How To Play Alternative Energy Stocks
By Dr. Steve Sjuggerud
April 18, 2007
"I don't care how you feel about global warming..." Rick Rule told us yesterday.
"The reality is, $19 billion has been raised for 'climate change' investment funds. But there's less than $1 billion worth of investments out there that have a chance of succeeding."
Rick's implication, of course, was that the alternative-energy (like wind, solar, and geothermal) companies that "have a chance" of being viable could absolutely soar in value as all of this money piles into the sector.
Rick Rule, if you don't know, is a legendary energy and natural resources investor. Among his many hats, he runs the brokerage firm Global Resource Investments. Rick was speaking at a private S&A meeting we held at the Ritz-Carlton in Naples, Florida.
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"Look, for the most part, alternative energy doesn't work," he said. He was talking about alternative-energy sources in an economic sense, saying they can't compete with the old technologies.
"Two technologies do work... and they are geothermal power and wellhead hydroelectric power."
Rick's point was that this $19 billion is going to get invested... And the big Wall Street firms that raised the money and get a 1% or 2% annual fee are going to make sure their $200 million or $400 million annual fees are safe. So they'll likely direct that toward the most viable businesses.
The easiest way to play alternative energy stocks is through the Powershares WilderHill Clean Energy Fund (PBW). This ETF is a basket of companies dealing in hydroelectric, wind, solar, etc...
While Rick didn't mention this fund in particular, the trend in the price of PBW confirms Rick's idea... The fund had been stuck around $17 a share since last summer. But now that oil prices are recovering, it has recently broken out and hit $20 a share.
At DailyWealth, we're skeptical of alternative energy investments – we believe that it will be a long time before these businesses become profitable, if they ever do.
But when it comes to energy, Rick Rule is smarter than us. And he's telling us that the demand for alternative-energy investments is far greater than the supply of worthy investments.
This enormous pile of cash will get invested, and will push alternative energy plays higher. Your feelings about Al Gore are irrelevant. According to Rick, these stocks are going up.
P.S. Here in Naples, I made sure I saw guitar player Andy Wahlberg. If you didn't know, I am a guitar fanatic... I love playing 'em, collecting 'em, restoring 'em, whatever. You name it, I'm interested.
I am hard to impress when it comes to the guitar. But Andy's instrumentals on his 11-string "harp" guitar were about as extraordinary as it gets for guitar players. I highly recommend ordering his solo harp guitar CD called "Collections." Check Andy out.
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