Green Shares - environmentally-friendly investments - Brief Article

E: The Environmental Magazine, May, 2000 by Marshall Glickman

Eco-Friendly Stock Choices for the Bold and the Cautious

As I write these words, alternative energy stocks are hot. Solar panel manufacturer Spire Corp. (stock symbol: SPIR) recently saw its stock more than double in a day. Electric vehicle battery maker, Electric Fuel Corporation (EFCX), which was trading just a shade over a buck in October, is now over 10 (after hitting 21 in late January). Hottest of all are the fuel cell companies Ballard Power Systems (BLDP) and Plug Power (PLUG), which have been leading this rally. In the past month Ballard has gone from 23 to 90 while Plug Power zoomed from 15 to 156 (and is now bouncing between 100 and 120).

What's going on here? Are investors convinced that Vice President Al "I'll truly be green when I'm boss" Gore is going to be elected and institute sweeping legislation to benefit green energy companies? Have new inventions paved the way for a new era of clean power? In truth, fuel cells are an exciting technology, as they can generate power without combustion for everything from cars to homes and cellular phones. And since hydrogen is the most common element on Earth, securing a supply won't inspire geopolitical jockeying.

The reason for the current fever pitch of alternative energy stocks has little to do with politics or technological advances and more to do with stock-du-jour investing. With the word on the street that Bill Gates has invested in fuel cell companies, investors hungry for the next new thing are turning their eye to a technology with promise -- and no need to deliver immediate earnings.

So what's an investor, eager to profit from these promising technologies, to do? Since roller coaster rides aren't for everyone, you may want to sit this one out and see if stock prices become more aligned with profits. Plug Power and Ballard are currently valued at $5 and $6 billion respectively. Yet their combined sales for 1999 were only $58.6 million; their losses almost $68 million.

Of course, no one expects Plug Power and Ballard to earn money just yet. An investment in them is an investment in the future. So if you can't resist the allure of profiting from truly clean energy, at least proceed with a plan. Bob Beaty, www.worldlyinvestor.com's Canada editor, recommends: "The smart money way to invest in Ballard [and Plug Power] is by dollar-cost-averaging. That is, buy small positions over a period of perhaps several years, no matter if the stock moves up or down" This strategy allows long-term investors to participate in the companies' improving fortunes while reducing your risk of getting caught holding expensive stock.

Cash in Carpets?

If you prefer investing in a company with a more established sales history, but which is still environmentally progressive, consider Interface Inc. (IFSIA). Interface is the world's largest manufacturer of carpet tiles --obviously not a classically green industry. In fact, in turning petroleum into floor coverings for its corporate clientele, Interface still contributes its share of pollution. In 1998, the Atlanta-based company's 26 factories (on four continents) produced more than 605 million gallons of contaminated water, 704 tons of toxic gases, and 62,800 tons of carbon dioxide. But before writing the company off as another bad boy of industrial capitalism, consider how Interface is changing.

After reading Paul Hawken's The Ecology of Commerce almost six years ago, Interface founder and CEO Ray Anderson experienced an eco-conversion. He has since joined Hawken in the pantheon of green business heroes by putting sustainable principles to work in the marketplace. "I want to pioneer the company of the next industrial revolution" says Anderson.

Interface has institutionalized recycling, improved its energy efficiency, and reduced or eliminated many toxic chemicals used in the manufacturing process. Since 1994, its North America divisions have kept 608,000 square yards of carpet out of the landfills. Most significantly, the company's overall measure of energy and material efficiency has improved 26 percent. "In other words" says Jim Hartzfeld, senior vice president of Interface Research Corporation, "we're 26 percent closer to becoming material and energy sustainable."

Interface's stock price, which was recently trading around 4 1/2, has suffered over the last 18 months along with the whole corporate floor covering industry. "With businesses investing so heavily in Y2K preparedness, expenses such as floor coverings got put on hold" explains Anderson. "We've also made long-term strategic investments, which will help ensure the financial health and sustainability of our business, but in the short-term hurt profits."

Knowing that carpets eventually wear out, Anderson has recently bought almost 100,000 shares of his own company's stock. While no one can say how long it will take before the stock rebounds, with a four percent dividend, you can get paid while you wait.

MARSHALL GLICKMAN's book, The Mindful Money Guide: Creating Harmony Between Your Values and Finances (Ballantine Books/Wellspring) offers guidelines for choosing stocks.