By Nick Hodge | Friday, October 31st, 2008
Jim Cramer doesn’t know jack about renewable energy.
He may be sharp on other sectors of the market, have close friends in high offices of public companies, and master the odd TV sound buttons like nobody’s business. But what about solar, wind, geothermal, and the rest of the alternative energy technologies?
Let’s take a look…
Back in May, Cramer proposed an informal index of wind energy stocks. It included:
· Trinity Industries (NYSE: TRN)
· Otter Tail (NASDAQ: OTTR)
· Woodward Governor (NASDAQ: WGOV)
· MasTec (NYSE: MTZ)
· Ameron (NYSE: AMN)
· Kaydon (NYSE: KDN)
· Thomas & Betts (NYSE: TNB)
· Broadwind Energy (OTCBB: BWEN)
· Vestas Wind Systems (VWDRY.PK)
· Clipper Wind Power (CRPWF.PK)
· Quanta Services (NYSE: PWR)
Wind Expert, or Windbag?
Only two of those companies have performed better than the S&P since the end of May. Three of them have done about twice as worse, losing in the 60% range.
I don’t highlight this to bash Mr. Cramer, but rather to highlight an important point.
As renewable energy becomes an increasingly sought-after investment sector, traditional market pundits are going to be leaping on the bandwagon.
Thing is, they really haven’t been paying close attention all along, and they’re only now starting to take an interest after billions of dollars have been made.
So typical analysts and gurus (the sames ones who walked blindly into the current mess) don’t have the pretext they need to really understand the renewable energy markets, and particularly wind energy companies, whereas Green Chip’s been covering these stocks for years.
But the talking heads feel obligated to cover this constantly growing sector nonetheless. After all, renewable energy is getting bigger an bigger everyday.
Wouldn’t you rather be getting wind energy investment advice from someone who knows the sector inside and out?
How to Invest in Wind Energy Stocks
Cramer made a few mistakes when he selected the stocks for his wind energy index.
First of all, he selected them at the wrong time, just a few months before one of the worst market skids in a lifetime.
It’s hard to completely fault him for that. A bunch of us got hosed over the past few months.
But he made another critical mistake: He only chose a handful of the companies that I would’ve put in there, namely Vestas and Ameron.
Instead of comprising his list mostly of pure-play wind companies, he opted to include plays that, in some cases, hardly have a tangible connection to the wind industry.
Trinity Industries, for example, mainly manufactures, sells, and leases railcars and accessories, and makes barges, with only a tiny fraction of the business dedicated to making steel towers on which wind turbines are mounted.
Otter Tail lists wind towers as an item it sells, but it also lists polyvinyl chloride pipes, horticultural containers, diagnostic medical equipment, and dehydrated potato products for the snack food industries.
So just what kind of wind energy company is Otter Tail? Not the kind that I would recommend.
If you want to recommend companies that pursue wind as a portion of their strategy, why not Siemens (NYSE: SI) or General Electric (NYSE: GE), two of the top wind turbine manufacturers in the world.
Or how about looking at the litany of pure play wind energy installers like:
· Western Wind (TSX.V: WND)
· Naikun Wind Energy (TSX.V: NKW) or
· Nacel Energy Corporation (OTCBB: NCEN)
Certainly those companies will see more direct wind revenue than a company that splits time between wind towers and dehydrated potatoes.
But you’d have to be really tuned into the wind industry to know that. My service, the Alternative Energy Speculator, is acutely tuned into it.
We don’t just follow wind and other renewables because they’re hot in the news this week.
Beyond installers, you should be looking at companies that specialize in electric infrastructure that will be vital in introducing wind-generated power to the grid and constructing complex wind farms.
Cramer got close by suggesting Ameron, but I’d be looking at ABB (NYSE: ABB) and Tetra Tech (NASDAQ: TTEK).
When it comes to looking for a guide to investing in wind energy, selecting an advisory that only focuses on renewables in vital.
Guys like Cramer are great when it comes to financial and retail stocks, but renewable energy stocks are a different breed.
It takes someone who’s has been watching these stocks, and only these stocks, for years. That’s exactly what you get with the Alternative Energy Speculator.
Next week, I’ll be releasing a report to my readers about three must-own wind energy stocks.
Sign-up today to ensure you get the report as soon as it is released.
Call it like you see it,
Nick