President-elect Obama has chosen a
Green Dream Team to inform his transition to a ‘new energy economy’ that will increase domestic sources of energy, with a focus on renewable sources. Moreover, a large stimulus package is expected within the first few weeks of his presidency that will spur business and create jobs. Based on what Obama
has said, I’m assuming that we will see a boost in share prices of companies that stand to benefit in the short-term from this stimulus package, and in the long-term as the Green Economy emerges.
This strategy has two complementary goals:
-Generate a reasonable financial return on investment.
-Invest in sustainability leaders.
I’ve divided the companies into GOLD, SILVER, and BRONZE classes. Each company was assessed for it’s cash on hand, debt/equity ratio, and dividend yield. If a company’s dividend is not available, it’s probably because they are young and are reinvesting profits rather than distributing them to investors. I also performed a qualitative assessment of its sustainability strategy. The ideal candidates used a strategy called
Backcasting, whereby a clear long-term vision is the guide for today’s practical initiatives. I was looking for sustainability reports (ideally the
Global Reporting Initiative guidelines), strategic partnerships, and a demonstrated understanding of sustainability risks and opportunities.
****DISCLAIMER**** I do not own any of these securities, nor am I qualified to issue any recommendations. Systemic risks affecting the entire market are a threat to each of these holdings, regardless of business strengths and opportunities. My goal here is to educate ONLY. You should research the company further on your own terms before making any investment decisions. ****DISCLAIMER****
Here are the picks:
GOLD STOCKS
CaterpillarCaterpillar machines are synonymous with construction and infrastructure. I figured that this company stands to benefit from an Obama infrastructure stimulus. However, I was surprised to learn that they also had a wonderful long-term sustainability strategy. They produced a comprehensive GRI
sustainability report in 2007, which detailed their vision as “to contribute, through diverse businesses, to a society in which people’s basic needs are not only met but fulfilled in a way that sustains the environment”. Caterpillar has operational goals set for the year 2020 including: reducing absolute greenhouse gas emissions by 25%; renewable sources for for 20% of energy needs; increase customer energy efficiency by 20%; zero waste to landfill; and more. Finally, they are using a Life Cycle Assessment to understand the environmental impact of their entire operation. Caterpillar has a large amount of debt on their books, but I am not worried about them going bankrupt.
Johnson & JohnsonWith an aging population and a healthcare system in desperate need of resurrection, the Healthcare industry is poised to grow significantly under Obama’s administration. Even during hard economic times, people will continue to invest in their own physical well-being. Johnson & Johnson have produced one of the best
sustainability reports I have ever seen, raising the bar of transparency leadership. Areas of improvement are: sustainable supply-chain; product stewardship; climate change mitigation; responsible research; and facilitating access to healthcare for those less fortunate. In 2006, JNJ created 5-year goals in the area of biodiversity, energy use and CO2 emissions, education, waste, water, transparency, and environmental literacy. On pace to meet most of these goals, JNJ is a corporate sustainability leader.
First Solar, Inc.If Obama is serious about meeting renewable energy goals, solar electricity capacity needs to grow. First Solar is America’s most recognized solar company and should pop the most as investors flock to Greentech stocks. My prediction is that Obama will install solar panel on the White House within the first 100 days of his presidency, signaling a push towards residential and commercial solar power generation. With lots of cash and little debt, First Solar is well positioned financially to meet this new demand. Moreover, they use systems design to reduce cost and environmental impact throughout a product’s entire
lifecycle. I expect this stock to pop in the next 100 days, and to continue growing for the next 10 years.
Johnson Controls, Inc.Johnson Controls is a well-diversified company that is guided by the vision of “a more comfortable, safe and sustainable world“ and values like integrity, customer satisfaction, employee engagement, innovation, and sustainability. Delivering products from hybrid-car batteries to HVAC systems, Johnson Controls also offers complete building efficiency services. Improving the efficiency of millions of buildings is a logical first-step for Obama as he tries to create green-collar jobs. Labor-intensive, it produces a high multiple of economic activity for every government dollar spent. Also, it serves the dual goals of lowering costs and reducing CO2 emissions, which makes it an attractive investment for businesses hoping to take advantage of the current low interest rates. Johnson Controls has used the GRI guidelines for their
sustainability report, and they are a leader in employee education and engagement. I feel confident that they are moving in the right direction, and that Johnston Controls will grow in the new economy.
SILVER STOCKS
Western Wind EnergyFor investors who want to incorporate wind into their portfolio, Western Wind Energy is a good choice. They recently completed a financing that will increase their cash, and they have almost no debt. With many
projects in development, Western Wind Energy should benefit from a government boost of clean energy prices and subsidies. Although they don’t produce a sustainability report, their focus on wind energy means that they will profit from the transition to a sustainable energy grid.
Florida Power & Light EnergyFPL Energy is an investor-owned utility company providing electricity throughout the state of Florida. They have produced a
sustainability report (although not using GRI guidelines), and produce almost 80% of their energy using natural gas and wind (49% NG, 30% wind). As renewable energy targets are set, and carbon-intensive energy production is discouraged, FPL Energy will be leading the way for US utilities. Although they have lots of debt, their customer base is increasing and electricity distribution is generally recession-proof.
ENERNOCOne of the big challenges facing an economy powered primarily by renewable energy is the problem of baseload. With intermittent energy sources like wind and solar, the fear is that energy demand could outstrip supply during busy times. ENERNOC provides a solution known as
demand response. It allows companies to automatically curtail heavy energy use during peak times, when electricity is most demand (and therefore most expensive). Demand response is a win-win solution because it cuts corporate costs (by purchasing electricity when it is cheapest) and reduces the spikes of peak demand, allowing for a smoother transition to a new energy economy. Moreover, the company can assist large institutions (like
Western Connecticut State University) to improve energy efficiency through monitoring and waste identification.
Cooper IndustriesAlthough they provide an array of electrical products, Cooper Industries is starting to focus more on energy efficient lights and environmentally responsible electrical transformers. Their
corporate social responsibility report was uninspiring, and did not use the GRI guidelines. Without a strong long-term vision and plan, Cooper Industries might not adapt as quicker as some other companies in this industry. That said, they have lots of cash, not much debt, and the stock is very undervalued. As efficiency and renewable energy go mainstream, expect Cooper to grow.
Waterfurnace Renewable EnergiesWaterfurnace Renewable Energies installs heating/cooling geothermal systems to homes and businesses. Able to reduce a building’s energy consumption for heat, cooling, and hot water by 70%, geothermal heat pump systems require an upfront infrastructure investment. Normally, buildings balk at upfront costs like this, but with extremely low interest rates, this type of investment becomes very attractive. As energy efficiency standards become law, geothermal heating should become commonplace. Although they have no long-term sustainability strategy, Waterfurnace Renewable Energies has some good
green initiatives. If geothermal technology catches on in the USA the way it has in Sweden and in Switzerland, then this company will generate huge profits.
BRONZE STOCKS
American SuperconductorAmerican Superconductor is a leader in high-efficiency power cables and electronic convertors. These products are crucial to the creation of a renewable energy grid, as their voltage control technologies are needed to connect wind farms to transmission grids. Although they have not communicated any sort of sustainability strategy, American Superconductor will be a critical company to the emergence of a new energy economy.
Spire CorpSpire is a well-diversified company that sells turn-key solar production lines, medical devices and semiconductors. As the US decides to ramp-up solar panel production and new firms enter the market, expect this company to be extremely successful. A clear vision and sustainability report would make this company much more attractive to me, as there is no indication of a long-term sustainability strategy.
Energy Conversion Devices, Inc.Energy Conversion Devices is a leader in two important industries: solar and storage. Under the UNI-SOLAR brand, ECD sells solar panels ideal for rooftop installation. They also operate the Ovonics Materials Division, which makes nickel hydroxide batteries used in all hybrid vehicles. They are also leaders in hydrogen technologies, which has the potential to further transform energy storage. Unfortunately, they have not yet communicated a sustainability strategy, and their long-term vision is unclear.
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