Clean Energy Stocks Shopping List: FAQ
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...
Free Talk: A Permaculture Portfolio
For readers in the Hudson Valley, I will be giving a free talk next Monday night. I will speak about applying permaculture design principles to your investment strategy. While I developed my own strategy over the last two decades without any reference to these design principles, now that I'm familiar with them, I realize that I have been thinking along these lines for a long time. The design principles are remarkably robust and intuitive.
I used to think Permaculture was just about redesigning our food systems, but it's much much more than that.
The talk is sponsored by the Rondout Valley...
Five Hedging Strategies for Stock Pickers
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...
Green Energy Investing for Experts, Index and Wrap-Up
Tom Konrad, CFA My Green Energy Investing for Experts series looked at ways shorting could both protect your portfolio against market decline, and make it greener by shorting decidedly non-green companies. This is an index of the entries, plus one more industry for you to consider. Green Energy Investing for Experts, Part I made the case that shorting stocks that are particularly vulnerable to peak oil or climate change is a good way to hedge a portfolio of green stocks against a market decline while making the whole portfolio greener. Green Energy Investing for Experts, Part II looked at...
Green Energy Investing For Beginners, Part II: How Much To Invest
Tom Konrad, CFA In Green Energy Investing for Beginners, Part I, gave information to guide the choice of green investment vehicles (mutual funds, ETFs, or stocks.) This article is intended to help investors decide how much of their money to put into those vehicles. An informed decision of how much to invest in green energy is at least as important as how you make the investment. The choice between green Exhange Traded Funds (ETFs) and green Mutual funds rests on a difference of about one percent per year, caused by differences in fees. Yet in the first three quarters...
Green Energy Investing For Beginners, Part IV: Model Portfolio
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...
Green Energy Investing For Beginners, Part III: Before You Invest
Tom Konrad, CFA Before you consider green stock market investments, invest in yourself. A reader of my article on asset allocation for green energy investors brought up an important point: we may have green opportunities in our own lives, such as improving the energy efficiency of our homes, which will return much safer and higher returns than green stocks, especially when the market as a whole is as overvalued as I currently believe it is. Homeowners typically have a large number of high-return energy efficiency investments they can make. Since energy efficiency reduces energy use, it both produces returns...
When to Sell: Five Rules of Thumb
A common complaint about investment writers is that we are always willing to tell you the next stock to buy, but we don't always get around to telling you when to sell. I'm as guilty of this as most: generally, I write about the stocks I'm interested in... which are the ones I'm buying, not selling. And, although I write the occasional negative article (Petrosun Drilling most recently, but also US Sustainable Energy and Global Resource Corporation), these were more stocks to avoid, rather than stocks which had seen their run. This is unlikely to change. For a start,...
An Elephant Hunter Explains Market Dynamics
John Petersen Friday afternoon was a strange time for Axion Power International (AXPW.OB). After trading 200,000 shares early in the day, Axion filed $28 million mixed shelf registration with the SEC at about one o'clock and the fly on the wall reported the filing within minutes. It seems that some stockholders were spooked by the news and assumed that Axion would sell stock right away instead of waiting for the fall deal season. Their knee-jerk selling shoved another 1.1 million shares into the market in three hours and made Friday the second heaviest trading day in Axion's history....
How to Beat the Market: Less Money and More Judgement
Last week, I looked at how a small investor could gain an advantage in the market by understanding the other players. The most important other players are institutional investors such as hedge funds, pension funds, mutual funds, and investment banks who have considerably more resources and valuation skills than the individual investor, and so trying to take them on directly to beat them at their own is likely to be an expensive exercise in futility. Two Exploitable Weaknesses On the other hand, I argued that institutional investors have certain handicaps and biases which do allow small investors to enter...
Better, or Beta?
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...
The Black Swan and My Hedging Strategy
Tom Konrad, Ph.D., CFA Nassim Nicholas Taleb's The Black Swan: The Impact of the Highly Improbable changed the way I trade; I can't give a book higher praise. This isn't a book review; since the book is over two years old, and I did not get around to reading it until this Spring, I direct readers to this Foolish Book Review, which agrees with my viewpoint quite well, and to the New York Times for a detailed critique. The latter seemed overly nit-picky to me, but then I'm a fan. Human Biases Recently,...
Climate-Risk Adjusted Returns and the Weasel Coefficient
By Tom Konrad, Ph.D., CFA
An 80% Weasel Coefficient
Some activists, including a friend of mine, recently had a conversation with representatives of TIAA to try to persuade them to divest from fossil fuels. The conversation was mostly cordial, but predictably did not get anywhere.
One of the activists summed up the response from TIAA as “a non-response with a weasel coefficient of at least 80%.” Regarding the weasel coefficient, he also asked,
Can anyone explain to me what "our overarching strategy which targets climate-risk adjusted returns over the long-term” means in plain English?
Well, yes. Yes I can.
Climate Risk Adjusted Returns
When an investment...
Market Call: We’re Near the Peak
Tom Konrad, Ph.D. The current rally from the March 5 bottom has been breathtaking, especially in Clean Energy, with my Clean Energy Tracking Portfolio up 70.5% since it was assembled at the end of February (as of May 1), 11% higher than it was at the three month update last week, and the S&P 500 is up 41% from its March low. Even in a better economic climate, gains of this magnitude would have me running for cover. In the current economic climate, with a gigantic mountain of debt keeping consumers out of the stores, makes me feel this...
What Good Is Shareholder Advocacy?
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...
An Elephant Hunter Explains Inflection Point Investing
John Petersen In "An Elephant Hunter Explains Market Dynamics" I discussed the two basic types of public companies; earnings-driven companies that are “bought” in top-tier weighing machine markets and event-driven companies that are “sold” in lower-tier voting machine markets. Today I'll get a bit more granular and show how "sold" companies usually fall into one of two discrete sub-classes that have a major impact on their stock market valuations. As a starting point, I'll ignore the China-based companies that are listed in the US because their quirky metrics would only confuse the analysis. Then I'll break...
