NASDAQ Adds Five to Clean Edge Green Energy Index

Trends Push New Ventures Into Investment Spotlight

NASDAQ has announced new additions to its Clean Edge Green Energy Index, with the following five companies added to the Index: Broadwind Energy, Inc. (Nasdaq:BWEN), Comverge, Inc. (Nasdaq:COMV), Capstone Turbine Corporation (Nasdaq:CPST), ESCO Technologies Inc. (NYSE:ESE), and National Semiconductor Corporation (NYSE:NSM).

Of the five new additions to the index, two fall under the ten-dollar per share price level: Broadwind Energy and Capstone Turbine.

A Mighty Wind: Expanding World Demand for Clean Energy Solutions

Broadwind Energy (BWEN 8.10) has a national US presence in the wind energy business and provides an integrated supply chain in energy services, heavy steel fabrication, gears and bearings, towers and transportation for wind energy systems. 2008 revenue grew to $217 million from $29 million in 2007, with nearly $100 million of that increase derived from organic growth.

BWEN has around 100 million shares outstanding, and despite booking a $7.0 million operating loss in the first quarter of 2009, has seen its share price recover from recession lows well under $3.00 to current levels in the $8.00 to $9.00 range after touching July highs of $12.00.

The primary trend driving growth for BWEN is obviously expanding world demand for clean energy solutions. As an integrated wind energy provider, BWEN offers exposure to the trend through participation in a number of industry sub-sectors, and as such looks to be somewhat diversified, rather than a pure play on turbines, for example.

A Powerful Combination: Demand for Green Energy and Smart Grid Technology

Capstone Turbine Corporation CPST 1.49 makes and markets micro turbines used in stationary distributed power generation applications. In other words, on-site power generation independent of the power grid. Capstones turbines run on a wide range of fuels and are efficient and green, with extremely low emissions. For example, fuels include natural gas, propane, sour gas, and renewable fuels such as landfill or digester gas, kerosene, diesel and biodiesel. The systems use no oil or liquid lubricants and create ultra low emission energy, heating and cooling through an advanced combustion system.

The company has been selling products in the market since 1998, and booked $66.0 million in sales for fiscal 2009, compared to $44.5 million in 2008. Capstone has approximately 188 million shares outstanding. The company shows a 26-cent loss per share for 2009.  Share prices have risen from recession lows of $0.40 to the current $1.40 range.

Two underlying trends ought to drive Capstone's continued success. First, demand for green energy. Second, development of the smart grid that will enable owners of distributed power generation systems to sell energy back into the grid.

A Red Hot Sector with a Green Future Prediction

Cleantech and green energy promise to be hot sectors, sectors that create headlines and garner exceptional public attention for the foreseeable future, which can only benefit companies such as Broadwind and Capstone.

CPST looks particularly interesting due to its relatively modest share price, at the $1.50 level, and because it offers exposure to both efficient clean energy and smart grid growth potential.  Both BWEN and CPST share prices could advance as their earnings begin to trend up, as the public returns to the stock markets, and as EPS (earnings per share) multiples expand in a bull market environment.

The NASDAQ Clean Edge Green Energy Index tracks the performance of clean-energy companies that are publicly traded in the U.S. and includes companies engaged in the manufacturing, development, distribution, and installation of emerging clean-energy technologies such as solar photovoltaics, biofuels and advanced batteries.

The companies' stocks must meet minimum requirements for market value, average daily share volume, and price. The Index is evaluated on a semi-annual basis in March and September.

About the Author

Financial analyst Blake Desaulniers identifies trends and emerging market opportunities in Cleantech, Nanotech and Energy sectors. His http://www.financialprofilesmedia.com website helps investors find companies whose share price is poised to explode by exploiting technological breakthroughs.

Two Key Trends Drive Packaging Revolution

Higher oil prices and consumer demand for sustainable packing give investors a new way to profit.

Sustainable packaging represents a massive investment opportunity, as we move away from plastics and into more responsible materials. Packaging comes wrapped around just about every product you can imagine, at some stage in its life cycle. That’s why the annual global market amounts to $420 billion. That’s why this will be a hot sector to watch.

The move away from plastics has become more obvious, with governments legislating plastics out of the market. Europe has led the way, and the US is starting to follow. Although twice defeated in the California state legislature, a bill to ban single use PVC containers likely won’t go away. Other states will certainly follow suit. At present, some 30 million tons or plastic each year get dumped in the US, and only about 5% gets recycled. That will surely change.

When it comes to what makes up sustainable packaging, most experts agree that you have to look at the entire product life cycle, from raw materials sourcing and acquisition through eventual disposal. According to the Sustainable Packaging Coalition of Charlottesville Virginia, a not-for-profit organization, materials must be sourced responsibly, designed to be effective and safe throughout the life cycle, meet market criteria for performance and cost, made entirely using renewable energy, and once used can be recycled efficiently to provide a valuable resource for subsequent generations.

Alternatives to the ubiquitous PVC plastic solutions have become more available. Plastics made from renewable resources, known widely as bioplastics, have gained plenty of exposure, lately. DuPont (DD) fired up its first biomaterials plant in 2006, selling more than a $100million worth of products in the past year, including its bioplastic called Sorona. Starting this year, Cargill’s NatureWorks unit hopes to ship 140,000metric tons a year of a bioplastic called Ingeo, for use in fresh food containers and textiles, among other things. Brazilian petrochemical giant Braskem (BAK) is spending $300million on a factory for sugarcane-based bioplastics, while Toray Industries of Japan is making plastics from fermented plant starches and sugars. There’s also a host of U.S. startups with names such as Novomer and Cereplast (CERP.OB) that make plastics from wheat, tapioca, potatoes, soy, and more.

Many of these bioplastic products have drawbacks, however. First, they must be disposed of through high temperature composting or incineration. Second, many of them draw on what would otherwise be food supplies. As such, they fail to meet both responsible sourcing and efficient recycling criteria, to varying degrees.

As the price of oil continues to rise when world economies shift back into growth mode, the cost of oil, the raw material for most plastics, will drive more manufacturers into alternative sources such as bioplastics. The corollary strain on food stocks could cause bioplastics manufacturers increasing resistance, as higher demand for corn, soy, wheat and other raw materials drives food prices up and results in social outcry and potential restrictions. With bioplastics use growing at 20—30% per year, that’s a real threat. In any case, causing starvation in developing countries so the world can have nice packages hardly amounts to responsible.

Bioplastics increase greenhouse gas emitted from landfills, and concerns exist over the use of GM, or genetically modified crops used to supply bioplastic factories.

Other alternatives to PVC and bioplastics do exist. One popular European product uses agricultural waste to make packaging material than can be easily formed to a wide range of shapes, provides color, can be transferred from freezer to oven or microwave, and can be tossed in a back-yard compost heap and turns into fertilizer.

Adoption of this kind of product has been largely driven by a growing consumer demand for the better part of a decade. Subsequent political pressure has resulted in a spreading marginalization of PVC and oil-based products through legislation.

The two trends of higher oil prices and growing demand for sustainable packaging is likely to continue for the foreseeable future, as the global move to new alternatives transforms the game, and in the process creates a good number of new investment opportunities in green packaging.

Three Types of Investors in a Bull Market: Innovators, Imitators and Idiots

Warren Buffet’s observation that there are three types of people in an economy—innovators, imitators and idiots, clearly reflects in the classic three phases, or legs, of a bull market.

Innovators See Opportunity in Bears

Since the start of 2009, we’ve seen Buffet’s “innovators” move, with markets up 30 per cent or more. Despite ubiquitous bad news, disastrous trailing indicators, and headlines announcing bankruptcies, bailouts and mayhem in the financial markets, innovators made their move early as usual, picking up stocks at bargain process from those who wanted to, or were forced to sell into a market characterized by fear.

The innovators again demonstrated their ability to see past the short term, and to filter the noise and to establish early positions in key growth sectors. For instance, even while venture capital funding in Clean Technology deals withered in the first half of the year, compared to the same period a year earlier, the Cleantech Index (CTIUS) rose from below 600 to nearly 1,000—close to a 40 per cent gain, a gain similar to gains on most stock markets, since early March.

A 30 to 40 per cent gain in six months on the stock market looks pretty good by historical standards. In 2003, the Dow rose from around 8,000 to 10,500 in 10 months, a gain closer to 25 per cent in the first leg of a new bull market, before consolidating for most of 2004.

Imitators Ride the Bull

Following its initial run, the Dow slipped sideways for much of 2004, before starting on a longer, more stable climb from 10,000 to 12,000 by mid 2006 or early 2007, the second leg of the bull lasting around 18 to 24 months, depending on how you read the Dow chart. Buffet’s “imitators” had arrived.

News was good, trailing indicators turned positive, corporate earnings began rising, inflation remained under control, in general most anybody could invest with confidence during this period, as very little evidence of risk appeared anywhere.

Idiots Take the Bull by the Tail

The final leg of the 2003-2007 bull market occurred as it often does, when the “idiots” piled in and drove stock prices up sharply and rapidly. By the summer of 2007 you could see the churn at the top. The Dow had moved from 8,000 in 2003 to 14,000 in 2007, with the last 2,000 points coming mainly in the first quarter of 2007. A rapid 20 per cent rise coming off a bottom could make sense, but after two solid legs up, it could only have been Buffet’s “idiots” who kept buying stocks aggressively, or insisted on holding.

Is Stock Market History Repeating Itself?

In 2009, we have already seen the first leg up—and a solid one it was. And we have begun to see consolidation, ahead of trailing indicators turning positive. This is largely what the imitators will wait for.

Lacking confidence and in many case resources to step in at the pit of a recession, where the real bargains can be found, imitators will appear on the scene once the potential for missing out on increasing corporate earnings and improving economic fundamentals, and the appearance widespread good news headlines, compels them to get back into stocks.

When this will happen can’t be predicted with much accuracy, perhaps 2010, perhaps 2011, but eventually the second leg of the bull market, likely lasting something around 24 months, will get underway.

Three Sectors that Can Turn Imitators into Innovators

Every bull market has its particular characteristics, and every investor has their own preferences. For those who watch trends and technologies, and for those imitators who want to get the kind of returns innovators get, three sectors ought to have great appeal—Cleantech, Nanotech, and Energy.

Beyond merely the scope of this bull market, these emerging markets look to have extraordinary growth potential, and are in many ways intertwined—economically and technically. Energy efficiency is a part of Cleantech, for instance. Solar panels or wind turbines used to reduce the carbon footprint of a production process amounts to both Energy and Cleantech. If the surface has been developed using nanocrystals, it may also be a Nano business.

Yet each of these sectors will foster initiatives that qualify as “pure play.” Nano-based electronics, for instance, look to be on the verge of taking computing to the next level, as the current threshold of miniaturization has already come into view. Still, most people know very little about these sectors—perhaps more about Energy and less about Nano. As small cap investors, they ought to learn.

Getting a First Leg Up on Emerging Markets

In a larger sense, each offers the opportunity for anybody to make Buffet’s “innovators” class, which is to say that each of these sectors offers such excellent longer term potential, and that gains to date represent only a tiny tick on what is widely expected to be a spectacular uptrend.

Of course, most imitators don’t feel comfortable making their move until they see bottom line results getting fatter—a little late by innovator standards. Taking the characteristics of a short term beginning of a bull market in stocks and extrapolating to an emerging sector, and in particular micro-cap stocks, it’s easy to see how an effort to understand Nanotechnology, or Cleantech can and will pay off.

In the context of the current bull market, it is clear that the innovators are in. It is not, however, clear that the pole positions have been established in Nanotech, Cleantech and Energy for the longer term. It is likely that the imitators will show up in the stock market pretty soon. For their sake, let’s hope they find their way, in some part, to these sectors.

The creative destruction that pushed GM into bankruptcy has created new opportunity for cleantech venture and startups that can adapt and innovate in, of all places, the automotive market, according to the Cleantech Q2 Investment Monitor. The two-year, 40% decline in American auto sales between 2006 and 2008 has led to drastic cuts in capacity and output.

Venture Capitalist Cleantech Investing Gains Momentum

In the face of the pullback, venture capital cleantech investors picked up the pace of their investments in the transport sector, committing record amounts to electric vehicles, powertrains and components, and advanced batteries. Total investment in the sector accounted for a third of all clean technology new funding during the second quarter.

Many of these startups will succeed in producing new components and vehicle innovations, however the most likely exit for investors will be eventual buyout by larger manufacturers, due to the obvious barriers to new vehicle market entry.

Biomass-to-Power Gains Investor Attention

Other subsectors that look to be gaining investor interest include biomass-to-power, particularly for the southeastern US which lack wind and solar resources, yet have substantial biomass feedstocks. Biomass, unlike wind and solar, is a relatively dependable energy platform and can be used for base demand, much like coal-fired generation. Biomass plants, however, require large-scale capitalization, and will likely find funding through large infrastructure players and utilities rather than the venture capital markets.

Efficiency

Industrial Energy Efficiency represents the low-hanging fruit in carbon savings, according to a recent study from McKinsey. Companies offering energy efficiency innovations now look to be attractive targets for venture dollars.

Smart Grid Technology - Electrifying Potential

Finally, grid-level energy storage continues to be the Holy Grail that can transform wind and solar from peak level load source to base load. High energy density and high power density make flow batteries a promising approach. A flow battery is a form of rechargeable battery in which electrolyte containing one or more dissolved electroactive species flows through an electrochemical cell that converts chemical energy directly to electricity. Vehicle-to-grid also shows longer term potential as electric vehicle market penetration evolves along with smart grid technology.

Investment Opportunities: Financial Profiles with Blake Desaulniers

Financial Profiles Trends & Technologies can help set you on the road to greater wealth and success in the stock market. By focusing on three key sectors, Financial Profiles gives you the best chance to outperform all of the indices in the coming economic recovery because the key to winning is seeing the big trends and identifying emerging market opportunities. For 25 years Blake Desaulniers has been in research and analysis for financial publications and involved in major winners.

Today, Blake continues to help investors find little-known companies whose share price is poised to explode as the company exploits an important trend or technological breakthrough. Most are in the three key emerging sectors most likely to outperform the market — Cleantech, Nanotech and Energy. Most are micro-cap stocks. Research shows that micro-caps have traditionally delivered some of the market’s biggest returns, often surging more than 100% when these companies achieve a major milestone. Yet ironically, these stocks are among the least covered by analysts.

But thanks to Financial Profiles Media, individual investors will have the information and analysis they need to achieve the breathtaking gains these stocks are capable of providing. For further information, analysis and recommendations, visit the Financial Profiles Media website and Financial Profiles Media Blog.

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