A year ago, I brought you 10 Alternative Energy Stocks I thought were worth speculating on for 2008. I revisited these in June, when a balanced portfolio of the 10 was "up 11.4% for the year, compared to the S&P 500 which is down 4.2% and the NASDAQ Clean Edge US Index, which is down approximately 14.3%."

Speculative picks tend to do better than the market as a whole in bull markets, and worse in bear markets, so given the steep drop in markets since then, I would normally expect these more speculative picks to fare worse. This is borne out in the fact that the more speculative the pick, the worse the stock performed. (I put these picks in rough order of riskiness, with the riskier ones given lower numbers. The exception to this rule was #9, Lighting Science (LSCG.OB), which probably would have been #3 except that I wanted to talk about it and the other LED stock Cree in the same article.)

Last week, Mark Solheim of Kiplinger’s Personal Finance Magazine,posted an article on Seeking Alpha that really helped clarify the economic issues I’ve been writing about for several weeks. His article, backed up by the analytical strengths of the Kiplinger organization, noted that most HEVs offer limited economic benefit to their owners. My reaction was the predictable question:

If HEVs offer marginal economics with NiMH batteries, how can they possibly pay with Li-ion batteries that cost significantly more per watt hour of energy storage?

The last month has been a lot of fun! I enjoy writing for Seeking Alpha because it’s an open forum where deathless prose is discouraged and key macro-economic concepts take priority over petty detail. While reader comments have made it clear that folks don’t like it when I challenge their assumptions and they like it even less when I criticize a favorite stock, the numerous comments pro and con have helped refine my thinking and clarify the core message.

My fundamental precept is very simple. I believe the energy storage sector is certain to be enormous and is likely to be the next major investment trend. To quote a recent staff report from the California Energy Commission:

I’m convinced that energy storage is going to be the next major investment trend and I have a very bullish outlook for the entire sector. My rationale is simple. As industrialized nations switch from fossil fuels to inherently variable alternative sources like wind and solar power, robust dispatchable energy storage will become essential to insure that electricity continues to flow at the flip of a switch. The only other options are more coal fired power plants or an unstable grid that suffers from increasingly severe disruptions when variable power supplies fail to mesh with variable power demands.

When I began studying the storage sector almost five years ago, I was amazed at the complexity and scope of the problem. While my simple mind was looking for a silver bullet solution, I quickly learned that there is no single technology that can solve all energy storage problems. Instead, there are a multitude of technologies that can each solve part of the problem. That’s why professionals believe a comprehensive solution will require a multi-pronged approach and something north of a trillion dollars in energy storage investment.

Since I last covered clean energy mutual funds and ETFs, the sector has seen the launch of two solar ETFs: (KWT), the Market Vectors Solar Energy ETF from VanEck,  and (TAN), the Claymore/MAC Global Solar Energy ETF.   Continuing in the tradition of cute ticker symbols, First Trust's new global wind energy ETF is (FAN).

I recommend that investors stay away from the (very expensive) green energy mutual funds, and invest either in one of the ETFs, or if they have a few tens of thousands of dollars to invest and are willing to roll up their sleeves a little, they buy a representative sample of the stocks (a "tracking portfolio") held by the mutual funds and ETFs, and save further on expenses.

This is the first of a short series of articles where I plan on reviewing how my stock recommendations have been doing this year.  I started the year bringing you 10 Alternative Energy Stocks I thought were worth speculating on for 2008, and I'll start this review with those articles, and also give you updates on what's been happening (or not) with the stocks.  Click on the company name a link to the original article where I wrote about the stock.

Overall, a portfolio with equal dollar positions in these ten stocks is up 11.4% for the year, compared to the S&P 500 which is down 4.2% and the NASDAQ Clean Edge US Index, which is down approximately 14.3% (I took the number from CELS, the ETF which tracks the index, since I could not find up-to-date index values) since the start of the year.

A common complaint about investment writers is that we are always willing to tell you the next stock to buy, but we don't always get around to telling you when to sell. I'm as guilty of this as most: generally, I write about the stocks I'm interested in... which are the ones I'm buying, not selling. And, although I write the occasional negative article (Petrosun Drilling most recently, but also US Sustainable Energy and Global Resource Corporation (GBRC.PK)), these were more stocks to avoid, rather than stocks which had seen their run.

This is unlikely to change. For a start, I'm not selling many alternative energy stocks... I'm using the downturn to add to my holdings, and intend to continue doing so even if the downturn becomes a full-blown bear market, as it well may. What I am selling are stocks I bought in 2001-2004, mostly precious metals mining stocks, and I have not researched any of them for 3 years. I don't have a lot to say about them, nor would an article fit the Alternative Energy Stocks theme.

Since I first profiled Electro Energy Inc. (EEEI) on September 16, the stock fell substantially to as low as 30 cents, and just recently has shot back up to the price it was when I wrote the article, a very cheap 50 cents.

Bipolar Rebound

Bottom-Fishing for Batteries

Too Many Brownies Before Dinner

"When you feed your kid six brownies before dinner, you can't expect him to eat the salad, no matter how good it is." So says Leslie Glustrom, a long term renewable energy advocate. This is her metaphor for why Xcel Energy (XEL) has been reluctant to pursue Demand Side Management (DSM) and renewable energy projects in Colorado as they have been in Minnesota.

Unfortunately, too many investors don’t take the time to read the SEC filings before making an investment and when the hype dies down, they get hurt.

TRANSCRIPT SPONSOR

Electro Energy, Inc. (EEEI)
Wall Street Analyst Forum
February 14, 2007 9:10 am ET

Note: Normalized net income includes the effect of taxes, but excludes any unusual items.