Strategy

Tom Konrad, CFA My target sector allocation for Green Energy Sectors: How much to put in Solar, Wind, Geothermal, Biomass, Biofuels, Energy Efficiency, Alternative Transport, and enabling technologies such as Smart Grid and Transmission. In Part I of this series on green energy investing (see also Part II and Part III), I suggested readers "structure your portfolio to reflect the technologies which are actually going to make a difference."  This is not the same as investing in a market portfolio, because the market tends to overemphasize the most exciting or familiar (as opposed to the most useful) technologies.  This...

Vote With Money Instead by Garvin Jabusch Many people assume that engagement with public companies through proxy voting and resolution filing is the best  if not only  way to see positive environmental, social, and governance outcomes from your investments. For me, this approach misses a fundamental point of market-based solutions: you make in investments in the most compelling ideas that reflect what you think is likely to grow, where you think the economy is headed, and yes, outcomes you support. That means using investments to favor firms that are already making innovative sustainable contributions to the global economy...

Tom Konrad CFA Blood In the Streets Walter Rothschild, 2nd Baron Rothschild Image via Wikipedia Baron Rothschild was an 18th century British nobleman who supposedly originated the phrase "Buy when there's blood in the streets, even if the blood is your own."  Although accounts differ, Rothschild was a successful banker, and supposedly made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. True or not, the...

Tom Konrad CFA Green energy experts accept that solar panels are one of the least cost effective ways to reduce your carbon footprint.  Nevertheless, many buy solar stocks.  They should rethink their investment strategies. I recently spoke on "Stock Selection in the Era of Peak Oil and Climate Change" at the ASPO 2009 International Peak Oil Conference.  Whenever green energy enthusiasts find out that I analyze green energy stocks professionally, they react in one of two ways.  Many want to know my top stock pick in general (New Flyer Industries NFI-UN.TO/NFYIF.PK) or in their favorite sector (see below.)   ...

Tom Konrad, Ph.D., CFA. My recent market call now looks premature.  What lessons can we learn? When we make market predictions, we will inevitably be wrong some of the time.  I stuck my neck out at the start of June, saying "We're near the peak."  I later gave some numbers to allow readers to objectively judge if that call was right or wrong.  I said that we should consider it an accurate call if the S&P 500 fell 20% (to 756) before it rose 5% (to 992.)  The S&P 500 has not yet come near 756, but it closed...

Stocks may be expensive now, and the temptation is to buy before they get even more expensive.  Why patience makes the brokerage account golden. Tom Konrad, Ph.D., CFA On Friday, I started a series on stocks I'd like to buy when they are cheaper.  The first was on clean or efficient transport stocks which will benefit from both Climate Change regulation and high oil prices due to Peak Oil. Before I continue on with my Clean Energy Shopping List series, I think it's worth talking about the underlying strategy, since it can be counter-intuitive, and I expect that many...

If you're going to have someone else manage your money, consider their incentives carefully. I just finished reading Micheal Lewis's excellent book The Big Short: Inside the Doomsday Machine on the Wall Street's role in the subprime mortgage meltdown and the few investors who saw it coming. I began with a low opinion of the effectiveness of the vast majority fund managers and advisors who manage other people's money for a living, but the the highly-paid gross negligence and/or incompetence of the people running the CDO operations of the big Wall Street banks in the years leading...

By Marc Gunther.  Last week, ExxonMobil added Susan Avery, a physicist, atmospheric scientist and former president of the Woods Hole Oceanographic Institutions, to its board of directors. Shareholder advocates, led by the Interfaith Center on Corporate Responsibility (ICCR), which has been organizing shareholder campaigns at ExxonMobil for nearly two decades yes, two decades welcomed the appointment. Tim Smith, the director of environmental, social and governance (ESG) shareowner engagement at Walden Asset Management, said in a news release: “This action by the board is encouraging for shareowners and we want to commend Exxon for this prudent and...

Investors who feel the market is overvalued have two options: move into other asset classes (cash, bonds), or hedge their market exposure.  Hedging your exposure does not have to be rocket science, but it does require diligent attention to the market and your portfolio.  I recently discussed how it makes sense to be out of the market if you expect that there is a good chance of a large decline, even if that means there is as much of a chance of missing a large upswing as there is a large decline. In my estimation, this is one of...

It's that time of year again.  I've started studying for the third (and final) CFA® exam, and my readers are "treated" to my theories of the market and trading.  No stock picks today; put your thinking caps on!  CAPM: Nice Theory, Too Bad About the Market In Level II of the exam, we studied efficient-market theories, such as CAPM and APT.  I actually like an elegant theory (I spent nearly decade of my life studying mathematics), but as a market practitioner, I know the market doesn't work that way.  I learned this lesson the hard way.   Early in my...

When I first came across ProShares' UltraShort ETFs, I thought they were a brilliant idea.  They seem to promise a multitude of advantages for investors: The ability to hedge market or sector exposure without having to go short.  (Going short requires a margin account, and US law prohibits the use of margin in most retirement accounts.) They should have a better risk profile than shorting.  With an UltraShort, you can't lose more than your initial investment.  With true shorting, the potential losses are unlimited.  As the underlying index rises, each percentage gain creates a smaller dollar fall, while...

Tom Konrad, Ph.D., CFA My Quick Clean Energy Tracking Portfolio has produced unexpected out-performance.  Is it because of high beta (β) in a rising market? I recently asked why two portfolios which I had designed to track green energy mutual funds ended up out-performing them by a wide margin.   This is the first of a short series of articles looking into possible causes.  Could the portfolios be outperforming because the stocks they contain rise more when the market rises (and fall more when the market falls) than do the mutual funds they were designed to track?  In...

I got a call from my broker this morning asking me if I'd be willing to loan out my shares of Cree, Inc. (NASD:CREE) to a short seller.  Since the only cost to me is that I will not be able to vote my shares, and I will earn 2.5% per annum on the value, I said "yes."  Normally, brokerages get the shares they lend out to shorts from margin accounts with a margin balance.  Since I never carry a balance (although I do have a margin account in order to trade options) they must ask my permission...