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