Yes, there are lots of deals in alternative-energy technology stocks. Your research just has to dig deeper.
That's what I discovered when I was publishing my financial newsletter years ago. So when I saw Wired magazine's new feature, "The Clean Tech Meltdown," I knew there had to be stocks that probably weren't melting down, were overlooked, appealed to contrarians or were long-term investments.
We began our research with Rachel Swaby's sidebar, "Power Struggles" on Wired, focusing on eight areas in the alternative energy sector. We were able to isolate leads to 19 specific investment opportunities:
Solar power stocks: 'One hour sunlight can power the world for a year'
The good news: There's enough sunlight hitting "Earth in one hour to power the world for a year," reports Wired. But the "prices for conventional solar cells have fallen 40% in the past year, due largely to a flood of panels from Chinese manufacturers, which have benefited from plunging silicon prices and government support."
And yet, the opportunities are huge: "15% Return on Solar Investments Attract Buffett, KKR and Google" shouts the headline over at InvestorPlace.com. That 15% estimate comes from Stanford's Center for Energy Policy and Finance.
Is the sun setting on the solar industry? Don't bet on it. Bloomberg reports that U.S. solar developers are luring cash at record rates -- and that investors include Warren Buffett's Berkshire Hathaway (BRK.A)
Berkshire Hathaway together with the biggest Internet search company, the private equity company and insurers MetLife (MET)
Bottom line: don't let China and Solyndra spook you, the future of solar is here in America: Buffett MidAmerican Energy Holdings recently agreed to buy California's Topaz Solar Farm from First Solar (FSLR)
Another solar opportunity highlighted in InvestorPlace and The Sun newspaper is Oakland-based BrightSource Energy. And last month Seeking Alpha said "solar stocks are close to the bottom," highlighting Suntech (STP),
And naturally they urge caution and patience: "While we were skeptical about solar stocks in the recent past because it simply takes time to absorb a 50% fall in ASP, we were always of the opinion that the future is bright for the industry."
Wind-power stocks: 'Enough energy for 12 times America's needs'
Yes, Wired says wind energy can meet our total consumption needs 12 times over. But as we all know, competition's impacting the alternative-energy arena: Wholesale electricity used to be between $45 and $85 per megawatt-hour a few years ago, "but the natural-gas boom, plus the 2008 recession, drove prices under $30 by 2009, eliminating wind's financial edge. Also, NIMBY protests have made getting approval for a wind farm in the U.S. as difficult as getting it for a coal-fired plant."
The good news is that the worst could be over and the wind may be at the industry's back, so to speak, because the long-term opportunities look great. Cheaper wind turbines should "lower costs for wind power by 2014." Growth has been slow since the 2008 meltdown; for example, the Guinness Atkinson Alternative Energy Fund [GAAEX] is now under $5 from $15 earlier.
But the wind sector is still predicted to meet roughly a third of America's energy demands over the next couple decades.
The folks on Seeking Alpha also note there are very few wind companies trading on the big boards and for the likes of General Electric (GE),
Others that crossed their radar: the "new FirstTrust Global Wind Energy ETF (FAN),
Fuel-cells stocks: 'hydrogen-powered, perfect energy, zero emissions'
Yes, the promise is enormous says Wired: "Zero-emission energy for everything from laptops to cars to power stations, all fueled by the most abundant element in the universe, hydrogen."
OK, there are a few drawbacks you need to know about. But that's not stopping long-time analyst Mitch Vine highlighting "four fuel cell companies for pure-play investment" over on Seeking Alpha.
To compete with fossil fuels fuel cells must sell electricity for "around $30 per kilowatt." But currently the cost "is about $49. Also, there are only about 60 hydrogen refueling stations in the country, serving around 200 small vehicles and 15 buses."
And one "industry leader, FuelCell Energy, lost $56.3 million in 2010 and has never turned a profit." In short, Wired says "Even if fuel cells become cheaper and more reliable, a workable hydrogen infrastructure is still decades away."
Yes, "the development stage has taken longer than hoped, and profits have been elusive." But Seeking Alpha's Mitch Vine likes the promise. And even more important, so do the big auto companies: "Toyota (TM),
There are four American companies -- Ballard Power (BLDP),
So while Wired notes that FuelCell Energy hasn't made a profit, Vine's research focuses on the $69.8 million of revenue in 2010. Yes, the industry as a whole may still be in the development stage, but when you look below the surface, some specific firms are worth a closer look for investors.
Algae power: '30 times more energy-dense that all other biofuels'
Wired says algae is "by some measures, up to 30 times more energy-dense than other biofuel crops. It ought to yield cheaper fuel, saving huge swaths of arable land."
But a new Department of Energy "road map includes a 33-item list of R&D challenges -- from assessing environmental risks to creating efficient conversion methods -- that must be overcome for algae to be viable."
And, unfortunately, today's "researchers still aren't able to cultivate the stuff on a large scale." According to the government study it could be "many years of both basic and applied science and engineering that will likely be needed to achieve affordable, scalable and sustainable algae-based fuels."
Long term, biofuels generally are doubtful as a matter of national energy policy, wrote Michael Grunwald in "Seven Myths About Alternative Energy," a Foreign Policy feature back in 2009.
This long-term challenge should be a warning to traders. Grundwald says: "This is not just a climate disaster. The grain it takes to fill an SUV tank with ethanol could feed a hungry person for a year." Worse, "biofuel mandates are exerting constant upward pressure on global food prices and have contributed to food riots in dozens of poorer countries."
In short, while American farmers love biofuel mandates and ethanol subsidies, they are considered "counterproductive" as long-term national policies, in spite of the fact that America has "quintupled its ethanol production in a decade and plans to quintuple its biofuel production again in the next decade. This will mean more money for well-subsidized grain farmers, but also more malnutrition, more deforestation, and more emissions."
Warning, the Washington political climate could change our national biofuel policies in the near future, so move cautiously here. A couple of months ago U.S. News & World Report wrote "Biofuel Subsidies Are a Waste of Taxpayer Money," suggesting a major reexamination of agricultural subsidies. And that could impact future growth opportunities for farmers, traders and speculators.
Come back on Thursday when we'll review the remaining four investment opportunities in Wired's list of alternative-power technologies: vehicle batteries, new cellulosic biofuels, smart meters and charging stations.