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.)

Opportunity

On Friday, October 10, 2008 , I stopped being bearish for the first time since the 1990s.  My long term expectation of a crash that didn't come had been undermining my self confidence.  Even the decline in 2001 and 2002 had not seemed severe enough, given the financial imbalances in the system.  I had begun to worry that I might be genetically bearish, and that my worries had nothing to do with a market that was greatly overvalued.

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.

Lighting Sciences Group (LSCG.OB) is a step above the everyday vermin that inhabit the OTC BB. It has two real businesses, one of which manufactures and distributes LEDs, and the other of which installs LED and other lighting systems. The one problem with Lighting Sciences is that its value as a real company is dwarfed by its market cap. In this way it resembles some other companies I have criticized in the past, including Continental Fuels (CFUL.OB) and Noble Roman’s (NROM.OB).

Market Cap

Producing electricity costs about $60 billion a year in the U.S. The cost of electrical energy should not be measured in dollars alone. There are also environmental costs like the cost of carbon dioxide emissions associated with electricity production. Approximately 20% of electricity is used for lighting.

Solid-state lighting [SSL] has the potential to revolutionize the lighting industry. SSL refers to a type of lighting that utilizes light-emitting diodes (LEDs), organic light-emitting diodes or polymer light-emitting diodes as sources of illumination rather than electrical filaments or gas. Solid-state lighting is increasingly used in a variety of lighting applications because it offers many benefits including, long life, energy savings, better quality light output, intrinsically safe, smaller flexible light fixtures and durability.

Investing in renewable energy stocks seldom fails to be exciting - it can lead to crushing losses as well as mouthwatering gains. (Think ethanol stocks and thin film solar in 2007.) With this in mind, I usually emphasize that the majority of most investors' portfolios should be targeted towards larger, more profitable companies, especially those focused on energy efficiency rather than the more sexy renewable energy technologies.

This is the philosophy behind Alternative Energy Stocks' Blue Chip Portfolio: companies that aren't sexy, but which still are well positioned to take advantage of rising oil prices and increasing efforts to reduce and regulate greenhouse gas emissions. That said, a small exposure to even extremely volatile stocks can, if kept small, improve the risk-return profile of a portfolio, so long as those stocks are not overly correlated to the portfolio as a whole.

Despite four years of high oil prices, this report sees increasing market tightness beyond 2010, with OPEC spare capacity declining to minimal levels by 2012,'' the IEA said in its Medium-Term Oil Market Report, which is published every six months. "Low OPEC spare capacity and slow non-OPEC production growth are of significant concern."

I was blown away . . . as were most energy stocks today. Big movers among stocks I've mentioned recently:

Cree's Wild Ride

On May 21, I noticed a big up-move in Cree, Inc. (CREE), a company I've been adding to most of my managed portfolios for the last year, at prices averaging around $18. Checking recent news stories, I noted two articles on TheStreet.com which had recommended it over the weekend (as a beaten down stock and chart of the day.) It turns out this was just the beginning of a feeding frenzy among the media which has gone on for the last couple weeks, bringing a lot of attention to what I call "the next compact fluorescent:" light-emitting diodes, or LEDs. Highlights have been LEDs Emerge To Fight Fluorescents, by Peter Svensson, a story that got picked up by innumerable media outlets, and a Newsweek article by John Carey. The icing on the cake was when Am Tech / JSA Research on Friday with a price target of $50, which they believe can be achieved within a year.