You Don’t Have to be Green to Invest in a Growing Area

I’m not a Green person. I know that seems odd considering I’m the editor of Cabot Green Investor, but hear out my reasons for my pronouncement. One is that I still harbor an image of Green people as ascetic devotees; people committed to their eco ideals far more than I could be. While my wife and I care about the environment and would love to be eco-friendly in everything we do, practicality and necessity keep me from being Green–it costs too much money to build a 100% Green house from scratch, too much effort to take mass transit everywhere and I have too much curiosity to not fly to far-flung nooks of the world. Sure I recycle, but I’m not Green. Or so I thought.

Last month, I was reading a weekend Wall Street Journal that featured a cover story about one writer’s attempts to redo her kitchen Green. I was interested because my wife, Jeanne, and I are redoing the kitchen in the fixer-upper we bought on the shores of Boston Harbor. Like many of these types of stories, the drama in the Journal piece was accentuated–clearly the paper wanted readers to feel this was a Herculean effort worth reading about.

For one, the author interviewed five cabinetmakers before finding one that used wood with low levels of formaldehyde. Five! Well wait, I thought, at our local design store we settled on cabinets from Omega that are ultra-low in the chemical because we didn’t want our new baby, Lila, exposed to it. The writer spoke about finding a retailer halfway across the country that had eco-friendly lighting. A short drive to the hardware store got us compact florescent bulbs from General Electric (NYSE: GE) that cut the electric bill for the house. The writer also proudly noted how she used bamboo flooring, which is considered more sustainable because bamboo grows fast. Heck, we’re doing her one better by reusing 80-year-old pine planks from elsewhere in the house.

Gravitating to Being Green

The more I thought about it, the more I realized that we’ve gravitated to being pretty Green not out of a moral obligation to the environment (though we all have that), but out of more mundane consumer-driven pros and cons. For example, Jeanne wanted to be able to fill the bathtub with hot water, so we switched to an on-demand Rinnai heater, slashing our natural gas usage and hence our bill by 25%. New wood can’t take the harsh winter wind and sea spray, so we’re using decking made from recycled plastic and reclaimed wood by Trex (NYSE: TWP). Jeanne doesn’t want to be exposed to growth hormones and I believe it’s only humane to let cows graze, so we buy organic milk, like Stonyfield Farm. You get the picture.

And the fact is, if someone like me, a typical middle-class guy from Long Island, ends up acting fairly Green, a lot of other people are too. Multiple surveys show that the average American is acting on environmental concern. Fully 82% of people surveyed in a recent poll by the Climate Group, a nonprofit study group founded by a number of corporations, have altered their behavior out of concern for global warming. And it’s no surprise the brands that are seen as most Green in their industries, from Toyota (NYSE: TM) to Whole Foods (NSDQ: WFMI), have been the best performers in the stock market in recent years.

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Environmentalists Protest Greenwashing

With the heightened sense of Green consciousness, I’ve also noticed the rise in companies saying they are Green for things they would have done anyway. For instance, recently I got a press release from Inglenook, the jug wine maker, saying that it was becoming eco-friendly by dropping glass bottles and switching to bag-in-a-box containers.

This isn’t the first release like this from wineries, all of which tout how they are now Green. But realizing that wineries prefer boxes because they’re easier to ship and cheaper than glass, I conclude that whether good for the environment or not, they were going to switch anyway.

Real estate developers too are very good at this-every new development is now Green because its golf course “preserves open space.” Among environmentalists, this is known as greenwashing-giving an eco-spin to an endeavor that really isn’t Green.

I’ve found myself doing much the same. When the opportunity came to buy a low-mileage 1989 BMW 325ix (a rare example of one of the first all-wheel drive sports cars), I suddenly found myself reciting to my wife the statistic that one would have to drive a new Prius 100,000 miles to make up for its environmental impact (in making its nickel-based batteries and such) compared with simply buying a fairly gasoline-efficient used car. “Plus,” I told Jeanne, “because it doesn’t have airbags, we can put Lila’s car seat in the front!” She didn’t buy either argument (especially not the latter.) Still, I got the car. Because we no longer live in a city, we decided a second car would be useful–especially one that goes from zero to 60 in seven seconds and is designed to race on ice! Lila, by the way, rides exclusively in our Mazda.

The Best Stocks, Not the Most Ethically Pure

Another reason I don’t consider myself Green is that the philosophy of the Cabot Green Investor is to find the best stocks to invest in, not the most ethically pure. After years of writing about business and investing for publications such as Forbes and the Wall Street Journal–and being an investor myself–I like to think I’ve scraped away the emotion that clouds the process of stock evaluation. Happily, in the Green space, the best stocks are frequently the ones that also are doing true good for the environment. Cabot Green Investor subscribers were early to reap the benefits of one such stock-Gushan Environmental Energy (NYSE: GU).

Gushan is a Chinese company that takes used restaurant cooking oil and waste animal fats from food processing and turns it into biodiesel. Biodiesel is eco-friendly because it utilizes waste that otherwise would be dumped into a landfill or the water supply while emitting 50% less carbon into the atmosphere than oil-derived diesel. Gushan is also a huge beneficiary of China’s remarkable growth, and diesel is so in demand that Gushan has corporate customers paying above market price for it. After we recommended it to subscribers in February, Gushan shares jumped 50% in the bear market. The company’s future is so bright we’ve kept shares as a buy recommendation.

It’s not just China where we’re seeing success–a U.S. wind energy company recommended in our May issue is up 70%, an Aussie recycler spotlighted in April is already up 20%, as is a domestic hazardous waste company we featured in March. As the stock market regains its footing, the Green sector should be poised to return to the stunning growth seen in 2007, when companies like First Solar (NSDQ: FSLR) saw shares rise more than 700%.

The reason for my optimism in Green stocks is based on the remarkable growth they’re experiencing. The clean energy area for one is expected to grow from a $77 billion market today to a $255 billion market in less than a decade.

China recently proclaimed its goal to grow its domestic wind energy to 100 gigawatts, more than all the wind power installed in the world today. Europe is pushing solar power as a route to independence from their Russian-controlled natural gas supplies. The U.S., the world’s largest importer and consumer of oil, has no choice but to diversify its energy portfolio if we’re to continue to enjoy our lifestyle. And there are hundreds of pioneering new companies, American and foreign, that are exploring exciting and innovative ways to generate energy and meet consumer demand for Green products–from electricity generated by ocean waves to organic potting soil to the next generation of hybrid cars.

So I may not be Green in every action, but we’re all becoming Greener every day. Even if you’re not a stock analyst, it’s easy to see there’s a great investing opportunity in that.

Sincerely,

Brendan Coffey
For Cabot Wealth Advisory

Editor’s Note: Brendan Coffey is the editor of Cabot’s newest publication, Cabot Green Investor. As mentioned above, several of the stocks chosen by Brendan have made double-digit gains since the start of the year. Each stock featured in Cabot Green Investor is picked using Cabot’s time-tested growth stock criteria and for its earth-friendliness. Click the link below to find out how you can get in on the ground floor of a great new investing opportunity.

http://www.cabot.net/info/cgi/cgiii02.aspx?source=wc02

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