Interested in playing global warming? Look overseas.
The United States is not exactly a world leader when it comes to addressing climate change. Which is all the more troubling when new research suggests a 99.99% chance that global warming exists and is caused by humans.
Investing in green energy at home presents some hurdles for the average investor. Let’s start with the fact that many of these stocks are expensive. For instance Solar City (SCTY), one of the largest installers of solar paneling in the country, trades at a price-to-book ratio of almost 8. To give you some context, blue chips like General Electric (GE) or Ford (F) trade with a P/B of around 2.
Compounding the risk in the U.S. is a pretty complicated legislative environment, particularly where the environment is concerned.
A lot of the green energy companies that grew quickly over the last 5 years were benefitting from President Obama’s green tax credits, which expired at the end of last year. Not only does their expiration spell higher taxes for green energy concerns, but it also dampens investor enthusiasm, making it harder for them to raise equity on the open market.
Green-spirited Americans need not fear that all is lost. Hedge fund billionaire Tom Stayer has recently announced a campaign to fashion himself into a kind of Koch brother of the left wing. He’s throwing money against anyone who backs development of the Keystone Pipeline, even Democrats.
That’s why any investor interested in green energy will be watching this year’s election closely. A big victory for Republicans in November will be bad for the renewable energy sector, as Republicans deny climate change by a ratio of 3/2.
Even if you’re bullish on the Democrats, the odds on green equities are hardly appealing from an investment standpoint. So if you’re looking to play global warming, you’d be advised to look overseas. There the picture is rosier, where even less developed countries like Brazil and China are far ahead of the U.S. on issues like carbon reduction.
As countries abroad crack down on carbon, companies who were already investing in energy efficiency or renewable fuels will benefit disproportionately. So we decided to look overseas to build this stock screen.
American Depository Receipts (ADRs) are shares of stocks in foreign companies that trade on US exchanges. They’re a great way to get leverage on other companies while still investing your money using U.S. currency. We compiled a list of ADRs that are all working on green initiatives, whether through recycling, energy reduction, or creating new kinds of fuel.
1. ABB Ltd. (ABB, Earnings, Analysts, Financials): Provides power and automation technologies for utility and industrial customers worldwide. Market cap at $59.67B, most recent closing price at $25.90.
As countries require more rigorous efficiency standards from their industries, this maker of power and automation technology can help them do it. ABB’s portfolio of products includes a number of high-efficiency generators and plants; and automation products such as robots that replace humans. The company is based in Switzerland.
2. Ballard Power Systems Inc. (BLDP, Earnings, Analysts, Financials): Develops, manufactures, and services of fuel cell products for motive and stationary power markets primarily in the U.S., Canada, the United Kingdom, and Germany. Market cap at $411.3M, most recent closing price at $3.78.
Ballard makes fuel cells but is unique in that it has a whole unit devoted to energy efficient fuel modules to go in buses, which by some estimates could soon be less polluting than trains.
3. Canadian Solar Inc. (CSIQ, Earnings, Analysts, Financials): Designs and sells solar power products in Canada and internationally. Market cap at $1.43B, most recent closing price at $26.46.
Canadian Solar has won number of lucrative contracts building solar panels on Canadian public buildings and schools; bolstering 76% revenue growth in the last year. But investors should note the company’s level of debt.
4. China Sunergy Co. Ltd. (CSUN, Earnings, Analysts, Financials): Designs, develops, manufactures, and sells solar cells and solar modules. Market cap at $62.11M, most recent closing price at $4.18.
5. JA Solar Holdings Co., Ltd. (JASO, Earnings, Analysts, Financials): Develops and sells photovoltaic solar cells and solar products, which convert sunlight into electricity in the People's Republic of China. Market cap at $438.68M, most recent closing price at $10.15.
Within the next year, China is expected to derive most of its energy from renewable sources. In the last 8 years it’s become the greatest producer of wind energy and a world-wide leader in the use of geothermal and hydroelectric power. The country’s investments have also involved a number of important developments with regards to solar.
6. Koninklijke Philips Electronics NV (PHG, Earnings, Analysts, Financials): Engages in the healthcare, consumer lifestyle, and lighting product businesses worldwide. Market cap at $32.3B, most recent closing price at $34.
Philips is a global leader in more efficient lighting, particularly LEDs, which use one sixth of the electricity of traditional incandescent bulbs.
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