I trust you’re all well and enjoying the New Year...
Keeping to the subject of renewal I wanted to write to you about one of my favourite hot topics - clean energy. With concerns about oil supplies increasing all the time you can’t get away from the subject of renewable energy – so much so that the oil majors have had to sit up and take note, but it is the smaller players that are leading the way. I believe there are some absolutely brilliant clean energy punts on AIM at the moment – but please, please play the sector with care...
Green energy groups are starting to generate massive interest – and this trend is set to continue. Did you know that home wind-turbines briefly became B&Q’s top-selling item in cash terms last year? Then there’s Tesco… The country’s savviest retailer has invested £100m into an environment fund, which will research renewable energy sources for its growing network of stores.
In fact, global investment in clean energy has risen to $70.9bn - and on AIM alone clean energy companies raised £830m last year. But shouldn’t this represent a danger sign to anyone who went through the dot-com boom-and-bust cycle?
Quite frankly Kermit the Frog was right; it isn’t easy being green. This is especially true as an investor. You just need to look at the chart of AIM-listed Biofuels to see how badly you could get burnt. The company is building a plant to produce biodiesel from vegetable oils and its shares have fallen a staggering 80% since August 2006. The group has been plagued by operational difficulties in getting its plant running, rising input costs and it looks certain to have to raise more cash.
The message is simple; there are potentially huge profits to be made from investing in “ethical” energy, but you need to act with caution… Green euphoria could lead you down the road to a red bank balance.
There are many different forms of clean energy - solar, wind and geothermal to name but three. However, the most alternative energy source is wind. Understandably, this meant it has been the best performing clean energy sector so far with major players such as Danish group Vestas Wind dominating the business. However, the British may finally be about to catch up with the Scandinavians.
One of my favourite wind stocks at the moment is Clipper Windpower, which recently struck a deal with oil behemoth BP to develop a series of wind farms. The wind turbines work by transforming kinetic energy in wind into electricity - but there is a valuation issue with this stock at the moment.
I first discovered Clipper Windpower when it came to market back in September 2005. Unfortunately I wasn’t allowed to buy into the group at that time because I was a dealer in penny shares, and under my terms of employment it was forbidden to buy any AIM-listed stocks, even if they were (like Clipper Windpower) companies that we did not cover.
That meant I missed out on that one – indeed I watched in agony as the share price soared. However, the sector remains vibrant and exciting and there are certainly a significant number of undervalued plays out there.
With wind stocks already sent to heady valuations by investors, it is the lesser-established sectors such as clean geothermal energy where the opportunities for 2007 lie. I am currently looking at the sector in its entirety and I will tell you my conclusion in February in a special report on clean energy stocks. It will also contain an exclusive interview with the CEO of a cracking green energy stock, one that could literally clean up over the coming year… All will be revealed in February…
Bye for now,
Melissa Carroll
for The Penny Sleuth
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