danno

Smart Investing in the Smart Grid

Nice article, but I have some issues here.

Many of the utilities and ISOs in particular, have been real foot draggers when it has come to smart grid, competition, de-coupling, etc. which are key issues here. I'm not sure I'd like to be investing in utility industry particularly with its legacy "we're still a monopoly so screw the customer" mentality. Also any rate increases still need political approval which is a real political hot potato.

I am an investor in PZD, and it doesn't have or hasn't had investments in "tiny biofuel companies" for long time. If it did, I'd probably dump it. So you are off the mark on that description.

I would think the best pure plays of public companies for smart grid are Telvent and MYR Group. Otherwise what I see is a business that will be dominated by giants like ABB, Siemens, Honeywell, GE, Schneider, IBM, Johnson Controls, Cisco, etc. but the best technology is still with many non-public companies like Silver Spring Networks, Fat Spaniel, BPL, C-Powered, Eka Systems, etc.

That said, I wouldn't want to bet on any of the public companies individually, because they are very diversified and don't have enough exposure overall to the Smart Grid. PZD seems to have the highest exposure to this "sector", at about 12% or so, but I think it avoids companies in industries that are doomed, too. such as grain-based fuels and "clean coal". I think that it's easier to outperform by avoiding investing in what you know is doomed and focusing on sectors that you know will do well such as smart grid, energy efficiency, or water purification technologies. Avoiding the dogs is half the game, and there don't seem to be too many dogs in smart grid, yet.

Cap and Trade Would Sink the U.S. Economy

Of course taxing fossil fuels to pay for their externalities (pollution, public health, mercury contamination, trade deficit, war in middle east, etc.) would be the most efficient, elegant, and economically viable way to handle this problem, then we could kill most of the subsidies. Not necessary politically easy to accomplish though. Beyond that, just because Mr. Jackson and Mr. Galt know how to type, doesn't mean that they can write something intelligent. I've done enough work with Livermore, Sandia, and Brookings to recognize the utter horse---- the simpletons spew forth.

So What if China Builds Coal Plants?

It's not just global warming and it's not just China. You have to add the same behavior in Indonesia, India, Turkey, Vietnam, and Pakistan. That's about 1.5x China's population and growing much faster.

Next, the particulate from coal plants in Asia accounts for a significant and growing amount of the particulate pollution in North American skies. It adds to a public health problem and also settles in the Sierra Nevada mountains. This darkens the snowpack there causing it to melt faster and glaciers to retreat further. This has massive implications for water supplies and security globally, but no place more than California.

Finally, in terms of an intermediate solution, it would seem to me that Fuel-tech, FTEK is one of the best plays for maximizing coal, oil, and waste-fired power plants, while dramatically slashing output of NOx and SOx. FTEK's solutions are highly economical and better than anything the competition has.

We have made huge strides in fighting acid rain in North America and even in Europe. There is no reason why Asia cannot do the same.

Comparing Green Energy ETFs

OOPS.

What I meant to say is that a good Index should NEVER have lousy companies unless...

Sorry about that.

On Oct 19 09:00 AM danno wrote:

> Actually, a good Index should have lousy companies in them, unless
> it is a sector or composite Index. When companies go bad, they are
> replaced. DJ 30 Industrials is a good example. Moreover, some of
> the better ETFs really offer is intelligent indexing that is most
> of the benefits of a mutual fund through and active selection process,
> but then passive index management to avoid market timing, capital
> gains distributions, and high fees. Since very fund managers (and
> only a tiny percentage of individual of investors) can beat the market
> with any regularity on a risk-adjusted basis (especially when you
> adjust for fees) it's very questionable, in my mind, that actively
> managed funds or individual investors are going to beat the indexes.
>
>
> What smart investors can do, is:
> a) Asset allocation and diversification
> b) Pick the very best index-based funds.
> c) only invest their "play money" in individual stocks, short-term
> investing, and other speculative stuff.
>
> This is not fun to hear, very humbling, and doesn't sell books and
> TV shows, but it does allow investors to get good returns, and get
> on and enjoy the rest of their lives.
>
> The one exception is when investors really know an industry or company
> very, very well. Then sometimes, they can beat the street, but that
> means a lot of work and specialized knowledge since there are often
> many insiders and street analysts who follow the same companies very
> closely and get paid to do it (so they spend many, many hours following
> the company, its peers, and meeting with management. That's a tough
> edge to beat. It doesn't always mean their advice is great since
> they often cannot publish what they really think.

Comparing Green Energy ETFs

Actually, a good Index should have lousy companies in them, unless it is a sector or composite Index. When companies go bad, they are replaced. DJ 30 Industrials is a good example. Moreover, some of the better ETFs really offer is intelligent indexing that is most of the benefits of a mutual fund through and active selection process, but then passive index management to avoid market timing, capital gains distributions, and high fees. Since very fund managers (and only a tiny percentage of individual of investors) can beat the market with any regularity on a risk-adjusted basis (especially when you adjust for fees) it's very questionable, in my mind, that actively managed funds or individual investors are going to beat the indexes.

What smart investors can do, is:
a) Asset allocation and diversification
b) Pick the very best index-based funds.
c) only invest their "play money" in individual stocks, short-term investing, and other speculative stuff.

This is not fun to hear, very humbling, and doesn't sell books and TV shows, but it does allow investors to get good returns, and get on and enjoy the rest of their lives.

The one exception is when investors really know an industry or company very, very well. Then sometimes, they can beat the street, but that means a lot of work and specialized knowledge since there are often many insiders and street analysts who follow the same companies very closely and get paid to do it (so they spend many, many hours following the company, its peers, and meeting with management. That's a tough edge to beat. It doesn't always mean their advice is great since they often cannot publish what they really think.

Tapping into Geothermal

Most of the other stocks in geothermal are really risky and unproven. Ormat has more expertise in this field than nearly all the rest of the geothermal companies in the world combined. I wish there were other quality plays in the sector but there really aren't. Energy Development Co. of the Philippines is another stock that all geothermal power, but it's only in the Philippines and therefore much more risky and makes most of its money as a utility and doesn't seem to have the growth imperative that Ormat has. Anyhow, I think Ormat helps EDC develop its plants.

Not sure what to think about Calpine. Any opinions out there?

Comparing Green Energy ETFs

Dear Dr. Konrad:

If you look at the history of the holdings of some of these ETFs you'll realize that many of them have managers that don't know squat. Of course the managers are learning, but investors are paying them to learn at their own expense.

I don't know why you waste your ink on stuff like the cleanedge ETF, PBW, or PBD or many of their peers including the water funds. The strategy behind so many of these indexes looks like something my assembled by a kindergarten class. The funds grab deep in shallow industry niches and pick up a lot of crappy companies. Ever see a good publicly-traded fuel cell company? Funny, I haven't either. What exactly does this "index" track, anyhow?

Sometimes the indexes/ETFs pick companies that are anything but green (corn ethanol, "clean" coal, polluting coal plants anyone?), or companies that have tiny or exposure to the sector, demonstrates that they are either run by the incompetent for the incompetent/lazy investor or they are products just out to earn a quick buck. Obviously it's both of the above.

Did anyone out there ever notice that some of these indexes/ETFs have 6%, 10%, 15% or even 20% of their holdings in one stock? The arbs and hedge funds sure have. Ever see what happens when an index owns 100-270 days average trading volume of one stock when the quarterly/semiannual/a... rebalance happens? The arbs get several days to take the ETF investors to the cleaners. Maybe that's the cleanest thing about some of these funds.

Or the indexes hold stocks that are either super illiquid or trade on some exchange that's closed to foreigners investors (like us Gai-jin) so that the ETF can't actually track the index properly.

If you want narrow focus on green/clean energy pick up a solar or wind ETF for the short-term directional volatility. For the long run, investors and writers should do their home work and look at more than just fees.

Who's running these things ? Mickey, Goofy, or Pluto? People work really hard to save their money - so they should work just as hard to do their homework before then invest it. IMHO, I would recommend that you do much more extensive research before further pontification in this investment arena where quality products are few and far between.

Capstone Turbine Is Still a Stock to Watch

Let's think about this. CPST is going to need a lot more capital to succeed. If CPST was that good, then why haven't the big boys acquired it?

Battery Investing for Beginners, Part 4

It will be interesting to see if compressed air from braking replaces electric for many hybrids. It certainly yields more power far more cheaply (for fuel injection, etc) and is easier to use. I'm not convinced that electric hybrids based regenerative braking is more than a flash in the pan.

10 Green Energy Stocks for 2009 - Q3 Performance Update

GE? GE?

Clean Energy makes up an minute fraction of GE's business. Do you really think that this will drive GE's stock? No way, no how.

Also why is the S&P 500 the benchmark here?

Greentech IPOs: First A123, Who’s Next?

Mistras is the next cleantech IPO.

FYI the last 2 IPOs were A123 and the Indian Solar company Euro Multivision Limited (EML).

Greentech Media and Cleantech.com tend to have all the latest news in this field. I suspect most others copy from them.

Battery Investing for Beginners, Part 3

Why wouldn't your peer group include the following stocks?

Saft - among the best there is.
Polypore
Wilson Greatbatch
BYD
Chloride

Next: most of the companies that you selected are cheap because they are mediocre to lousy companies. That is not to say that there arent' frothy valuations for A123 and many of the Chinese small cap battery companies, but the valuations of the some of the companies that you think look cheap, may indeed by overly generous, to say the least. Certainly Enersys is a great company, but the rest of your picks get grades of 'C' through 'F' in terms of quality stocks.

Portfolio Outperformance Due to High Beta?

A caveat for reliance on Beta is that it's highly subjective. Naturally it's backwards looking, but what's important to note is how much it changes as the time period measured changes.

Next, why is the S&P the relevant benchmark here? There are more relevant indices to use, IMHO.

Green Stocks: A Better Way to Play?

Okay


On Sep 28 04:06 PM Tom Konrad wrote:

> 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.

The Top 10 Acquirers in Greentech

1) Valero? One of the dirtiest around. Anyhow, there's nothing green about ethanol from corn. Period.

2) How about Schneider Electric, it has spent more on acquiring cleantech or green companies than ANY company listed here.
3) How about EDP Renoveis, Acciona, and Iberdrola? Their business models depend on acquiring windpower projects which they then manage and sometimes complete.
4) I would think that Mitsui, ABB, Mitsubishi, Johnson Controls, and Emerson would also be on the prowl.
5) DuPont and 3M, both must make major acquisitions to grow or they won't be able to keep up growth rates or dividends for that matter.