Progress and profits in the field of renewable energy
Events are telling us we must have renewed energy sources, says a U.S. advisory with six renewable energy stocks to buy, two from China.
Waste not, want not.
That proverb is more than two centuries old, and it sometimes seems as though it hasn’t really been followed for at least a century.
We waste a lot in our society. No doubt we could all be more efficient.
But more to the point, can we afford to go on using up resources at our current pace?
No, says one U.S. advisory bluntly. It’s time to pay more attention to renewable energy. It’s a necessity, says The Complete Investor.
Yes, there’s a long way to go. But this advisory thinks investors should start getting in on the process now.
It has six renewable energy stocks that are in the forefront of energy conservation and the development of renewable energies.
Four are from the developed world. But two are from the nation that seems to be open to everything in its race to the future, China.
Economic catastrophe
For a long time, writes Mr. Stephen Leeb, editor of the advisory, investors ignored the problems of commodity inflation. That hasn’t been the case in the past two weeks.
Yet we still may not have realized the full implications of resource shortages on economic growth. Until we do, we may be headed for “economic catastrophe,” he warns.
The only way to combat the economic drag of resource shortages is to develop renewable energies. “Our foot-dragging on this front is almost inexcusable,” says the editor, “complacency bears much of the blame.”
But events may be forcing us to wake up, he adds. The “Arab spring” has already cost the world 1 billion barrels of oil a day from Libya that may never be recovered. Remember, he says, that before its war with Iraq in the 1980s, Iran was producing 6 billion barrels a day. It has never come close to that level since.
He also asserts that the natural disasters in Japan have “shaken faith in nuclear energy.” Even China will locate its new plants more carefully, slowing its pace of nuclear development.
“Renewable energy is the only real solution,” writes Mr. Leeb.
Yet a massive buildup of these energies will not be easy. Storage facilities alone represent an immense challenge. Renewable energies also require big inputs of steel, silver and rare earth metals, among others.
All of this in turn puts a premium on energy conservation. It’s essential in order to buy time “to build a renewable infrastructure and to reduce total energy demand.”
The first two stocks the advisory recommends are doing just that.
Energy savings
BorgWarner (NYSE-BWA) “is a leader in automotive technology designed to boost gas mileage.” This is arguably the most important route to energy savings in the U.S., comments Mr. Leeb.
This stock, which pays no dividend, reached a 52-week high of $82 just over a month ago and now trades at $76.86. Renewable energy doesn’t always mean new — this firm can trace its routes back to 1880. It is also a holding in the advisory’s Growth Portfolio.
So is Johnson Controls (NYSE-JCI), which is more than an auto parts company, says the editor. Its technology conserves energy not only in cars but also in the crucial sphere of non-residential buildings.
Johnson is trading at $38.72, just about $4 below its early April high. It pays a dividend of $0.64 that yields 1.6 per cent.
Both of these stocks are trading at valuations that “far understate their long-term growth prospects,” states Mr. Leeb.
The smart grid
Energy conservation is also the job of France’s Schneider Electronic (OTC-SBCSY; France-SU). It serves industry, the infrastructure and energy markets, and residential and non-residential buildings.
“Its products are vital to the ‘smart grid,’ which monitors and controls electricity usage,” explains the editor. It has acquired American Power Conversion, which gives it the means of providing more secure power.
The company has more than $15 billion in revenues “and growth has been torrid in developing economies,” he adds. It trades at $16.03, yielding 2.8 per cent on a dividend of $0.46.
Another Growth Portfolio stock is Applied Materials (NASDQ-AMAT). It has converted its expertise in silicon, acquired as a maker of semiconductors, into the production of solar panels.
“This is a dynamic growth stock masquerading as a value stock with loads of downside protection and great upside potential,” says Mr. Leeb. It trades at $15.05, yielding 2.1 per cent on its $0.32 dividend.
Explosive growth
Across the Pacific, Yingli Green Energy (NYSE-YGE) is making solar panels in China. Its modules are among the most efficient in the world, says the editor, and its costs are among the lowest.
Most of its panels go to Europe, but its growth in China “should prove explosive,” adds Mr. Leeb. Annual growth already tops 50 per cent a year.
It has the most upside of any of these six stocks, he notes, although it does carry a good deal of debt. It trades at $10.88, with no dividend.
China Windpower (OTC-CWPWF; HK-182) gives investors more protection with just as much upside, in the editor’s opinion. It is a private firm competing with state-owned companies that tend to be less efficient.
It designs and initiates the construction of wind farms, uses them to take a stake in the entire project, and then sells part of that stake to raise more capital. Its profits have more than doubled over the past two years and should climb by at least 50 per cent in the next two years.
China is committed to windpower, says Mr. Leeb, so the company has a chance to sustain its “explosive growth.” The stock is certainly cheap at $0.10 on the Over The Counter board. There’s no dividend yet.
The growth of renewable energy may be slow, this advisory admits. But the best stocks in the field may be growing a whole lot faster.
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