Posts Tagged ‘Alternative Energy’

« Older Entries

The future for Solar investors: Think Cash Flow

Friday, March 30th, 2012

Investing in Solar and other alternative energies has been a hazardous experience for investors for several reasons:

  • Too much competition which results in price cutting and profit margin pressure which results in volatile earnings and significant stock volatility.
  • Reliance on government subsidies in an era of budget restraints.

But these issues are the primary problems associated with investing in solar cell manufacturers.

What about investing in Solar Farms that have their infrastructure in place and long term selling agreements with credible utilities?  This is an entirely different enterprise than just selling solar panels since this is really an issue of cash flow.

Warren Buffett’s MidAmerican Energy Holdings Co. agreed to buy the Topaz Solar Farm in California from First Solar Inc. on Dec. 7. The project’s development budget is estimated at $2.4 billion and it may generate a 16.3 percent return on investment by selling power to PG&E Corp. at about $150 a megawatt-hour, through a 25-year contract, according to New Energy Finance calculations.

“After tax, you’re looking at returns in the 10 percent to 15 percent range” for solar projects, said Dan Reicher, executive director of Stanford University’s center for energy policy and finance in California. “The beauty of solar is once you make the capital investment, you’ve got free fuel and very low operating costs.”

With Treasury yields in the 2% to 3% range solar farms offer a viable alternative to bonds.  In my opinion its only a matter of time before solar farms are offered in either a REIT or MLP structure to the public, where the cash flow generated is passed on to shareholders with special tax considerations.  Best of all, the cash flow comes without the risks and headaches of solar panel manufacturing and sales.

Now we’re finally getting somewhere.

Brad

No positions

Tags: , , , , ,
Posted in Green Investing, Socially Responsible Investing | No Comments »

Market turn approaching?

Wednesday, December 14th, 2011

This may be premature but I’ve noticed that our portfolios have been outperforming for the past three days.   That may not sound like much but I believe its an indication that the breadth of the market is improving and that the major indices are masking underlying strength.

When underlying market strength is weak, the major indexes that you can own via ETF’s or Index mutual funds tend to do relatively well.  However, when underlying strength is weak there is a strong tendency for individual equities and small caps to outperform.  This could be the case now, time will tell.   It has been 10 months since we last outperformed so the tide may be turning.

We continue to hold Appliance Recycling Centers of America ARCI Green Plains Renewable Energy GPRE and have a small position in Perma Fix Environmental Solutions PESI.

Severe sell off in solar play First Solar FSLR a former high flying darling of the solar energy industry.   FSLR came out with a statement that 2012 earnings will be roughly half of analysts expectations.   We have no position in FSLR but I must say the price is getting interesting.

FSLR share price is $33.90

The balance sheet is solid: Book value is $46 which includes $8 in cash and the equivalent of approximately $7 in debt.

But the market cap is now below revenues, which indicates very good value.

Its probably too early to buy as the stock needs to stabilize and the source of the earnings weakness must be determined.  Stating again for the umpteenth time:  Europe is the primary source of Alt Energy revenues and Europe is cutting back severely through austerity programs to curb their debt.  Alt Energy will be sacrificed in the meantime as for most countries its a discretionary expense.

Long ARCI, PESI and GPRE

 

 

Tags: , , , , , , ,
Posted in Green Investing, Investing Outlook, Socially Responsible Investing | No Comments »

Solar Eclipsed

Wednesday, September 21st, 2011

Evergreen Solar bankrupt….Solyndra bankrupt….Was it possible to see the collapse in the Solar stocks coming?  Yes it was and I’ve mentioned this frequently for better for the better part of three years.   It all boils down to the fact that you don’t want to own investments that rely heavily on government subsidies for their survival.   You especially don’t want to own those investments during periods of financial austerity.  The solar stock industry relies heavily upon subsidies from the US, China and Europe, with all three in either recession/depression or on the brink this outcome was inevitable.

For as long as I’ve been practicing SRI (over 20 years) I’ve been uniform and adamant that investing proactively is contradictory to effective long term investing.  Investing including Socially Responsible Investing is about handling risk intelligently and dispensing with the rose colored glasses.  Eventually every investment will turn against you and how you decide to cope with this inevitable turn will largely dictate the degree of your long term success.  Being emotionally married to an investment is a sure and quick way to the poorhouse, you’d have been much better off supporting the company as a consumer not an investor.

Is there a survivor and a longer term winner in the bunch?   Probably First Solar

Investing in Solar or Alternative energy now is nothing more than a spectator sport for the time being.

No positions.

Tags: , , , , ,
Posted in Green Investing, Investing Outlook | No Comments »

Derek And The Dominoes

Wednesday, December 1st, 2010

Ok I must confess I don’t have a tie in for “Derek” other than being a great fan of Eric Clapton, so I’m thinking of Dominoes today with the effect of GDP to Corporate Earnings to Stock Valuations.   So much for the Gloom and Deflation from this past Summer.

The U.S. economy is clearly accelerating regardless of the weakness in Europe so the recent rise in equity prices is justified IMO.  In fact, I do believe that 1200 on the SPX will be surpassed and will become the next support level by this December.   While I’m gratified for having nailed the recent market stop with our sales in ETF’s, that top may prove to be a momentary top along the road higher.

RMHI model portfolios have actually exceeded the peak from a month ago and are on their way to an above average year.   Since the model is about being “above average” I’m not surprised just gratified.  Taking a look at the fund performance list on www.socialfunds.com the top of the heap appears to be the Calvert Capital Accumulation fund which was up approximately 15% at the end of October.   Our portfolios have moved almost in sync for the past 3 months and I hope this will rank RMHI as close to the top of the heap as 2007.

Otherwise:

This morning Goldman Sachs raised estimates for real U.S. GDP:
2011 GDP goes from 2.0% to 2.7% and 2012 goes to an estimate of 3.6%.

With that kind of growth, where’s the love for bonds now?  If investors want to recoup losses from past years they must adjust for the resurgence of growth in the U.S. and dispense with the “fear trade” of bonds over equities.  Bond investors, especially those owning Treasuries will find that there is a very high price for the concept of “safety” and that the perception of safety is a myth to begin with when you find that your pursuit is enjoined with the masses.  Safety can most often be found with high investor negativity when the urge to sell is at its peak, no when its the overwhelming trend.

On the Green Investment / Socially Responsible Investment ledger our models are identifying a class of equities that appear to have our favored combination of Value plus Momentum: In particular are Battery Manufacturers and China based waste to energy plays.

Be careful out there

Brad

No Positions

Tags: , , , , ,
Posted in Green Investing, Socially Responsible Investing | No Comments »

Atlas Pipeline Holdings (AHD) update

Tuesday, November 9th, 2010

Overnight Chevron has made a bid for Atlas Energy which to my way of thinking confirms that natural gas has real potential to be a bridge fuel, a transition away from gasoline for the nations trucks and autos.   While it has been believed by many that our President was loathe to get behind natural gas and is a supporter of the fuel of Dickens, coal.   This purchase of Atlas may indicate that natural gas and not coal could come to the forefront if the US intends to wean itself off gasoline.

Green Investors should understand that the weaning process away from petro based gasoline fuels will be a piecemeal process, sometimes moving glacially slow and very dependent upon political support.   The purchase of Atlas by Chevron marks the second major purchase in recent years followed by Exxon’s purchase of XTO Energy.   Do we see a trend emerging?

RMHI has had a substantial position in Atlas subsidiary Atlas Pipeline Holdings for several months.   While the search for more glamorous alternative energy investments can be enticing for green investors, we’ve preferred a more conservative position with investing the eventual transition from gasoline fuels to natural gas to ??.

Long AHD

Brad

Tags: , , , , , ,
Posted in Green Investing | No Comments »

Iberdrola SA (IBDRY) The Worlds Largest Clean Energy Utility

Tuesday, September 14th, 2010

Catching my eye today is Spain’s Iberdrola SA which is the worlds largest clean energy utility symbol IBDRY and the second largest utility in Spain.    It is also the worlds largest provider of Wind Power.   Iberdrola stated in 1998 they intended to invest over $8 billion dollars in clean energy, primarily wind power in the United States, regardless of what Congress may or may not do with tax incentives.

IBDRY plans on building a 30 megawatt wind farm on US forest service land in Vermont and will be called Deerfield Wind Power.   Vermont Public Service plans to buy 20 megawatts of power from Deerfield at an undisclosed price with a contract for nine years.   Iberdrola will have the option to sell the remaining 10 megawatts at market prices.   The project will have 15 wind turbines.

Iberdrola SA is an interesting company in which we have no position in but will commence doing our homework on.   In 2008 the company was the potential target of a takeover attempt by France’s state owned Électricité de France and Germany’s E.ON.

Shares of IBDRY are trading at just under $30 a share with an estimated Book Value of $29.73 with a dividend of just over 5.8%.  Cash on hand is $6 a share which subtracting from the Book Value and using last years $2.68 in earnings creates an Earnings Yield of 13%, pretty good.

Based upon valuation relative to growth I believe IBDRY deserves further attention.   IBDRY meets our standards for Green Investing in that IBDRY is not a speculative company dependent upon a make or break product.   IBDRY could make sense for most investors who seek a long term investment in Alternative Energy.

No Position

Brad

Tags: , , , , ,
Posted in Green Investing, Socially Responsible Investing | No Comments »

Lithium Mining: A quandry for SRI

Wednesday, July 21st, 2010

The the recent attention of the Tesla IPO attention has been also drawn to the manufacturers of electric car components, especially to the Holy Grail for the electric car…the battery.

Lithium is a major ingredient in the creation of batteries for electric cars but the extraction from the Lithium mines will be at odds with most SRI funds and advisers.   For example in our screening process we eliminate the extraction industries which includes mining.  Hence would this not eliminate Lithium mining from consideration?

Recently we received an update on an upcoming ETF IPO that will focus on the chain of Lithium production:  the Global X Lithium ETF which will trade under the symbol LIT.

The top holding in the LIT ETF which will comprise a 20% weighting will be Chemical and Mining Company of Chile symbol SQM, a company we ordinarily would avoid for purchase.

The second holding is industrial giant FMC which is a major manufacturer of insecticides, crop production and pest control products and will represent just over 17% of the portfolio composition.

For a report on the state of the battery industry and its relative position in lieu of forthcoming developments and consumer adoption of electric vehicles we suggest the recently published report from Goldman Sachs: Americas: Clean Energy, Energy Storage

Brad Pappas

No positions

Tags: , ,
Posted in Green Investing, Socially Responsible Investing | No Comments »

Gaiam Corp (GAIA)

Tuesday, July 13th, 2010

While we may be unabashed in our enthusiasm for Socially Responsible Investing (SRI) that does not mean we look at Green stocks with rose colored glasses.   In truth we devote more time and attention, plus number crunching to make sure the holding is justified and meets our financial criteria.

Case in point is Gaiam Corp.  (GAIA)

Company description: “Gaiam, Inc., a lifestyle media company, provides a selection of information, media, products, and services to customers focusing on personal development, wellness, ecological lifestyles, and responsible media. The company engages in content creation, product development and sourcing, customer service, and distribution. It operates in three segments: Direct to Consumer, Business, and Solar segment. The Direct to Consumer segment provides an opportunity to launch and support new media releases; a sounding board for new product testing; promotional opportunities; a growing subscription base; and customer feedback and the lifestyles of health and sustainability industry?s focus and future. This segment offers content through direct response television, catalogs, e-commerce, and subscription community services. The Business segment provides content to businesses, retailers, international licenses, corporate accounts, and media outlets. The Solar segment offers turnkey services, including the design, procurement, installation, grid connection, monitoring, maintenance, and referrals for third-party financing of solar energy systems. This segment also sells renewable energy products and sustainable living resources; and offers residential and small commercial solar energy integration services. Gaiam, Inc. sells its products in the United States, Canada, Mexico, Japan, and the United Kingdom. The company was founded in 1988 and is headquartered in Louisville, Colorado.”

Current Price $6.61
NCAV $2.88
Intrinsic/Discounted Cash Flow Value $10.67
Price to Book: 1.0
Book Value $6.45
Cash per share : $2.07
LT Debt $0
Market Cap $156 million
Piotroski score: 7 out of 9 (which is good)
Altman score 5.7 (little chance of bankruptcy)

GAIA is a small cap retail stock  focused on the lifestyle/yoga market/alternative energy in Colorado.   The stock has pulled back along with the market albeit at a faster pace for the past two months and in our opinion is nearing a very attractive valuation as it begins to touch Book Value along with minimal expectations.

The company has met or exceeded analyst expectations for the past year and current and 2011 estimates have been firm.  However this stock is thinly traded and there is only one analyst following the stock.

Back in late 2007 and 2008 when the consumer was empowered the stock traded in the high $20′s and topped at $30.  The company posted a loss of (.08) for 2008 The stock does seem to be volatile long term and has a bust / boom personality as it trades in sympathy with the economy.  We don’t envision that the US consumer is completely on its back:

“socially acceptable deleveraging needn’t entail the pesky inconvienence of forgoing consumption.”

Revenue growth does appear to be making an improvement with sales improving 14.8% year to year.

A comparison to competitor Lululemon Athletica (LULU) shows the contrast between the much loved LULU and the loathed GAIA.  Eco-cache has a cost in terms of potential return:

Current Price $38
NCAV $2.38
Intrinsic/Discounted Cash Flow Value $12.5
Price to Book: 10.4
Book Value $3.79
Cash per share : $2.45
LT Debt $0
Market Cap $2.7 billion
Piotroski score 7
Altman Z 44 (excellent)

To be a successful investor frequently means to cut against the grain of popularity and think in terms of buying a business cheaply.  LULU is an excellent example of the price you pay for “Glamour” to own what is currently in fashion and popular.  No doubt there are many unhappy GAIA shareholders at present but we believe there will be a Reversion to Mean Valuation which in our definition would be appreciation above DCF valuation ($10+), a level GAIA sustained during the economic expansion of 2003 to 2007.  In addition, GAIA is a candidate for tax loss selling within the next 3 to 5 months which could be the catalyst to drive the price lower.

In sum, GAIA represents good value at present however the company’s volatility requires an even greater discount to intrinsic value/DCF than the current price offers, but we’re near those values.  A move in price below $6 might just be the opportunity for longer term investors comfortable with the risk of a consumer cyclical company with a very Green edge.

No positions

Brad Pappas

Tags: , , , , , ,
Posted in Green Investing, Socially Responsible Investing | No Comments »

Green energy versus a weak economy

Thursday, July 8th, 2010

With the disaster ongoing in the Gulf many people have asked me if this is a good time to invest in proactive Green energy.   Can you imagine how badly I would like to say yes? But how do we weigh the desire to invest in Green Tech sensibly with a weak economy?  With a tightrope of course and a strong balance sheet with a dirt cheap stock valuation as our net.

With this post I’d like to draw attention to the strong correlation to the price of oil (USO) which is driven primarily by economic growth and activity and the Powershares Wilderhill Clean Energy ETF (PBW) which I’m using as a proxy for Green Energy.   At present we do not have the necessary worldwide GDP growth necessary for a price run in oil, especially with the world’s economic driver China attempting to cool its GDP growth, the present soft patch in the U.S. and the austerity measures in Europe.

The bottom line for the “Green Investor” is to look elsewhere for the time being.  Look to other industries and companies that are not quite so cyclical and dependent upon fast GDP for growth.  We must always keep in mind that “return of capital” is more important than “return on capital”.

Fear not, soon enough I’ll be writing on at least two very “Green” companies that meet our model of investment.

No Positions

Brad Pappas

Tags: , , , ,
Posted in Green Investing | No Comments »

Non confirming markets

Wednesday, June 30th, 2010

Both the US stock market and Treasury market are seeing non-confirmations in the most recent moves lower.

US stock market:

Advance / Decline line is not confirming the move lower as the average stock is not falling with the market indices.

New Lows: The number of new lows continues to shrink when compared to the two other times we’ve been this low in the past month.

VIX: The VIX which is a measure of volatility which peaked in this cycle at 45 in May closed yesterday at 34.

Sentimentrader.com’s Intermediate Term model has moved to excessive pessimism once again. Generally a good time to increase long exposure.

In the Treasury market:

Investor Sentiment is at the highest since December 2008, not one of the better times to be buying bonds. Plus we have to be concerned with the thought of worldwide investment managers buying US Treasuries to look good for their clients in light of the decline in Euro bonds, otherwise known as “Window Dressing”.

Lastly, the decline in US Treasury yields is not confirmed by the bonds of other G-7 nations.

The Tesla IPO has gained a great deal of attention but it has to be time to ring the register. There will be other times to buy this if it can deliver something other than losses. I just read the battery for the car costs $30,000 and does not work in cold weather. Well, that pretty much kills the potential for a Tesla at 8000 feet in Colorado.

No positions

Tags: , , , , , ,
Posted in Investing Outlook | No Comments »

« Older Entries