Investing in a Cleaner Planet

On the wall of my cubicle is a button, one of 82 that I’ve collected over the years from the Contrary Opinion Forum in Vermont. It reads, “Life is Understood Backwards–Lived Forwards,” meaning, at least to me, that while hindsight is 20/20, the future remains indistinct, precisely because it does not exist yet; it only becomes real as we live it. And every action we (and other people) take creates that future, with long-term implications that are frequently unimagined.

For example, back in June 1966, when my grandmother had been widowed and living alone for nearly 10 years, her eldest son (my uncle) bought her a baby parrot to keep her company. It was a double yellow-headed Amazon. The price, including cage, was $150, a substantial sum back then.

Grandma named the bird Maria, and fed her regularly. Soon enough, Maria grew to full size, and became a great talker, mimicking the phrases she heard every day. As the years passed she became a member of the family, welcoming grandkids, friends, repairmen and more. She enjoyed nuts in particular, but to watch her get the marrow from the remnants of a leg of cooked chicken was a real eye-opener.

Loss of a Parrot

In 1986, Grandma passed away, at the ripe old age of 96 … and Maria, in her prime at 20, was inherited by my parents. So for two solid decades … and more … my parents cared for that bird. My mother in particular became her guardian. Maria would perch on her shoulder, and let my mother scratch her head. Maria enjoyed excursions outdoors in the summer, and in the winter she was kept warm in the kitchen. They were a great pair. But Maria stopped learning new phrases long ago, in the same way many people stop learning as they get older. And a few weeks ago, she lost her appetite and started looking ragged. The vet diagnosed liver trouble and prescribed some pills. But Maria, at age 41, eventually succumbed.

So on the morning of her passing, my mother announced there would be a funeral that afternoon. At 4 p.m., 20 of us gathered in a big circle to bury Maria in a shoebox in the yard. We reminisced about Maria’s youth, and shared stories about her long life. The best was this. Sometimes, when the phone would ring, Maria would call out, “I’ve got it!”

Now, 41 years ago, when my uncle bought that bird, he had no idea what the future would bring. Nevertheless, a person who actually stopped to think about the long-term might have concluded that things would work out pretty much as they did. What this has to do with investing, we’ll see.

Change in Cuba

Similarly, when Fidel Castro took control of Cuba in 1959, no one knew that he would hold sway for 49 years. On the other hand, there was no reason to believe he wouldn’t. In the absence of a greater force–particularly after the failed Bay of Pigs invasion in 1961–it became evident that Castro would maintain control. The result, of course, was that the Cuban economy was held hostage to the ideals of a socialist dictator. And economically, the result was a disaster.

Today, with Fidel ill and his brother Raul in charge, we can already see changes occurring. In less than two months, in fact, Raul has lifted bans on the sales of computers, DVD players and cell phones. He has launched an overhaul of the agricultural sector, so that state and private farmers, after meeting state quotas, can legally earn money for themselves. And he has removed wage limits, so that the most productive workers will ultimately be the highest earners.

If this trend continues–and I see no reason why it won’t–we can expect great progress for Cuba in the years and decades ahead. In fact, I’d say that for patient investors who can handle the risk, investment in Cuba is now attractive.

Big Trouble Ahead for Venezuela

Contrarily, I see big trouble ahead for Venezuela, where President Hugo Chavez continues down the wrong path. The inflation rate in Venezuela was more than 20% last year. Basic foods like milk, beans, chicken and cooking oil are in short supply. So Chavez, blaming the private sector, is privatizing everything he can grab, from steel mills to sugar plantations. And the state can afford it, thanks to windfall profits from oil!

We Americans love Venezuelan oil; in fact, the country was our fourth-largest source of oil in 2007. As a result, we were Venezuela’s largest source of foreign trading revenue.

But if Chavez thinks his government can produce oil, steel and sugar more efficiently than private companies, he’s got a lot to learn. Of course, he won’t learn; he’ll stick to his principles just like Castro stuck to his. And when the oil begins to run out–if not before–times will get tough.

Interestingly, Chavez has even tinkered with time, an indication, perhaps of how power-hungry he is. Last August, he ordered all of the country’s clocks turned back half an hour, so the poor people of Venezuela would enjoy more natural sunlight and thus be more productive. As a result, Venezuela is out of step, time-wise, with every other country on earth!

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The preceding three examples have all been about long-term trends, which are generally lived forward and understood backward. As we live them, we notice mostly the messy little details, often neglecting to see the forest for the trees. Later, hindsight brings great clarity. But I’m convinced that with a little thought, we can see these trends as we live them, and thus put ourselves on the road to benefit from today’s long-term trends.

So today’s investment idea is based on the observation that there’s growing demand for a cleaner planet. To embrace this idea, you’ve first got to believe that the world, in general, is in the process of cleaning itself up. The U.S. and Europe are certainly on track with this, while lesser-developed countries, particularly China, have emphasized productivity at the expense of cleanliness; I’ve been to China and I know what the smog is like!

But I also know that China, India and other fast-growing countries will eventually get on the bandwagon. There will be laws passed; it always helps to have lawmakers on your side. And the leaders in the industry will do very well indeed.

Which brings me to Clean Harbors (CLHB) a stock that was first recommended in the pages of Cabot Green Investor by editor Brendan Coffey.

Here’s part of what Brendan wrote.

“Founded in 1980 as a four-man outfit to wash out oil tanks, Clean Harbors, under the leadership of founder, President, CEO and Chairman Alan S. McKim, has proved to be a consistent winner providing waste disposal and emergency remediation. Since it went public in 1987, shares have returned more than 3,000%. The growth appears far from being played out. Even in the face of a possible recession and fears of broad corporate spending cuts, Clean Harbors still sees sales rising 6% to 8% this year to more than $1 billion, making it the largest player in the specialized waste management arena.

Clean Harbors cobbles together two-thirds of that $1 billion in sales in technical services, primarily industrial waste and wastewater handling for customers including laboratories, pharmaceutical companies, university research departments and chemical manufacturers. In the one industrial area where it lagged, electronics manufacturers, Clean Harbors made a strategic buy of Romic, a company that caters to that segment, in August of last year.

The company also has a growing business consulting with industry to recycle more of its manufacturing by-products and in helping oil refineries become more efficient and less polluting. It recently opened a facility in Alberta, Canada, to focus such efforts on the rapidly growing oil sands industry!

Growth is seen coming from the on-site service market–assisting utilities in foul weather, cleaning up from disasters and managing waste facilities on behalf of other companies. Clean Harbors gets one-third of its sales from this area, which is estimated to be a $13 billion a year market now, with untapped revenues of another $13 billion. Business for Clean Harbors began to take off with its efforts to assist utilities after hurricanes Katrina and Rita. More recently, the company got lots of publicity for cleaning up a November oil spill in San Francisco that was the largest in the Bay Area in two decades.”

I look at Clean Harbors and I see a company with an excellent track record of growth. It’s not a hot stock, but it’s a well-managed company that is likely to see great growth as the world becomes increasingly focused on cleaning up.

And chart-wise, it’s attractive right here! After hitting an all-time high of 68 in March, the stock pulled back to the zone between 62 and 64, where it traded tightly all last week. In the meantime, the 50-day moving average has almost caught up, and the odds are very good that these supportive components will soon contribute to an upmove that takes the stock back up to 68, and beyond.

Editor’s Note: Clean Harbors may never be mentioned here again, but you can get regular updates on the stock by subscribing to Cabot’s newest investment advisory service, Cabot Green Investor. As the name suggests, it’s devoted to investments in companies that make the earth better, not worse. Cabot Green Investor is too young to have a track record, but it uses the same growth-oriented system as our flagship, Cabot Market Letter, so you can be confident that in the long run the stocks recommended will beat the market. To get started with a no-risk trial subscription, simply click the link below.

Yours in pursuit of wisdom and wealth,

Timothy Lutts
Cabot Wealth Advisory

P.S. We want to thank all of our readers who sent in valuable comments regarding Timothy Lutts’ recent Peak Oil issues of Cabot Wealth Advisory. If you wish to continue the discussion with your fellow subscribers, you may do so by registering a unique username and password at the Cabot Forum, The Forum is a place for Cabot subscribers to discuss investing, stocks and related topics with each other. Thanks again and we look forward to reading more of your comments in the future.


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