If you are thinking of investing in clean energy stocks..dont….Not if you need the money for retirement, or college, or anything besides impressing your friends with good intentions.
Because green energy companies are creating a lot more press than profits. And that will get worse before – if ever – it gets better.
People in the investment business only have two ways to value a share of stock: We can listen to what the company says. Or watch what it does.
If you choose the former, you probably like all the pretty pictures of windmills and solar panels featured so prominently in so many television commercials.
The truth about wind and solar and alternative energy is that none of them would exist without the full-throated support of a well organized green lobby. And that together, both account for an infinitesimal portion of the energy we create.
No amount of subsidies or green happy talk can change this fact: Energy from solar still costs 22 cents a kilowatt hour. Coal cost 6.
That’s not solid enough ground to build a strong portfolio.
If there is one thing smaller than the energy wind and solar produce, it is the profits these energy sources add to their company’s balance sheets.
Prospects are not profits. Talking is not doing. Betting on prospects is gambling. Betting on performance is investing.
Last year, President Obama visited the solar power manufacturer Solyndra, the largest recipient of federal subsidies for solar power. Despite all the talk about the bright future of solar, not one major news account of that day mentioned one small fact about this company: Just a few months earlier, to prepare for a stock offering, its own accounting firm said the company was no longer a “going concern.” So it had to cancel its Initial Public Offering for stock.
And that was after the hundreds of millions of dollar in federal loans.
The president of the United States was betting the future of green energy on a company whose own accounting firm said would not be in business for long.
If you are investing in a company – green or not – because of promises, and not a record of earnings, you are doing the same thing.
Little noted in the green frenzy of the last few years are the companies that drill or pump or mine for oil, natural gas or coal. They are making money. They never stopped – even during the financial tsunami.
What they say is not that sexy. What they do is. CSX makes money running railroads. Caterpillar makes money building trucks. Golar makes money shipping and storing liquefied natural gas.
And they are doing so despite one of the most challenging regulatory environments any business can imagine.
It is not in the least political to say our leaders in Washington are losing their appetite for – and ability to – heap subsidies on expensive energy while ignoring abundant domestic supplies in times of record scarcity.
Already, some big funds are getting out of green energy because investors want something that actually makes money.
So should we.
Bill Gunderson is the owner of Gunderson Capital Management in Oceanside, Cal. He also hosts a show on KCEO radio about investing in stocks and is author of The Best Stocks Now!
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