Asking the Right Questions: Why Invest in Clean Energy?
Tom Konrad, Ph.D., CFA Often, knowing more about a company is less useful than knowing just a few of the right things. Knowing the right questions to ask can help investors wade through a sea of mostly irrelevant information. Take a moment to answer the following poll: Suppose you want to know if fictional solar Company MySolar will outperform other solar stocks. Which fact would be most useful in your decision?(poll) The key to this question was the stated goal of "outperforming other solar stocks." An investor who is only hoping to achieve returns equal...
The Big Short and Picking a Money Manager
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...
The Difference between Reality and Pandering
Garvin Jabusch Innovation and increasing economic efficiency have always been the keys to profits and wealth. Getting more value out of systems without commensurate increases in inputs is the definition of growing efficiency, and it has been the engine of human economies since someone figured out how to use energy from a water wheel to grind grain instead of doing it by hand with a stone bowl and pestle. With that development (to simplify), a couple family members could run the wheel, freeing up everyone else for other pursuits. This kind of gain is the hallmark, to greater and...
The Catholic Church Shouldn’t be Investing in Abortion Clinics
Tom Konrad CFA Jesus Saves, but where does he invest? Photo via Bigstock. This article is not about the Church, or abortion. As far as I know, the former does not invest in the latter. This article is about investing, and morality. Since 350.org began its campaign to get endowments and pensions to divest from fossil fuels, I've heard two basic criticisms of the movement from my colleagues in the investment management profession. Endowments selling their fossil fuel investments won't stop us from using fossil...
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...
Stocks We Love to Hate
Investing in clean energy is both an economic and a moral decision. From an economic perspective, I believe that constrained supplies of fossil fuels (not just Peak Oil, but also Peak Coal and Natural Gas) are leading to a permanent rise in the value of all forms of energy. From a moral perspective, I know that we and the vast majority of our children are limited to this one planet for generations to come, so we should abuse it as little as possible, so, of all the possible forms of energy to invest in, clean energy (Renewable and...
Short Demand for Cree High and Rising
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...
Why Do Green Energy Experts Buy Solar Stocks?
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.) ...
Cleantech Investing For EcoGeeks
by Tom Konrad. This story is cross-posted on EcoGeek.org As lovers of green gadgets, EcoGeeks probably know as much about what's new in clean technology (a.k.a Cleantech) as anyone on the web. So if you're an EcoGeek thinking about investing in companies which make the technology you know and love, you will probably take comfort in the old adage that you should invest in what you know. An EcoGeek investing in clean technology companies will have an advantage understanding how a company makes money, and what is a needed innovation with a large market, and what is simply a...
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...
Opportunity Hiding in Plain Sight
Information asymmetry, climate investing and the active management edge.
By Garvin Jabusch
The theory of efficient markets says all stock prices are perpetually accurate, because investors always have complete and up-to-date information about their holdings.
But as any casual observer knows, information and topical awareness are not evenly distributed, even among professional analysts. Reality is always far more complicated than equity markets can quickly assimilate, meaning information asymmetry is a constant. While usually considered a type of market failure, information asymmetry is frequently used as a “source of competitive advantage.” The person with the most information is best equipped to make the best...
Navigating the Clean and Bloody Streets of Europe
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...
Twelve Green Investment Themes From Putin’s War on Ukraine
By Tom Konrad, Ph.D., CFA
Horrific, Tragic, Unprovoked, Heartbreaking. There is no lack of adjectives to describe Putin’s war on Ukraine. And while there probably can’t be too much coverage of the tragedies and war crimes, many others can write those far better than I.
As an economic and stock market commentator, the adjective I will focus on is world-changing. There is no doubt that the first land war in Europe since World War II, piled on top of a global pandemic, is already reshaping the economy in dramatic ways.
Some of those changes, like Europe switching away from Russian gas and...
Green Energy Investing For Beginners, Part I: Stocks, Mutual Funds, or ETFs
Tom Konrad CFA Investing in green energy can be good for both the climate and your wallet. How good depends on choosing the right investment vehicles (mutual funds, ETFs, or stocks) and sectors to invest in. This will get you started. More and more investors are investing in green energy. According to the Cleantech Group, the Cleantech sector is now the largest sector for venture capital investment. Green Energy is not just for venture capitalists. Small investors have done well in 2009. Since the market bottomed at the start of March, the average green energy mutual fund topped...
Correction, or Bear Market?
by Tom Konrad, Ph.D., CFA
On February 21st, I was helping an investment advisor I consult with pick stocks for a new client's portfolio. He lamented that there were not enough stocks at good valuations. This is one of the hardest parts of being an investment advisor: a client expects the advisor to build a portfolio of stocks which should do well, but sometimes, especially in late stage bull markets, most stocks are overvalued. I reminded him, "The Constitution does not guarantee anyone the right to good stock picks." He agreed, but he still had to tell his client that...
Green Energy Investing for Beginners: A Small Investor’s Perspective
This is a guest post by Brad Wright, who felt that my "Beginners" series was a too high level to really live up to the name. He's probably right about that, so here is his effort to bring it down to basics for the small Canadian investor. The links and section headers are mine. Tom Konrad. Motivation The goal of this article is to assist with your future investments by explaining investment options, how they work and potential alternatives that may be of interest to you. The take away I’m looking for is with a little research you can...
