I don’t generally advise individual stock picking (unless you like the thrill of the gamble), here’s what everyone should have:

Johnson Controls (JCI)

• Provided efficiency controls for energy delivery for cars, climate, security, lighting, and building automation for corporate real estate.
• History of increasing dividends since 1985.
• Currently deflated P/E ratio at 13, undervalued due to general economic concerns despite strong fundamentals.
• Avoids sector risk by offering fundamental supplies for many alternative energy and sustainable business solutions.
• Favorite of alternative energy mutual fund managers, including stalwarts New Alternatives Fund [NALFX] and Winslow Green Solutions [WGGFX].

Wainwright Bank & Trust (WAIN)

• Despite hard hit financials sector, Wainwright’s green and non profit focus has left it with over 10 years of uninterrupted increasing dividends.
• Yield on last dividend at 3.4%.
• Currently a trailing 17 P/E, excellent positioned for buyout after the subprime fallout leaves it standing tall among other regional banks.
• Wainwright Green Loans and Equal Exchange CDs promote sustainable and green initiatives.
• LEED certified branch offices already position the bank to save significant savings over the coming years in energy and efficiency costs.

Schnitzer Steel Industries Inc (SCHN)

• Offers recycled metals, primarily steel, to construction, contractors, fabricators, and farm suppliers.
• As price of steel and metals continue to rise, increased pressure for supply.
• Consistent dividends paid for over 14 years despite insignificant yield.
• P/E ratio at 15 despite share price between $83 and $84 (as of July 25 close).

PowerShares WilderHill Clean Energy (PBW)

• ETF investing in clean energy producers and conservation companies.
• Volatile, but has excellent 3 year alpha (9.14) and growth potential diversified across multiple sectors.
• Avoid making single alternative energy bets (ie, Solar vs. Wind vs. Geothermal vs. Hydro), excellent diversification tool with upside capture.
• WilderHill created the first alternative energy indices, excellent management and relatively low 70bps expense ratio for its peer group.

PowerShares Water Resources (PHO)

• ETF investing in ADRs and global water solution companies.
• Water investments combine both living necessities, energy, and recycling.
• Global diversification, low 66bps expense ratio, 0.33% yield, and moderate 21 overall P/E makes for an attractive long term investment.

Honorable Mention:

PowerShares US Dollar Bearish (UDN)

• Profit on the failing US economy without contributing to the naked shorting controversy.
• Decaying infrastructure, lack of strong energy initiatives, continued deregulation, unsustainable economic and political policy all contribute to the weakening of the United States overall economic global position. This is directly reflected in the price of the dollar.

I’ll be the first to admit the ETFs are a bit of a cheat, but I think the long term prospects are too hard to ignore. Choosing an individual solar or wind company puts your investment at risk of being outmoded by another form of alternative energy. In the end, alternative energy investments will be cooperative by my analysis, relying on combinations of several forms available on a local or regional level. The same is true of water supply, though I do like companies like Calgon Carbon Group (CCC) as individual water purifying or recycling plays.

We at Smug Investments do not make recommendations lightly, so be smug and invest sustainably.

Disclosure: Many of the assets I discuss are either in my fund's asset pool, or I currently own shares personally. This may create a conflict of interest that cannot be denied, though I do not make any money directly from the companies I discuss, and I have no relationship (other than as an investor) with the companies.

Comments

[User 222632:]

Does Anyone have names of other water plays???? I am doing some research into this group as a viable investment going forward!!!

2008 Jul 28 08:21 AM

[bowater:]

there is a public company in Minnesota that can transport the oil sands slurry through it's pipes with harming the pipes.

irproducts.com

2008 Jul 28 08:53 AM

[bowater:]

HEK

for water.

2008 Jul 28 09:18 AM

[Matt Moscardi:]

CGW also is another water play worth considering.

2008 Jul 28 10:01 AM

[The Market ...:]

User 222...check out PICO

2008 Jul 28 04:37 PM

[lickbush:]

I like CGW a bit better than PHO. CGW has a more global focus, while PHO leans toward the US.

2008 Jul 28 08:26 PM