Tom Konrad

Portfolio Outperformance Due to High Beta?

Danno,
I agree with your caveat about the benchmark. I just used the S&P because it was easy... a total stock market index probably would have been better, although I think sector benchmarks, like the cleantech ETFs I graphed are too narrow, since they contain a much narrower the same range of companies than the mutual funds. Because of the imprecision implicit in my choice of index, I was willing to conclude that 10% out-performance remaining fell within the error of my calculations.

On the backwards looking nature of Beta, I cheated. If you will note, I used the last 200 trading days, a period which included the time over which I was attempting to explain the out-performance. Hence my Beta calculations come over roughly the same period as the portfolio results I was trying to explain.

I call this "cheating," because it's only possible to do after the fact. If I had attempted to used Beta during the portfolio design stage, at the end of February, I would have been stuck using data only up to that point in time, and would not have been able to know if the Betas would change over time. However, since I was able to use the more recent data, the backward-looking nature was OK because I was using it to explain backward-looking data.

It is only when we try to use Beta to predict the future (as opposed to explain the past) that its backward-looking nature becomes problematic.

Green Stocks: A Better Way to Play?

Jade:
Your green portfolio seems overly concentrated on one clean energy sub-sector: Solar. This is a large part of why you have such wild gyrations (plus the fact that solar is probably the most volatile clean energy sector.) I think choosing only one stock per clean energy subsector will greatly reduce the volatility of your portfolio.

Here are a few suggestions to consider: www.altenergystocks.co...

Another good place to look is in the portfolios of the green energy mutual funds and ETFs, as I did in the article where I created these portfolios.

Green Stocks: A Better Way to Play?

attofarad,
I realize my last comment was not very clear. To understand the construction of the portfolio, please click on the first link in the story:
" Clean Energy Tracking Portfolio"

On Sep 28 02:47 PM attofarad wrote:

> How did ELON end up in both the winners and losers?

Green Stocks: A Better Way to Play?

Danno,

1) This is not cherry-picked data... this portfolio was designed to be a track the mutual funds at lower cost with more tax efficiency. It did not work that way; why I'm trying to do now is figure out why. The risk adjustment you suggest is what I'll be looking into in the second article in the series. Other adjustments will follow if that does not prove sufficient explanation.

a,b, and c) Please read the original article where I constructed the portfolio (Click on the very first link in the article), and you will understand how all the stocks you object to got there: They were selected from the portfolios of the mutual funds I'm comparing them to.

2) I don't know how you can disagree with my analysis, since my analysis was "This portfolio outperformed and I'm not sure why, but I'm hoping I'm on to something." I have not shown anything yet, except that I've stumbled across something worth looking into.


On Sep 28 03:15 PM danno wrote:

> I am very skeptical of Dr. Konrad's analysis.
>
> 1) To compare returns without adjusting for risk (not to mention
> management fees, or taxes is foolhardy, at best. A CFA should know
> better than that.
>
> - The mutual funds are tax-inefficient, have high management fees,
> and less liquid, and rarely beat the indexes.
>
> - One could have bought a Russell 3000 ETF or other similar Indices
> and gotten similar returns at lower risk and cost, or it one wanted
> to stay consistent with the green theme, bought PZD and still taken
> less risk and earned about 60% ROI.
>
> - Dr. Konrad's inclusion of non green or alternative energy companies
> certainly undermines his claims as well.
>
> a) SJI - South Jersey is predominantly a regulated energy utility
> - nothing green about that rate hikes and demand are what drives
> its profits.
>
> b) what on earth is Citrix doing here? Is this a typo?
>
> c LXU: LSB Industries is still first a manufacturer of bulk chemicals,
> many of them very nasty. It has a hydronic and ground-source heat-pump
> business, but it's not a very "clean or green" company
>
> 3) Playing such short-term movements is not really investing, but
> rather trading or speculating. Dr. Konrad hasn't shown us any long-term
> outperformance, but rather cherry-picked data.

Green Stocks: A Better Way to Play?

attofarad:

ELON was the only smart grid company I came up with, so it had both the best and worst 3 year returns for smart grid.


On Sep 28 02:47 PM attofarad wrote:

> How did ELON end up in both the winners and losers?

Clean Energy Tracking Portfolio Outperforms Benchmark

Regarding energy denisty, for wind, the low density is not a problem because wind farms support multiple uses... only a few percent of the land of a wind farm is devoted to the turbines and access roads... the rest is left for other productive uses, such as farming.

For solar, your numbers are too low... averaged over a 24h day (including night) energy incidence of sunlight is 164 W/m^2/day. Assuming 10% efficienct solar modules (very low) and 50% of light captured, that is 8 W/m^2. I don't have numbers for wind, but the lowball solar numbers make me suspicious of your wind numbers as well.

And, much solar is installed on otherwise wasted space: rooftops. For now, the main constraint is not space, but affordability of panels.


On May 31 09:41 PM billp37 wrote:

> I am not an expert in energy. Only an interested reader.
>
> Two posts concern me about altenergy.
>
> Chairman, President and CEO Questar Corporation Keith O. Rattie said
> on April 2, 2009
>
> Why did my generation fail to develop wind and solar? Because our
> energy choices are ruthlessly ruled, not by political judgments,
> but by the immutable laws of thermodynamics. In engineer-speak, turning
> diffused sources of energy such as photons in sunlight or the kinetic
> energy in wind requires massive investment to concentrate that energy
> into a form that's usable on any meaningful scale.
>
> home.comcast.net/~bpayne37/pnmelectric...
>
> and
>
> fast neutron
> Santa Fe, NM
> January 12, 2009
>
> From actual experience, wind farms produce 1.2 watts per square meter.
> Solar Thermal and Photovoltaic methods capture 5 to 6 watts per square
> meter. There is no economy of size in either technology. Dividing
> the watts you need by those values gives the land area in square
> meters needed to produce the juice. The numbers are astronomical
>
>
> www.topix.net/forum/so...
>
>
> We returned from my 50th college reunion on Monday May 25, 2009.
>
>
> Professor Carson is advocating and Whitman college is soliciting
> money to support solar electricity generation.
>
> home.comcast.net/~bpayne37/whitman59/w...
>
> :-)
>
> home.comcast.net/~bpayne37/whitman59/w...