Another Way To Profit From Alternative Energy
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There’s no doubt that investors can make a lot of money by investing in the right alternative energy stocks.
And of course, there’s the added bonus that these investments are backing those companies that can enable a safer, cleaner energy infrastructure. One that is not reliant upon fossil fuels.
It really is a win-win situation.
The trick however, is finding those alternative energy stocks that have what it takes to deliver over the long-haul. We’re talking about…
• Solar manufacturers that boast high efficiencies and low-cost operations
• Wind farm developers that are actively expanding their operations, but also generate revenue
• Geothermal firms with multiple, long-term power purchase agreements locked in for the next 10 to 20 years.
These are the types of alternative energy companies that will reward investors handsomely for many years to come. And these are also the companies that are transforming our energy economy at this very moment.
Of course, there are opportunities for investors to pick up shares of smaller, more speculative green companies too. Primarily, those that may not have the financial backing or high-level connections often attributed to some of the bigger players – but do, however, have the cutting edge technology to put them at the forefront of major acquisition targets.
This is also a win-win situation, as the behemoths that acquire these smaller firms often have the ability to take game-changing alternative energy technology to the mainstream. And early investors certainly benefit from surging share prices spawned from these acquisitions.
It’s also worth noting that, according to a recent U.N. report, green mergers and acquisitions more than doubled from $3.5 billion in Q1 2007 to $7.7 billion in Q1 2008.
These are big numbers, folks.
And it’s a clear indication that the rush to transition our energy economy is no longer the domain of small start-ups and highly-speculative bulletin board stocks.
Three the Easy Way
A couple of years ago, we had our first opportunity to profit from a major green acquisition.
In 2006 I alerted our Green Chip Stocks members to a company called Zenon Environmental. The company manufactures systems used for water and wastewater treatment.
In May of that year, General Electric (NYSE:GE) acquired the water treatment company for a 55 percent premium on its share price. The stock soared 53% overnight, and those who got in early made a nice chunk of change.
Then in February of 2007, we were treated to another green acquisition opportunity. During an organic photovoltaics conference, we uncovered a company called Cambridge Display. Trading on the NASDAQ, Cambridge Display developed technologies that could be used for the production of organic photovoltaics
By July, 2007, the Company was acquired by Sumitomo Chemical Company for a 107% premium on its share price. And once again, those who picked up shares early walked away with some pretty impressive gains.
Sumitomo had already been working with Cambridge Display on a joint venture to ramp up production of polymer OLED (Polymer Organic Light-Emitting Diode) technology for lighting applications. This technology is very energy efficient and can be used in ultra-thin lighting displays that can operate at lower voltages.
Now earlier this week we were rewarded yet again from a third green acquisition.
You see, last July—around the time Cambridge Display investors watched their stock more than double—we also told our readers about a solar inverter company called Xantrex Technology (TSX:XTX).
This past Monday, it was announced that Xantrex would be acquired by Schneider Electric.
Two weeks prior to this announcement, the stock was trading for about $8.43 a share. On Monday, it hit a high of $14.77 share. That’s a 75.2% gain in 11 trading days. Not too shabby!
Now understand, my intention here is not to go chasing random green companies in hopes they’ll be bought out. That’s not the smartest, and certainly not the most responsible way to invest. Rather, I’m merely pointing out that alternative energy investors can also profit from a bit of positive speculation.
You see, there are dozens of green companies out there with some amazing technologies. Unfortunately, there are also a lot of non-believers and bashers that love to attack some of these companies because the numbers aren’t perfect.
Yes, you want the technicals to be solid. But there’s also a lot to be said for game-changing technology, and the ability to work with larger corporations to bring that technology to market.
Some of these deals work out, some don’t. That’s just the nature of investing.
But with 237 green merger and acquisition deals last year, and perhaps as many as 20% more by the end of 2008 – don’t be surprised to see even more opportunities stemming from future green acquisitions.
To a new way of life, and a new generation of wealth…