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 August 19, 2009
Meet Energy's 2-headed Monster

 

Cleantech investing isn't about finding the next big field or formation. It doesn't rely on finding the next property with enough oil to satiate global demand for — let's face it — a few months or, best case scenario, a year or two.

In a world that consumes 60,000 barrels of oil per minute, large finds these days are the equivalent of adding a few drops of ketchup to the bottle that's been upside down in the fridge for weeks.

At that rate, the 10.5 billion barrels of estimated recoverable oil in ANWR would last a whopping 121 days. And remember, that's expensive oil — not the cheap stuff that squirts out of the ground. The latter hardly exists anymore.

Any bet on oil is really a referendum on when demand will once again outpace supply. It's a good bet, don't get me wrong. . . but it's only a good bet because oil is scarce. Betting that oil will rise is betting that there's not enough, because the price wouldn't go up if there were.

So make your money while you can.

Just know that the very reason the price of oil will rise is the declining economic availability of a finite resource. A day will come when there's nothing left to wager on.

That being said, investing in cleantech isn't reliant upon a fading resource. That's the whole beauty of it — the resources it needs are naturally available, abundant, and renewable. What cleantech investors are betting on is improvements in the technology used to harness that energy.

When great improvements are made, it's like finding the next Cantarell in the oil business.

Harnessing Clean Profits

Even a few years ago, cleantech investing was still about ideas: Who had the best idea for a solar panel? Who was planning to build the biggest wind turbine?

This was before the cleantech industry was scaled, before profitability was reached. Now, solar and wind are global businesses with major manufacturing bases on five continents.

It's no longer about the best idea; it's about lowest cost, highest margin, sales volume, and future contracts.

This is no longer a risky or marginal energy business. This is a growing international industry with global competition and government support. It's the fastest growing energy sector by far.

Which reminds me, when's the last time you heard a government or special interest group hammer home the idea of increasing oil dependence? All the attention is on limiting oil consumption while greatly increasing clean energy production.

As a multi-billion dollar global industry, there is serious money to be made investing in clean energy stocks. And the strategy is a bit more precise than wagering on the next company to secure a land lease.

That's where Green Chip and, in particular, the Alternative Energy Speculator, come in. Our years of experience in this industry have allowed us to become familiar with all of its nuances, putting us on the forefront of green investing.

In fact, The Speculator has closed 34 winning cleantech positions this year — more than one per week — not just in solar and wind, but in water and smart grid, as well.

The hardest part about investing in cleantech is deciding to actually invest in cleantech. We do the rest. Our thousands-strong community of successful green investors can attest to that.

But it's one thing to say it's easy. . . just like it's easy to state the "estimated" oil in a new find.

It's another thing to prove it and show it.

Here's what I mean. . .

It's Easy Being Green

It's not easy to know that there's a general oversupply of solar panels on the market right now. It's not easy to know that average selling prices (ASPs), for modules and solar cells have been slipping as a result, putting pressure on earnings margins for suppliers.

It's not easy to be familiar with stimulus packages in multiple countries that will push hundreds of billions of dollars into the green capital markets. It's not easy to interpret how that money will affect capital expenditures for new solar and wind plants.

And it's certainly not easy to keep track of contracts and pricing mechanisms for dozens of companies.

But it's easy to open your e-mail, buy a stock, and then sell it for a profit. Readers of the Alternative Energy Speculator have faced that daunting task 34 times this year.

It's the perfect combination of solid investment advice and a booming market. And it's much easier to take gains from a sector that international governments and banks are eager to see succeed, rather than from an industry facing mounting political roadblocks and adversity, not to mention resource scarcity.

Just take a look at the numbers. The chart below compares the year-to-date performance of the U.S. Oil Fund ETF (NYSE: USO), which tracks the price of oil, and the Oil Services HOLDRs ETF (NYSE: OIH), which holds a variety of stalwart oil service companies, against a solar company, a smart grid company, and a wind company:

Cleantech Stocks versus Oil

Oil has done marginally well for the year and the services ETF has done a bit better, up about 45% — respectable gains for any investor.

But notice the three stocks from three different cleantech sectors. They're each up well over 150%. . . and they're not isolated examples.

This is due to several factors: the loosening of credit markets and the willingness of banks to lend to cleantech projects; billions of stimulus dollars aimed at project development; tax advantages in several countries; high returns for project investors; and above all else, the fact that clean energy began at less than 1% of the energy mix.

When your share of global energy production is that small, even modest advancement means big percentage growth. Going to just 2% meant a doubling of its use. And the use of clean energy will double several times over in the next decade or two.

The use of oil is not going to double. Not even close.

So by all means, profit from oil's decay. It would be foolish not to.

But it's also foolish not to invest in clean energy and stuff your pockets from both sides. The growth rates are much faster and the returns much higher. Not to mention, all you have to do is open your e-mail and buy winning stocks.

Call it like you see it,

Nick Hodge

Nick