In 2007, when oil prices last rallied over $100 a barrel, alternative energy stocks boomed. Solar led the way with triple-digit returns, including 790% in First Solar (FSLR) and 300% in JA Solar (JASO). Already, green shares are tracking oil’s rise, up 6% as a group in the first two weeks of 2011.
Oil prices aren’t the only reason to invest in green stocks. Even as oil slumped during the recession, governments in China, South Korea, India, and Italy encouraged alternative energy programs. They want to establish their own energy security and avoid the long-term crunch looming thanks to booming demand from developing economies. There are also air quality issues to consider. The European Union implemented a continent-wide mandate on automakers to reduce their fleet’s emissions; China can shut down dirty factories at will; and the US EPA is poised to require improved emissions equipment at coal plants. Companies like Calgon Carbon (CCC) and Johnson Controls (JCI) will inevitably benefit from those initiatives.
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The very real threat of global warming has already altered the weather patterns for some nations. Australia, for instance, despite recent flooding in its far northeast, believes its populated south is now in permanent drought thanks to climate change. That increases the need for specialized products, such as desalination equipment from Energy Recovery (ERII) and efficient irrigation systems from Lindsay Corp (LNN).
Green stocks suffered inordinately in the bear market. It wasn’t until July 2010 that they were able to work through the overhang left by the market’s troubles. Since then, the sector has rallied and—from a technical analysis perspective—appears to be early in its bull move. That means the whole sector should enjoy a strong 2011. But of course, some stocks will perform better than others.
We sifted through the universe of green investments to identify our top 10 for 2011. Some of the most promising company stocks are tied to the manufacture of high tech parts (MXWL, PPO), the explosion of solar energy (ASYS, SOL), and the renewed focus on clean and efficient energy (FCEL, CCJ, CDXS, CREE) . In addition, we have recommended a few ETFs (such as PBW and QCLN) and provocative mutual funds (AECDX, ALTEX) to round out your green portfolio.
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