Tom Konrad CFA

Unenchanted April

After a great January, the last three months have not been kind
to clean energy stocks.  While my model portfolios are still
in positive territory (+5.4% and +0.9% for the unhedged and hedged
portfolios, respectively), and are above my clean energy benchmark
(The Powershares Wilderhill Clean Energy ETF, -3.4%), they have
again fallen behind my broader market index, the Russell 2000
(+7.3%.) 

alt="Gone_With_The_Wind_title_from_trailer[1].jpg" src="http://www.altenergystocks.com/archives/Gone_With_The_Wind_title_from_trailer%5B1%5D.jpg">

href="http://en.wikipedia.org/wiki/en%3AGone_with_the_Wind_(film)"> Gone with the Wind trailer, public domain

Gone With the Wind

April saw the chances of an extension of the federal Production
Tax Credit (PTC) for wind diminish significantly when Congress
failed to attach it to the payroll tax cut extension.  In an
election year, the chances of a stand-alone PTC extension getting
through Congress look slim, despite the massive numbers of layoffs
expected in the wind industry without an extension.  Even if
the PTC is extended next year, the diminished wind industry
capacity will be felt for years to come.  It’s already being
felt by wind stocks, and, I believe, other clean energy stocks are
reacting in sympathy.
src="http://www.altenergystocks.com/archives/11%20for%2012%20Apr.png"
height="557" width="520">

Stock Notes

Clean Energy Developers

• The greatest pain was felt among my group of clean energy
  development companies, most likely because developers are the
  most direct beneficiaries of clean energy subsidies such as the
  PTC.  Hardest hit was Finavera

  Wind Energy (TSXV:FVR,PINK: href="http://www.altenergystocks.com/comm/content/finavera-renewables/">FNVRF),

  which lost 43%.  On April 30, Finavera fell over a third,
  although the CEO href="http://www.forbes.com/sites/tomkonrad/2012/04/30/finavera-drops-over-13-on-no-news/">confirmed

  that there had been no change in the company’s prospects. 

  Perhaps some large investor feared some bad news would come out
  in Finavera’s href="http://www.finavera.com/media/press-release/finavera-wind-energy-releases-annual-financial-statements-and-provides-corporate">
  annual report on May 1, but I found little of note which
  had not already been released.  It’s worth pointing out
  that Finavera’s prospects should not be hurt and might even be
  helped by a failed PTC extension, since Finavera has no US
  projects, and the companies projects in Canada might benefit
  from cheaper wind equipment which might have been used in the
  United States had the PTC been extended.

• Western Wind Energy
  (TSXV:WND, PINK: href="http://www.altenergystocks.com/comm/content/western-wind-energy/">WNDEF)
  also has little exposure to the lack of a PTC extension, since
  most of this company’s href="http://www.altenergystocks.com/archives/2011/11/western_wind_a_clean_energy_rodney_dangerfield.html">value

  is in wind projects which were commissioned before the PTC
  expiration, and a solar project the company is developing
  in Puerto Rico.  Yet Western Wind has also been
  experiencing a sell-off on no news, although part of this may be
  due to an href="http://www.forbes.com/sites/tomkonrad/2012/04/26/western-wind-energy/">unsubstantiated

  smear campaign on blog comment sections and bulletin
  boards.  One (also unsubstantiated) rumor has it that a
  group of Toronto hedge funds are trying to force a quick sale
  far below the company’s current valuation, perhaps to Algonquin
  Power (TSX: AQN, PINK: href="http://www.altenergystocks.com/comm/content/algonquin-power-income-fund/">AQUNF)
  which made a low-ball offer last October.

• Alterra Power
  (TSX:AXY,PINK: href="http://www.altenergystocks.com/comm/content/magma/">MGMXF)
  also declined significantly on no news.  Alterra also has
  little exposure to the US wind market, and operates mostly
  internationally and has more of a focus on run-of-river
  hydropower and geothermal.

Other News of Note

• Bicycle manufacturer Accell
  Group ( href="http://www.altenergystocks.com/comm/content/accell/">ACCEL.AS)
  announced a successful conclusion to its talks to buy out
  Raliegh.  
• Waste Management ( href="http://www.altenergystocks.com/comm/content/waste-management/">WM)
  (along with several competitors) announced disappointing first
  quarter results.  At the time I href="http://www.forbes.com/sites/tomkonrad/2012/04/26/watch-for-buying-opportunity-in-wm/">wrote
  that the subsequent sell off might lead to another attractive
  buying opportunity, partly because I href="http://www.forbes.com/sites/tomkonrad/2012/04/26/waste-management-wm-two-reasons-the-earnings-miss-is-encouraging/">
  liked the reasons earnings fell short. WM has since
  declined from slightly over $36 to slightly under $34, and I
  have placed a limit order to add to my position at a little
  below the current price.  If the decline continues, I
  intend to continue to add to my position.  I like WM in the
  long term for the company’s sustainability initiatives and
  healthy (4.2%) and well-protected dividend.
• Last Thursday, Lime Energy
  (NASD: href="http://www.altenergystocks.com/comm/content/lime-solar/">LIME)
  announced a contract with Central Hudson (which happens to be my
  electric utility) to handle the utility’s direct install energy
  efficiency program.  I wrote that this href="http://www.forbes.com/sites/tomkonrad/2012/05/03/lime-energy-utility-centric-strategy-validated-by-award-from-central-hudson/">validated

  Lime’s strategy, but the stock has yet to get any love
  from investors as a consequence.

Conclusion

Investor disappointment with the lack of political support of
clean energy seems to be translating into a broader disappointment
with clean energy stocks in general.  Values continue to get
better in those clean energy stocks which are not dependent on
subsidies.  I think cautious buying is in order, but I also
think it likely that the political climate for clean energy will
continue to worsen this year, so it is probably best to keep the
majority of your funds in cash while waiting for more enchanting
values to blow our way.

DISCLOSURE: Long WFIFF, LIME,
RKWBF, WM, VE, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, AQUNF, short
IWM and SPY.

DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results. 
This article contains the current opinions of the author and
such opinions are subject to change without notice.  This
article has been distributed for informational purposes only.
Forecasts, estimates, and certain information contained herein
should not be considered as investment advice or a
recommendation of any particular security, strategy or
investment product.  Information contained herein has been
obtained from sources believed to be reliable, but not
guaranteed.

Tom Konrad CFA

Portfolio performance

March was a volatile month for clean energy, with many of my picks
reporting earnings.  My 11 picks were down 4% on average since
my last update (March 1st to April 5th), compared to a 9% decline in
the Powershares Wilderhill Clean Energy Index ( href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW),

while the broad Russell 2000 index was flat.  The hedged
portfolio (see the href="http://www.altenergystocks.com/archives/2012/01/ten_clean_energy_stocks_for_2012_1.html">
original article for details) lost 5%.

For the year to date, the portfolio has put in a strong performance,
and is up 15%.  PBW and the Russell 2000 are up only 3% and
11%, respectively.  The hedged portfolio is up 10%.  See
the following chart for details:
src="http://www.altenergystocks.com/archives/11for12Q1.png"
height="519" width="520">

Stock Notes

Wind Developers: A Little Birdie
Told Me

Last time, I mentioned I has a limit order to buy Western Wind
Energy ( href="http://www.altenergystocks.com/comm/content/magma/">WNDEF.PK/WND.V.) 

That order has since executed at $1.68, and the stock bottomed at
$1.66.  Since then, I href="https://twitter.com/#!/AltEnergyStocks/status/183212034178027521">tweeted

that the company had applied for the $90M Section 1603 cash
grant on their 120 MW Windstar project. While this was expected,
it reduces uncertainly around the company’s projects.  Even a
little more certainty around a $90M payment is significant for a
$115M market cap company.

I also href="https://twitter.com/#!/AltEnergyStocks/status/185801701528305664">tweeted 
that Finavera Wind Energy ( href="http://www.altenergystocks.com/comm/content/finavera-renewables/">FNVRF.PK/FVR.V)
had received its Environmental Assessment Certificate (EAC) for
its Tumbler Ridge project.  This was the last barrier to
project construction (funded by GE Energy ( href="http://www.altenergystocks.com/comm/content/general-electric/">GE).) 
The EAC is also significant because the EAC applications for
Finavera’s 77MW Wildmare and 120MW Meikle projects are modeled on
Tumbler Ridge.  Not only can Finavera begin construction of
Tumbler, but investors can be a little more confident that
Wildmare and Meikle will also
obtain EACs.  Finally, Finavera also closed on a $200
thousand convertible note in March, easing the company’s tight
liquidity.  I recently bought more Finavera at $0.355 on the
EAC news.

Earnings Notes

Earnings disappointed investors at New Flyer ( href="http://www.altenergystocks.com/comm/content/new-flyer-industries/">NFYEF.PK/NFI.TO)
and Lime Energy ( href="http://www.altenergystocks.com/comm/content/lime-solar/">LIME.) 

I href="http://www.altenergystocks.com/archives/2012/03/why_the_selloff_at_new_flyer_1.html">wrote

about New Flyer last week, so I won’t repeat myself
here.  Since then, the only news has been the ratification of
a new collective work agreement by the union at New Flyer’s
Winnipeg factory: Good news, but not enough to move the stock
much. 

The highlight of Lime’s ( href="http://www.altenergystocks.com/comm/content/lime-solar/">LIME)
earnings were a big write-off and less than expected revenues in
their Commercial and Industrial (C&I) division.  When I
first href="http://www.forbes.com/sites/tomkonrad/2011/10/28/lime-energy-delivering-energy-efficiency/">wrote

about Lime last October, I concluded by saying,

A renewed market decline, along with a possible earnings
miss caused by C&I clients hoarding cash in the climate of
uncertainty could easily lead to a lower stock price in the coming
months. I’ll be watching the stock closely and buying cautiously
if either of these comes to pass.

We have not had the stock market decline yet, but this was the
earnings miss I was waiting for.  I took the opportunity to
scoop up a bunch of this stock between $2.65 and $2.95 over the
last week, most notably when Lime had a surprising intra-day
sell-off which I href="https://twitter.com/#!/AltEnergyStocks/status/186867223535697922">tweeted
about on Monday.

On March 9th, Waterfurnace Renewable Energy href="http://www.altenergystocks.com/comm/content/waterfurnace-renewable-energy/">(WFIFF.PK/WFI.TO)
announced revenue for 2011, down 0.5% from 2010, but improved
margins because of a price increase in late 2010.  The market
has reacted mildly favorably, with Waterfurnace’s stock climbing
slowly but steadily since.

Alterra Power ( href="http://www.altenergystocks.com/comm/content/magma/">MGMXF.PK/AXY.TO)
also announced earnings on March 28th.  The good news was no
news: all Alterra’s development project continue on pace, and
there have been no significant hiccups in power production. 
Given the large number of mishaps in the geothermal industry in
2011, a few months of no bad news is all that it takes a for great
stock performance in 2012.

The Acquisition Cycle

Bicycle manufacturer Accell Group ( href="http://www.altenergystocks.com/comm/content/accell/">ACCEL.AS)
was cruising along with 2011 sales  9% over 2010, and net
profit up 11% announced in February.  Profits were driven by
a continued shift into higher value electric bikes.  The
company is re-cycling its profits into more acquisitions of
bicycle brands.   Accell adds value to its acquisitions with
a strong distribution network which is unusual in the very
fragmented bicycle industry.  Having already purchased
American electric bike and scooter manufacturer Currie
Technologies, Accell is now in talks to buy storied bicycle brand
Raleigh.  (As an aside, I own an older Currie iZip, a
utilitarian commuter bike, although I just upgraded to the much
sportier EZ008 and
am looking to sell the iZip.) 

Conclusion

While my stocks lost a little ground in March and the first week of
April, it has been a good month in comparison to Clean Energy stocks
in general.  Most of this has probably been due (again) to my
avoidance of solar stocks, which are again looking like they are
headed for new lows. 

We’re seeing decent buying opportunities in Lime Energy, which I
think is a deal below $3, and Finavera which seems quite cheap at
$0.36, although the company’s low cash on hand could drive the stock
lower if they are forced to dilute current stockholders to raise
funds.

DISCLOSURE: Long WFIFF, LIME,
AMRC, RKWBF, WM, VE, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, and puts
on IWM and SPY.



DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad CFA

Experimenting with more
frequent updates

In the past, I genrally only wrote about my annual list of ten
clean energy stocks on a quarterly basis, but when I href="http://www.altenergystocks.com/archives/2012/02/ten_clean_energy_stocks_for_2012_10_more_than_other_top10_lists_1.html">wrote

last month to apolgize for inadvertently slipping in an extra
stock, and in the process wrote a few notes on a couple of
the stocks with news, a couple readers wrote to say they liked the
more frequent updates.  So let it be written, so let it be
done. 

Leave a comment if you think it’s something I should continue
doing, or if you think my limited writing time is more valuably
spent talking about stocks you have not already heard about.

Portfolio performance

February was kind to my stock picks, which had a total return
since the start of the year of 19.5%, up from 15.1% at the start
of February.  The hedged portfolio showed a gain of 16.1%, up
from 12%.  Meanwhile my benchmarks both lost ground, the
Clean Energy ETF href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW
falling back to 10.9% from 20.8% at the start of February, and the
Russell 2000 ETF IWM falling from a gain of 12.3% to a gain of
only 8.8% for the year.

For details on the composition of the portfolio and hedged
portfolio, see the original article: href="http://www.altenergystocks.com/archives/2012/01/ten_clean_energy_stocks_for_2012_1.html">10

[sic] Clean Energy Stocks for 2012.  Stock-by-stock
performance and dividends are shown in the chart below.  Note
that the performance of foreign-traded stocks mrked with * is
calculated based on the prices in their home markets converted to
dollars at the prevailing rate at the time.

src="http://www.altenergystocks.com/archives/11for12Feb.png"
height="567" width="520">

Stock Notes

Euro Stocks Rebound as Crisis
Fades

The three European stocks ( href="http://www.altenergystocks.com/comm/content/rockwool/">Rockwool 
[ROCK-B.CO]
up 28%, Veolia [ href="http://www.altenergystocks.com/comm/content/veolia-environment/">VE]
up 31%, and Accell [ href="http://www.altenergystocks.com/comm/content/accell/">ACCEL.AS]
up 22%) have done well this year, as investors worst fears of the
outcome from the Greek debt crisis begin to fade.  Veolia
climbed 15% over the last two days href="http://www.greenchipstocks.com/articles/pre-market-rush-on-veolia-nyseve/1580">based

on its announcement that the company is in talks to sell its
mass transit unit.

Alterra Rises on HS Orka

The top performer has been Alterra Power [ href="http://www.altenergystocks.com/comm/content/magma/">MGMXF.PK/AXY.TO.] 

I think the 57% gain so far this year is partly based on the fact
that the company had been so beaten down last year, and the
announcement that the group of Icelandic pension funds that owned
25% of its HS Orka geothermal plant had href="http://www.neurope.eu/article/pension-funds-increase-stake-hs-orka">increased

their stake to 33.4%.  This is good for Alterra in two
ways: the cash can be used for investments in other renewable
energy projects, and the greater local ownership of the Icelandic
power plant helps to blunt the criticisms of Icelandic
nationalists who who have been highly critical of foreign
ownership of this power plant, which meets 9% of Iceland’s
electricity needs and 10% of its heating needs.

Depressed Stocks Cheer Up

The other star performer has been transit bus manufacturer New
Flyer href="http://www.altenergystocks.com/comm/content/new-flyer-industries/">(NFYEF.PK/NFI.TO). 

I believe the stock’s rise has been mostly a rebound from
excessively depressed levels at the start of the year.  Even
at the current $7.89 a share, I think this high-yielding stock
remains an excellent value.  The story at Waterfurnace ( href="http://www.altenergystocks.com/comm/content/waterfurnace-renewable-energy/">WFIFF.PK/WFI.TO)
is similar, with the stock rebounding from severely undervalued
levels at the start of the year on little news of note.

Drifting in the Western Wind

The worst performer has been Western Wind Energy ( href="http://www.altenergystocks.com/comm/content/magma/">WNDEF.PK/WND.V.) 

This stock has been drifting slowly downward on a lack of news
after rejecting potential buyout at the end of last year. 
Since the company has completed its Windstar and Kingman wind
farms, the value of the company has risen appreciably since I href="http://www.altenergystocks.com/archives/2011/11/western_wind_a_clean_energy_rodney_dangerfield.html">wrote

about it in late 2011, so the price decline represents an
opportunity to pick up a deeply undervalued renewable energy power
producer.  I have a limit order in to buy a little more at
slightly below the current price, despite my fairly large existing
position in the stock.

Conclusion

It’s been a good year so far for my picks, much like the start of
my last banner year, 2009.  As I wrote when I introduced this
list,

I’m optimistic about 2012.  Unless we see a total
economic meltdown…, I expect strong appreciation of this
portfolio of undervalued clean energy stocks in 2012.

DISCLOSURE: Long WFIFF, LIME,
AMRC, RKWBF, WM, VE, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, and puts
on IWM and SPY.



DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad. CFA

A “bonus” stock pick this year.  Also, notes on New Flyer
Industries and Finavera Wind Energy.

Maybe it was because Seeking Alpha did not carry my annual list
of href="http://www.altenergystocks.com/archives/2012/01/ten_clean_energy_stocks_for_2012_1.html">10

Clean Energy Stocks for 2012 this year, but no one seems to
have noticed that there were actually 11 stocks in the list. 
Call it the Spinal
Tap of top-ten lists.

If anyone did notice the extra pick, they didn’t leave a
comment.  What happened was that I have two number 8 stocks,
but there is enough text between them that neither I nor most of
my readers could see both 8′s at once on the same screen. 
Oops!

I had 10 originally, but my messed up numbering led me to think I
did not have enough, and so I went back and added href="http://www.altenergystocks.com/comm/content/honeywell/">Honeywell

(HON) at the last minute, choosing to play it safe with a
large cap energy efficiency company.  So far this year,
Honeywell has produced the expected safe results, but because
clean energy stocks (especially solar) have been on a tear, 
Honeywell’s 10.5% return has dragged down the portfolio’s average
a little.  But who’s complaining?

Performance

I’ll be complaining if including Honeywell makes my list not beat
href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW,
my clean energy benchmark for the first time in 2012.  As of
February 3rd, PBW is up 20.7% and my broad market benchmark IWM is
up 12.3%.  Meanwhile, my (ahem) eleven stocks are up an
average of 15.0%, with New Flyer’s monthly dividend payment
bringing the portfolio’s total return to 15.1%.  Readers who
hedged their portfolios by buying a put on SPY as I suggested did
worse (since the market was up in January), slightly
under-performing even the broad benchmark with a total return of
12.0%.  But the year is still young.

Solar

The main reason this portfolio has underperformed broader clean
energy was my decision not to include any solar stocks. 
Solar stocks have been rapidly making large percentage gains from
the miserable lows they hit at the end of last year.  The
Guggenheim Solar ETF href="http://www.altenergystocks.com/comm/content/claymore-mac-global-solar-index-etf/">TAN
is up 32% so far this year, and solar stocks are prominent among
PBW’s holdings.

I toyed with including a solar stock or two in the list, for
similar reasons to those I href="http://www.altenergystocks.com/archives/2011/10/inverter_stocks_a_value_bos_play_on_solar.html">discussed

last October, but I decided to hold off simply because I
don’t follow solar closely enough to make informed
selections. 

Finavera Wind Blows Back

In truth, the portfolio was doing considerably worse only a week
ago, but recently got a boost from a couple stocks which had been
lagging.  First, href="http://www.altenergystocks.com/comm/content/finavera-renewables/">Finavera

Wind Energy (FNVRF.PK)
 updated investors on progress towards environmental
permitting of its projects, highlighting the fact that two of
their projects are within months or receiving final permits:

Regularly published power industry data provides some
context for the valuation of wind energy projects. The data
illustrates the average multiples paid for projects in 2011. Early
stage projects have sold for more than $60,000/MW. Projects that
are fully permitted and have a power purchase agreement have sold
for more than $500,000/MW. The jump in value from the early stage
to the next stage is significant. Finavera currently finds itself
at this inflection point. Our projects are being valued in the
public markets as early stage, yet we are a few short months away
from being fully permitted on our first two projects. We believe
Finavera is on the cusp of a significant asset re-valuation.

At $0.43, Finavera is now up only 5% for the year, but if those
permits are granted it has a lot farther to go.  Investors
who bought the stock last month when it was trading in the
$0.25-$0.30 range are already feeling smug (I added to my
positions, but mostly between $0.35 and $0.40.)

New Flyer Puts the Pedal to the
Metal

Second, href="http://www.altenergystocks.com/comm/content/new-flyer-industries/">New

Flyer Industries (NFYEF.PK/NFI.TO) stock has been
accelerating since January 19th.  The unusual action prompted
regulators to ask New Flyer to disclose that New Flyer has been in
discussions “regarding

a potential commercial and strategic relationship.” 
But company CEO Paul Soubry says there are no deals closing, and href="http://www.winnipegfreepress.com/business/new-flyer-shares-hit-the-gas-138701724.html">several
analysts agree.

The stock has been incredibly under-priced since last
summer.  North American transit bus orders have been slow for
the past two years, and New Flyer has been reducing its backlog as
a result.  But the flip side of the slow bus market has been
a rapidly aging bus fleet and increasing pressure on transit
operators to replace aging buses. 

The share price run-up is most likely the result of investors
realizing that this is a massively under-priced stock in a
cyclical market which is about to enter an expansionary phase.

Conclusion

Although my stocks are suffering this year from my long-term
decision to mostly avoid solar, I’m not complaining about the
returns, and I’m very happy to see Clean Energy stocks finally
heading in the right direction after a href="http://www.altenergystocks.com/archives/2011/12/ten_clean_energy_stocks_for_2011_year_in_review.html">gruesome

year in 2011.

DISCLOSURE: Long NFYEF, FNVRF,
and puts on IWM and SPY.



DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad, CFA

There is a silver lining to the style="font-weight: bold;"
href="http://www.altenergystocks.com/archives/2011/12/ten_clean_energy_stocks_for_2011_year_in_review.html">
horrible year clean energy stocks had in 2011 style="font-weight: bold;">: the opportunity to buy clean energy
stocks (often considered a growth sector) at prices one would
expect from value stocks.

Each year since 2008 I have published an annual list of ten clean
energy stocks I thought were good buys at the beginning of the
year.  While the 2008 list was not really intended as an
investment portfolio, my annual lists quickly evolved into a
mini-portfolio of stock intended for hands-off investors who did
not want to pay the high fees of clean energy mutual funds, but
who, like me, saw shortcomings in the available clean energy
exchange traded funds.  In particular, the clean energy
exchange traded funds (ETFs) and href="http://www.altenergystocks.com/archives/2010/11/alternative_energy_and_climate_change_mutual_funds_part_ii.html">
most clean energy mutual funds) are href="http://www.altenergystocks.com/archives/2010/12/the_best_clean_and_renewable_energy_etfs.html">
far too focused on high profile sectors like solar and have
hardly any exposure to the most economic clean energy sectors,
such as href="http://www.altenergystocks.com/comm/content/energy-efficiency-stocks/">energy

efficiency, href="http://www.altenergystocks.com/comm/content/alternative-transportation-stocks/">alternative

transportation, and href="http://www.altenergystocks.com/comm/content/biomass-stocks/">biomass. 

Most clean energy ETFs come with relatively high costs for ETFs
(usually around 0.6% to 0.7%), which is expensive enough that a href="http://www.altenergystocks.com/archives/2009/03/costs_of_green_stocks_vs_costs_of_green_funds.html">small

portfolio of clean energy stocks can be acquired for less
over a modest holding period.

With that in mind, I now focus my annual list on the most
economic clean energy sectors.  Within those sectors, I
include stocks I currently consider relatively good values,
similar to the href="http://www.altenergystocks.com/archives/2009/11/green_energy_investing_for_beginners_part_iv_model_portfolio.html">clean

energy model portfolio I wrote about in late 2009.

The relative results have been good, when compared to the returns
investors would have gotten if they had invested in the clean
energy ETFs I use as a benchmark.  (I’ve currently settled on
the Powershares Wilderhill Clean Energy ETF ( href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW)
as a benchmark, because it is the most widely held of all clean
energy ETFs, but I used href="http://www.altenergystocks.com/comm/content/van-eck-global-alternative-energy-fund/">GEX

and href="http://www.altenergystocks.com/comm/content/ishares-sp-global-clean-energy-index/">ICLN

in the early years.)  Over the past four years, my picks
have outperformed the benchmark by href="http://www.altenergystocks.com/archives/2008/12/update_ten_speculations_for_2008.html">12%

in

2008, href="http://www.altenergystocks.com/archives/2009/12/in_review_10_clean_energy_stocks_for_2009.html">45%

in

2009, href="http://www.altenergystocks.com/archives/2010/12/ten_clean_energy_stocks_for_2010_the_year_in_review.html">10%

in

2010, and most recently by href="http://www.altenergystocks.com/archives/2011/12/ten_clean_energy_stocks_for_2011_year_in_review.html">4%

in 2011, despite company-specific bad news for three of the
stocks in the portfolio.

The Best Opportunity Since Early
2009

Despite the good relative performance, the last four years have
been so bad for clean energy in general that someone who had been
following the portfolio since 2008 would still be down because of
large losses in 2008 and 2011.  The upside of this poor
performance is that now is the best time to buy clean energy
stocks since the start of 2009. 

In both 2010 and 2011, I cautioned readers that the stocks I
listed were only good values relative to clean energy stocks in
general.  This year, as in 2009, I have the pleasure of
bringing you a list of ten clean energy stocks I think are good
values at current prices.   This does not mean that my
current crop of clean energy names can’t fall, but it does mean
that they have much more upside potential than they did in either
of the last two years.  If this portfolio ends 2012 lower
than it is now, I’m confident the decline will have been caused by
a fall of the stock market as a whole: Bad news specific to clean
energy seems to be more than adequately reflected in the current
prices of clean energy stocks.

That said, the fragile economy and political paralysis in both
the US and Europe hold many risks for the stock market in general
in 2012, so investors in these stocks would probably be wise to
hedge their positions with puts on broad market ETFs such as SPY
and IWM.

The Picks

Energy Efficiency

align="left">

src="http://www.altenergystocks.com/archives/LED%20Flood.JPG">

A dimmable LED downlight. Photo by author

Energy Efficiency has long been a staple of my annual lists, because
energy efficiency measures make sense in both good times and bad,
both as a way to save money, and to stimulate the economy. 
Because energy efficiency measures cost less than conventional
energy, they stimulate economic activity twice: first when they are
installed (as would any investment) and then for years to come, as
the energy cost savings are spent on other goods.

My energy efficiency picks are:

 1. href="http://www.altenergystocks.com/comm/content/waterfurnace-renewable-energy/"> style="font-weight: bold;">Waterfurance Renewable Energy
(WFIFF.PK $15.3455, WFI.TO), a perennial favorite because of
their profitable business selling geothermal heat pumps. 
Waterfurnace recently increased their quarterly dividend to $0.24,
for a 6% annual
yield.

2. href="http://www.altenergystocks.com/comm/content/lime-solar/"> style="font-weight: bold;">Lime Energy (LIME, $3.18)
was one of my href="http://www.forbes.com/sites/tomkonrad/2011/11/09/stock-picks-with-a-whole-systems-approach/">two

top picks in the energy services sector, the other being
Ameresco ( href="http://www.altenergystocks.com/comm/content/ameresco/">AMRC.)

I chose to include LIME in this list rather than AMRC because AMRC
is already up 35% since I recommended it.  While I still like
AMRC at current prices, I think LIME has better potential upside.

3. href="http://www.altenergystocks.com/comm/content/honeywell/"> style="font-weight: bold;"> Honeywell (HON, $54.35) has

a strong business providing building controls and efficient
heating and cooling equipment, as well as a performance
contracting arm.  I currently like the company’s relatively
modest trailing and forward P/E’s of 16 and 12, respectively,
strong cash flow, low debt, and 2.7% annual dividend yield.

4. href="http://www.altenergystocks.com/comm/content/rockwool/">Rockwool
International href="http://www.altenergystocks.com/comm/content/rockwool/">(RKWBF.PK
$82.29, href="http://www.rockwool.com/investor/share+information">ROCK-B.CO
473 DKK10) is an international insulation manufacturer whose share
price has fallen because of the EU crisis along with many other
Eutopean stocks.  Yet with only 43% of 2010 revenues
originating in Europe and headquarters outside the Euro zone, the
company seems relatively href="http://www.altenergystocks.com/archives/2011/12/navigating_the_clean_and_bloody_streets_of_europe.html">insulated
from the full effects of a Euro crisis.  Rockwool pays
an annual dividend, and has a yield of 2% based on the most recent
dividend payment.

Biomass

cellpadding="2" cellspacing="2">

href="http://commons.wikimedia.org/wiki/File%3ASchrotthaufen_Berlin.jpg"> alt="Schrotthaufen Berlin" src="http://upload.wikimedia.org/wikipedia/commons/thumb/0/09/Schrotthaufen_Berlin.jpg/240px-Schrotthaufen_Berlin.jpg" width="240">

By S. Müller (Own work) [CC-BY-2.5], href="http://commons.wikimedia.org/wiki/File%3ASchrotthaufen_Berlin.jpg">via Wikimedia Commons

I think one of the best ways to play cellulosic biofuels is to
buy the companies which control the cheapest potential
feedstocks.  I’m not sure that the best use of trash is to
make biofuel, but whether it is recycled, composted, digested,
incinerated, or converted in to biofuel, I see trash as a future
source of revenue in a resource constrained world, and who better
to profit from trash than the companies that collect it?

Last summer, I highlighted environmental services companies as a
way to invest in biomass in my article href="http://www.altenergystocks.com/archives/2011/08/trash_stocks_trashed_an_income_opportunity_1.html">Trash

Stocks Trashed: An Income Opportunity? 

5. href="http://www.altenergystocks.com/comm/content/waste-management/"> style="font-weight: bold;">Waste Management (WM,
$32.71) was my top pick at the time.  Since then, the
stock has since risen over $2 while continuing to pay its $0.34
quarterly dividend.

6. href="http://www.altenergystocks.com/comm/content/veolia-environment/"> style="font-weight: bold;">Veolia Environnement SA (VE,
$11.05) was then trading around $16, and I was cautious
about the compnay.  Today, Veolia seems too cheap to pass up,
despite the fact that I expect its 2012 annual dividend to be
significantly lower than the $1.47 (13.3%) paid in 2011.

Alternative Transport

cellpadding="2" cellspacing="2">

href="http://commons.wikimedia.org/wiki/File%3ATriMet_1990_Gillig_bus_carrying_bike.jpg"> alt="TriMet 1990 Gillig bus carrying bike" src="http://upload.wikimedia.org/wikipedia/commons/thumb/0/09/TriMet_1990_Gillig_bus_carrying_bike.jpg/240px-TriMet_1990_Gillig_bus_carrying_bike.jpg" width="240">

By Steve Morgan (Own work) [ href="http://www.altenergystocks.com/archives/2012/01/www.creativecommons.org/licenses/by-sa/3.0">CC-BY-SA-3.0 or GFDL], href="http://commons.wikimedia.org/wiki/File%3ATriMet_1990_Gillig_bus_carrying_bike.jpg">via Wikimedia Commons

Electric vehicles (EVs) may be cool and appeal to early-adopter
techies and some conspicuously consuming greens, but I think href="http://www.altenergystocks.com/archives/2011/09/its_time_to_kill_the_car_culture_drive_a_stake_through_its_heart_and_deincarnate_mobility.html">EV

adoption will be a long, hard slog.  The technologies
which are likely to advance faster are those that are already
economic, but also save transportation fuel.  Alternative
transportation such as biking, light rail, and buses top my list.

7. href="http://www.altenergystocks.com/comm/content/accell/"> style="font-weight: bold;">Accell Group (ACCEL.AS,
€14.15/$18.33) is a Netherlands based bicycle maker which I
recently highlighted as a href="http://www.altenergystocks.com/archives/2011/11/time_to_buy_one_of_the_best_peak_oil_investments.html">peak

oil investment to buy now, because the  company has
been href="http://www.altenergystocks.com/archives/2011/12/navigating_the_clean_and_bloody_streets_of_europe.html">battered

by the EU crisis.  Accell is up 11% since then,
although the stock still has significant Europe risk.

8. href="http://www.altenergystocks.com/comm/content/new-flyer-industries/"> style="font-weight: bold;">New Flyer Industries
(NFYEF.PK $5.6492, NFI.TO) is the largest North American
manufacturer of heavy duty transit buses, and currently looks like
a steal, despite the fact that the cyclical bus industry is in a
downturn, undermining profits. 

Both alternative transportation stocks pay healthy dividends,
with Accell’s over 6%, and New Flyer’s expected to fall next year
to a still healthy 8% to 9% at the current stock price.

Renewable Energy Developers

cellpadding="2" cellspacing="2">

src="http://www.altenergystocks.com/archives/Kingman%20solar%20and%20wind.png">

Western Wind’s Kingman I Wind & Solar park. Photo courtesy of the company.

With href="http://www.altenergystocks.com/archives/2011/12/solar_one_chart_that_highlights_the_adjustment_in_the_industry.html">overcapacity

among solar module and wind turbine manufacturers, the
consumers solar modules and wind turbines seem best placed to
benefit.  Low prices are not only good if you are a homeowner
looking to put a small PV system on your roof, they are also good
for renewable energy developers.

Government subsidies may be cut, but manufacturers still have
product to sell, and they’ll continue to do so as long as the
price exceeds their marginal cost of production… even if that
means they’ll never recoup the capital invested in their
factories.

This is good news for renewable project developers who have
projects locked in with the current subsidy regime, and who have
the financing to build them.  The improved economics of
owning solar farms can not be more aptly demonstrated by the
purchase of a href="http://www.altenergystocks.com/archives/2011/12/buffett_buys_into_another_solar_project_expect_more_to_follow.html">second

solar farm by Warren Buffett controlled MidAmerican Energy
Holding href="http://www.altenergystocks.com/archives/2011/12/buffett_buys_into_another_solar_project_expect_more_to_follow.html">s.

While selling renewable energy equipment can be an extremely
competitive business with constantly eroding margins, power
production is one of the most defensive businesses there is, with
electricity usually sold under long term (15-20 years) contracts
at pre-determined prices.  Nevertheless, small renewable
energy power producers are looking cheap compared to their future
discounted cash flows. 

8. href="http://www.altenergystocks.com/comm/content/finavera-renewables/"> style="font-weight: bold;"> Finavera Wind Energy
(FNVRF.PK, $0.409) is a wind project developer in Ireland
and British Columbia.  Although the company is small, risk is
much reduced by href="http://www.finavera.com/company/update/development-agreement-ge">joint

development agreements with industry heavyweight like GE
Energy ( href="http://www.altenergystocks.com/comm/content/general-electric/">GE),

which will be providing the equity needed to develop the company’s
first 77 MW project in British Columbia, and has indicated
interest in additional projects on similar terms.  This
outside financial muscle is good, since the company’s balance
sheet is weak, but the company is working to rectify that: 
Finavera just href="http://www.digitaljournal.com/pr/535675">closed a $442M
private placement at $0.45 a unit (1 share plus half a 12
month $0.55 warrant.)

9. href="http://www.altenergystocks.com/comm/content/magma/"> style="font-weight: bold;">Western Wind Energy Corp
(WNDEF.PK, $1.96) just completed its 120 MW Windstar project
in time to qualify for the 30% federal cash grant before it expired
at the end of 2011.  Based just on the company’s completed and
advanced projects, I think the href="http://www.altenergystocks.com/archives/2011/11/western_wind_a_clean_energy_rodney_dangerfield.html">discounted

cash flow value of Western Wind is now approximately $6,
making the company a safe bet with an easy 2-3x upside.

10. href="http://www.altenergystocks.com/comm/content/magma/"> style="font-weight: bold;">Alterra Power Corp. (MGMXF.PK
$0.40, AXY.TO), formed by the href="http://www.altenergystocks.com/archives/2011/04/the_magmaplutonic_merger.html">merger

of Magma Energy and Plutonic Power Corp, Alterra has a solid
cash position and a diversified base of producing assets across both
technologies and geographies.  As the company continues to
develop projects in-house and bulk up through mergers and
acquisitions, I expect the stock price to increase towards the value
of its assets, leading to outsize gains for investors who buy at the
currently depressed price, which is currently half of book value,
and includes $0.10 a share in cash.

Hedge

href="http://commons.wikimedia.org/wiki/File%3AHedge_(PSF).png"> alt="Hedge (PSF)"
src="http://upload.wikimedia.org/wikipedia/commons/thumb/3/30/Hedge_(PSF).png/120px-Hedge_(PSF).png"
style="border: 0px solid; width: 120px; height: 84px;"
align="right">

As discussed above, I think 2012 is a good year to hedge against
a broad market decline, and buying puts is the simplest and safest
way to do this. 

SPY ($125.50) tracks the S&P 500 and has a fairly liquid
options.  In order to be able to hedge ten stocks with an
equal investment in puts, we’ll need to buy significantly
out-of-the money puts.  For a complete hedge, we’d want the
notional value of the underlying shares of SPY to be equal to the
value of the hedged portfolio times the portfolio’s beta. 
Since I don’t put a lot of faith in such calcualtions because
betas and other correlations tend to change during market crises,
so I’ll just guess and use:

SPY January 2013 $110 Put
(SPY130119P00110000,
$7.81).  For every $781 put contract, the notional value of
the underlyng is $11000.  If we assume our portfolio’s beta
is 1.1, each such put contract would be sufficient to hedge a
$10,000 portfolio.  The beta of 1.1 is just a guess, but it
makes for round numbers.  Betas are generally near 1, and are
usually higher for riskier stocks.

This
hedge not only provides us with some insurance against a large
(greater than 13.4% = 1-110/125.5) decline in the S&P 500, it
also makes the hedged portfolio greener than the unhedged
one.  Puts and shorts are effectively dis-investments in the
underlying stock or ETF, and to the extent that companies in the
S&P 500 index reflect the generally “brown” economy, the
hedged portfolio is greener than the unhedged one.

What will 2012 Bring?

I’m optimistic about 2012.  Unless we see a total economic
meltdown (for which I suggest readers hedge their portfolios, as
discussed above), I expect strong appreciation of this portfolio
of undervalued clean energy stocks in 2012.

As usual, I’ll track the performance with quarterly updates, with
the stock picks benchmarked against PBW.

DISCLOSURE: Long WFIFF, LIME, AMRC, RKWBF, WM, VE, ACCEL, NFYEF,
FNVRF, WNDEF, MGMXF, and puts on IWM and SPY. style="font-style: italic;">


DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad, CFA

There is a silver lining to the style="font-weight: bold;"
href="http://www.altenergystocks.com/archives/2011/12/ten_clean_energy_stocks_for_2011_year_in_review.html">
horrible year clean energy stocks had in 2011 style="font-weight: bold;">: the opportunity to buy clean energy
stocks (often considered a growth sector) at prices one would
expect from value stocks.

Each year since 2008 I have published an annual list of ten clean
energy stocks I thought were good buys at the beginning of the
year.  While the 2008 list was not really intended as an
investment portfolio, my annual lists quickly evolved into a
mini-portfolio of stock intended for hands-off investors who did
not want to pay the high fees of clean energy mutual funds, but
who, like me, saw shortcomings in the available clean energy
exchange traded funds.  In particular, the clean energy
exchange traded funds (ETFs) and href="http://www.altenergystocks.com/archives/2010/11/alternative_energy_and_climate_change_mutual_funds_part_ii.html">
most clean energy mutual funds) are href="http://www.altenergystocks.com/archives/2010/12/the_best_clean_and_renewable_energy_etfs.html">
far too focused on high profile sectors like solar and have
hardly any exposure to the most economic clean energy sectors,
such as href="http://www.altenergystocks.com/comm/content/energy-efficiency-stocks/">energy

efficiency, href="http://www.altenergystocks.com/comm/content/alternative-transportation-stocks/">alternative

transportation, and href="http://www.altenergystocks.com/comm/content/biomass-stocks/">biomass. 

Most clean energy ETFs come with relatively high costs for ETFs
(usually around 0.6% to 0.7%), which is expensive enough that a href="http://www.altenergystocks.com/archives/2009/03/costs_of_green_stocks_vs_costs_of_green_funds.html">small

portfolio of clean energy stocks can be acquired for less
over a modest holding period.

With that in mind, I now focus my annual list on the most
economic clean energy sectors.  Within those sectors, I
include stocks I currently consider relatively good values,
similar to the href="http://www.altenergystocks.com/archives/2009/11/green_energy_investing_for_beginners_part_iv_model_portfolio.html">clean

energy model portfolio I wrote about in late 2009.

The relative results have been good, when compared to the returns
investors would have gotten if they had invested in the clean
energy ETFs I use as a benchmark.  (I’ve currently settled on
the Powershares Wilderhill Clean Energy ETF ( href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW)
as a benchmark, because it is the most widely held of all clean
energy ETFs, but I used href="http://www.altenergystocks.com/comm/content/van-eck-global-alternative-energy-fund/">GEX

and href="http://www.altenergystocks.com/comm/content/ishares-sp-global-clean-energy-index/">ICLN

in the early years.)  Over the past four years, my picks
have outperformed the benchmark by href="http://www.altenergystocks.com/archives/2008/12/update_ten_speculations_for_2008.html">12%

in

2008, href="http://www.altenergystocks.com/archives/2009/12/in_review_10_clean_energy_stocks_for_2009.html">45%

in

2009, href="http://www.altenergystocks.com/archives/2010/12/ten_clean_energy_stocks_for_2010_the_year_in_review.html">10%

in

2010, and most recently by href="http://www.altenergystocks.com/archives/2011/12/ten_clean_energy_stocks_for_2011_year_in_review.html">4%

in 2011, despite company-specific bad news for three of the
stocks in the portfolio.

The Best Opportunity Since Early
2009

Despite the good relative performance, the last four years have
been so bad for clean energy in general that someone who had been
following the portfolio since 2008 would still be down because of
large losses in 2008 and 2011.  The upside of this poor
performance is that now is the best time to buy clean energy
stocks since the start of 2009. 

In both 2010 and 2011, I cautioned readers that the stocks I
listed were only good values relative to clean energy stocks in
general.  This year, as in 2009, I have the pleasure of
bringing you a list of ten clean energy stocks I think are good
values at current prices.   This does not mean that my
current crop of clean energy names can’t fall, but it does mean
that they have much more upside potential than they did in either
of the last two years.  If this portfolio ends 2012 lower
than it is now, I’m confident the decline will have been caused by
a fall of the stock market as a whole: Bad news specific to clean
energy seems to be more than adequately reflected in the current
prices of clean energy stocks.

That said, the fragile economy and political paralysis in both
the US and Europe hold many risks for the stock market in general
in 2012, so investors in these stocks would probably be wise to
hedge their positions with puts on broad market ETFs such as SPY
and IWM.

The Picks

Energy Efficiency

align="left">

src="http://www.altenergystocks.com/archives/LED%20Flood.JPG">

A dimmable LED downlight. Photo by author

Energy Efficiency has long been a staple of my annual lists, because
energy efficiency measures make sense in both good times and bad,
both as a way to save money, and to stimulate the economy. 
Because energy efficiency measures cost less than conventional
energy, they stimulate economic activity twice: first when they are
installed (as would any investment) and then for years to come, as
the energy cost savings are spent on other goods.

My energy efficiency picks are:

 1. href="http://www.altenergystocks.com/comm/content/waterfurnace-renewable-energy/"> style="font-weight: bold;">Waterfurance Renewable Energy
(WFIFF.PK $15.3455, WFI.TO), a perennial favorite because of
their profitable business selling geothermal heat pumps. 
Waterfurnace recently increased their quarterly dividend to $0.24,
for a 6% annual
yield.

2. href="http://www.altenergystocks.com/comm/content/lime-solar/"> style="font-weight: bold;">Lime Energy (LIME, $3.18)
was one of my href="http://www.forbes.com/sites/tomkonrad/2011/11/09/stock-picks-with-a-whole-systems-approach/">two

top picks in the energy services sector, the other being
Ameresco ( href="http://www.altenergystocks.com/comm/content/ameresco/">AMRC.)

I chose to include LIME in this list rather than AMRC because AMRC
is already up 35% since I recommended it.  While I still like
AMRC at current prices, I think LIME has better potential upside.

3. href="http://www.altenergystocks.com/comm/content/honeywell/"> style="font-weight: bold;"> Honeywell (HON, $54.35) has

a strong business providing building controls and efficient
heating and cooling equipment, as well as a performance
contracting arm.  I currently like the company’s relatively
modest trailing and forward P/E’s of 16 and 12, respectively,
strong cash flow, low debt, and 2.7% annual dividend yield.

4. href="http://www.altenergystocks.com/comm/content/rockwool/">Rockwool
International href="http://www.altenergystocks.com/comm/content/rockwool/">(RKWBF.PK
$82.29, href="http://www.rockwool.com/investor/share+information">ROCK-B.CO
473 DKK10) is an international insulation manufacturer whose share
price has fallen because of the EU crisis along with many other
Eutopean stocks.  Yet with only 43% of 2010 revenues
originating in Europe and headquarters outside the Euro zone, the
company seems relatively href="http://www.altenergystocks.com/archives/2011/12/navigating_the_clean_and_bloody_streets_of_europe.html">insulated
from the full effects of a Euro crisis.  Rockwool pays
an annual dividend, and has a yield of 2% based on the most recent
dividend payment.

Biomass

cellpadding="2" cellspacing="2">

href="http://commons.wikimedia.org/wiki/File%3ASchrotthaufen_Berlin.jpg"> alt="Schrotthaufen Berlin" src="http://upload.wikimedia.org/wikipedia/commons/thumb/0/09/Schrotthaufen_Berlin.jpg/240px-Schrotthaufen_Berlin.jpg" width="240">

By S. Müller (Own work) [CC-BY-2.5], href="http://commons.wikimedia.org/wiki/File%3ASchrotthaufen_Berlin.jpg">via Wikimedia Commons

I think one of the best ways to play cellulosic biofuels is to
buy the companies which control the cheapest potential
feedstocks.  I’m not sure that the best use of trash is to
make biofuel, but whether it is recycled, composted, digested,
incinerated, or converted in to biofuel, I see trash as a future
source of revenue in a resource constrained world, and who better
to profit from trash than the companies that collect it?

Last summer, I highlighted environmental services companies as a
way to invest in biomass in my article href="http://www.altenergystocks.com/archives/2011/08/trash_stocks_trashed_an_income_opportunity_1.html">Trash

Stocks Trashed: An Income Opportunity? 

5. href="http://www.altenergystocks.com/comm/content/waste-management/"> style="font-weight: bold;">Waste Management (WM,
$32.71) was my top pick at the time.  Since then, the
stock has since risen over $2 while continuing to pay its $0.34
quarterly dividend.

6. href="http://www.altenergystocks.com/comm/content/veolia-environment/"> style="font-weight: bold;">Veolia Environnement SA (VE,
$11.05) was then trading around $16, and I was cautious
about the compnay.  Today, Veolia seems too cheap to pass up,
despite the fact that I expect its 2012 annual dividend to be
significantly lower than the $1.47 (13.3%) paid in 2011.

Alternative Transport

cellpadding="2" cellspacing="2">

href="http://commons.wikimedia.org/wiki/File%3ATriMet_1990_Gillig_bus_carrying_bike.jpg"> alt="TriMet 1990 Gillig bus carrying bike" src="http://upload.wikimedia.org/wikipedia/commons/thumb/0/09/TriMet_1990_Gillig_bus_carrying_bike.jpg/240px-TriMet_1990_Gillig_bus_carrying_bike.jpg" width="240">

By Steve Morgan (Own work) [ href="http://www.altenergystocks.com/archives/2012/01/www.creativecommons.org/licenses/by-sa/3.0">CC-BY-SA-3.0 or GFDL], href="http://commons.wikimedia.org/wiki/File%3ATriMet_1990_Gillig_bus_carrying_bike.jpg">via Wikimedia Commons

Electric vehicles (EVs) may be cool and appeal to early-adopter
techies and some conspicuously consuming greens, but I think href="http://www.altenergystocks.com/archives/2011/09/its_time_to_kill_the_car_culture_drive_a_stake_through_its_heart_and_deincarnate_mobility.html">EV

adoption will be a long, hard slog.  The technologies
which are likely to advance faster are those that are already
economic, but also save transportation fuel.  Alternative
transportation such as biking, light rail, and buses top my list.

7. href="http://www.altenergystocks.com/comm/content/accell/"> style="font-weight: bold;">Accell Group (ACCEL.AS,
€14.15/$18.33) is a Netherlands based bicycle maker which I
recently highlighted as a href="http://www.altenergystocks.com/archives/2011/11/time_to_buy_one_of_the_best_peak_oil_investments.html">peak

oil investment to buy now, because the  company has
been href="http://www.altenergystocks.com/archives/2011/12/navigating_the_clean_and_bloody_streets_of_europe.html">battered

by the EU crisis.  Accell is up 11% since then,
although the stock still has significant Europe risk.

8. href="http://www.altenergystocks.com/comm/content/new-flyer-industries/"> style="font-weight: bold;">New Flyer Industries
(NFYEF.PK $5.6492, NFI.TO) is the largest North American
manufacturer of heavy duty transit buses, and currently looks like
a steal, despite the fact that the cyclical bus industry is in a
downturn, undermining profits. 

Both alternative transportation stocks pay healthy dividends,
with Accell’s over 6%, and New Flyer’s expected to fall next year
to a still healthy 8% to 9% at the current stock price.

Renewable Energy Developers

cellpadding="2" cellspacing="2">

src="http://www.altenergystocks.com/archives/Kingman%20solar%20and%20wind.png">

Western Wind’s Kingman I Wind & Solar park. Photo courtesy of the company.

With href="http://www.altenergystocks.com/archives/2011/12/solar_one_chart_that_highlights_the_adjustment_in_the_industry.html">overcapacity

among solar module and wind turbine manufacturers, the
consumers solar modules and wind turbines seem best placed to
benefit.  Low prices are not only good if you are a homeowner
looking to put a small PV system on your roof, they are also good
for renewable energy developers.

Government subsidies may be cut, but manufacturers still have
product to sell, and they’ll continue to do so as long as the
price exceeds their marginal cost of production… even if that
means they’ll never recoup the capital invested in their
factories.

This is good news for renewable project developers who have
projects locked in with the current subsidy regime, and who have
the financing to build them.  The improved economics of
owning solar farms can not be more aptly demonstrated by the
purchase of a href="http://www.altenergystocks.com/archives/2011/12/buffett_buys_into_another_solar_project_expect_more_to_follow.html">second

solar farm by Warren Buffett controlled MidAmerican Energy
Holding href="http://www.altenergystocks.com/archives/2011/12/buffett_buys_into_another_solar_project_expect_more_to_follow.html">s.

While selling renewable energy equipment can be an extremely
competitive business with constantly eroding margins, power
production is one of the most defensive businesses there is, with
electricity usually sold under long term (15-20 years) contracts
at pre-determined prices.  Nevertheless, small renewable
energy power producers are looking cheap compared to their future
discounted cash flows. 

8. href="http://www.altenergystocks.com/comm/content/finavera-renewables/"> style="font-weight: bold;"> Finavera Wind Energy
(FNVRF.PK, $0.409) is a wind project developer in Ireland
and British Columbia.  Although the company is small, risk is
much reduced by href="http://www.finavera.com/company/update/development-agreement-ge">joint

development agreements with industry heavyweight like GE
Energy ( href="http://www.altenergystocks.com/comm/content/general-electric/">GE),

which will be providing the equity needed to develop the company’s
first 77 MW project in British Columbia, and has indicated
interest in additional projects on similar terms.  This
outside financial muscle is good, since the company’s balance
sheet is weak, but the company is working to rectify that: 
Finavera just href="http://www.digitaljournal.com/pr/535675">closed a $442M
private placement at $0.45 a unit (1 share plus half a 12
month $0.55 warrant.)

9. href="http://www.altenergystocks.com/comm/content/magma/"> style="font-weight: bold;">Western Wind Energy Corp
(WNDEF.PK, $1.96) just completed its 120 MW Windstar project
in time to qualify for the 30% federal cash grant before it expired
at the end of 2011.  Based just on the company’s completed and
advanced projects, I think the href="http://www.altenergystocks.com/archives/2011/11/western_wind_a_clean_energy_rodney_dangerfield.html">discounted

cash flow value of Western Wind is now approximately $6,
making the company a safe bet with an easy 2-3x upside.

10. href="http://www.altenergystocks.com/comm/content/magma/"> style="font-weight: bold;">Alterra Power Corp. (MGMXF.PK
$0.40, AXY.TO), formed by the href="http://www.altenergystocks.com/archives/2011/04/the_magmaplutonic_merger.html">merger

of Magma Energy and Plutonic Power Corp, Alterra has a solid
cash position and a diversified base of producing assets across both
technologies and geographies.  As the company continues to
develop projects in-house and bulk up through mergers and
acquisitions, I expect the stock price to increase towards the value
of its assets, leading to outsize gains for investors who buy at the
currently depressed price, which is currently half of book value,
and includes $0.10 a share in cash.

Hedge

href="http://commons.wikimedia.org/wiki/File%3AHedge_(PSF).png"> alt="Hedge (PSF)"
src="http://upload.wikimedia.org/wikipedia/commons/thumb/3/30/Hedge_(PSF).png/120px-Hedge_(PSF).png"
style="border: 0px solid; width: 120px; height: 84px;"
align="right">

As discussed above, I think 2012 is a good year to hedge against
a broad market decline, and buying puts is the simplest and safest
way to do this. 

SPY ($125.50) tracks the S&P 500 and has a fairly liquid
options.  In order to be able to hedge ten stocks with an
equal investment in puts, we’ll need to buy significantly
out-of-the money puts.  For a complete hedge, we’d want the
notional value of the underlying shares of SPY to be equal to the
value of the hedged portfolio times the portfolio’s beta. 
Since I don’t put a lot of faith in such calcualtions because
betas and other correlations tend to change during market crises,
so I’ll just guess and use:

SPY January 2013 $110 Put
(SPY130119P00110000,
$7.81).  For every $781 put contract, the notional value of
the underlyng is $11000.  If we assume our portfolio’s beta
is 1.1, each such put contract would be sufficient to hedge a
$10,000 portfolio.  The beta of 1.1 is just a guess, but it
makes for round numbers.  Betas are generally near 1, and are
usually higher for riskier stocks.

This
hedge not only provides us with some insurance against a large
(greater than 13.4% = 1-110/125.5) decline in the S&P 500, it
also makes the hedged portfolio greener than the unhedged
one.  Puts and shorts are effectively dis-investments in the
underlying stock or ETF, and to the extent that companies in the
S&P 500 index reflect the generally “brown” economy, the
hedged portfolio is greener than the unhedged one.

What will 2012 Bring?

I’m optimistic about 2012.  Unless we see a total economic
meltdown (for which I suggest readers hedge their portfolios, as
discussed above), I expect strong appreciation of this portfolio
of undervalued clean energy stocks in 2012.

As usual, I’ll track the performance with quarterly updates, with
the stock picks benchmarked against PBW.

DISCLOSURE: Long WFIFF, LIME, AMRC, RKWBF, WM, VE, ACCEL, NFYEF,
FNVRF, WNDEF, MGMXF, and puts on IWM and SPY. style="font-style: italic;">


DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad CFA

My clean energy portfolio outperformed again in 2011, but it was
a Pyrrhic victory.

Without a doubt, 2011 was a horrible year for Clean Energy
stocks, href="http://www.altenergystocks.com/archives/2011/10/10_clean_energy_stocks_for_2011_its_2008_all_over_again_1.html">nearly

as bad as 2008.  The difference was that, in 2008, the
entire stock market was crushed, while this year, the broad market
ended with only modest declines compared to clean energy stocks.

Based on 2010 and 2011 closing prices, the broad market (as
measured by the performance of the Russell 2000 index), was down
10%, while clean energy stocks were down 52%, as measured by the
most widely held href="http://www.altenergystocks.com/comm/content/etfs/">clean
energy ETF, the Powershares Wilderhill Clean Energy ETF ( href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW),

which I use as a benchmark for the sector.   For the fourth
year running since I began publishing an annual list of picks, my
portfolio again beat my clean energy benchmark, but only because
of the miserable performance of PBW.  The portfolio as a
whole lost 48% after taking into account the effect of
dividends.  (My portfolio exceeded its benchmark by href="http://www.altenergystocks.com/archives/2008/12/update_ten_speculations_for_2008.html">12%

in 2008, href="http://www.altenergystocks.com/archives/2009/12/in_review_10_clean_energy_stocks_for_2009.html">45%

in 2009, and href="http://www.altenergystocks.com/archives/2010/12/ten_clean_energy_stocks_for_2010_the_year_in_review.html">10%

in 2010.)  You can find the original article
introducing href="http://www.altenergystocks.com/archives/2011/01/ten_clean_and_green_energy_stocks_for_2011_1.html">2011′s

clean energy picks here.

What Happened?

I attribute my superior performance in previous years to better
sub-sector selection.  I generally avoid href="http://www.altenergystocks.com/comm/content/solar-stocks/">solar

stocks because I have long felt that the solar sector was href="http://www.altenergystocks.com/archives/2009/10/why_do_green_energy_experts_buy_solar_stocks.html">
too popular among people who should know better and href="http://www.altenergystocks.com/archives/2010/03/solar_headwinds.html">too

competitive for companies to retain consistent long term
margins.  Declining solar manufacturing margins arrived with
a vengeance in 2011, causing an implosion of solar stock prices,
including a couple high-profile bankruptcies.

href="http://www.altenergystocks.com/comm/content/energy-efficiency-stocks/">Energy

Efficiency stocks are usually central to my portfolios,
since energy efficiency has better economics that other energy
technologies (including fossil fuels), although this year I chose
to include two demand-response stocks EnerNOC ( href="http://www.altenergystocks.com/comm/content/enernoc/">ENOC)
and Comverge ( href="http://www.altenergystocks.com/comm/content/comverge/">COMV)
among the energy efficiency picks and got badly burned, as
demand-response seems to be becoming commoditized as well.

Despite the fact that I managed to squeak out a win over PBW, I
consider 2011 my worst year to date.  Not only did I make the
inauspicious choice to bet on demand response, but I also picked
two geothermal developers, in the href="http://www.altenergystocks.com/archives/2011/02/outlook_for_geothermal_energy_stocks_in_2011.html">expectation

that 2011 would be a good year for geothermal stocks. 
In fact, not only did geothermal stocks fall even further out of
favor in 2011, but both of my picks suffered from nasty surprises
early in the year, with Ram Power ( href="http://www.altenergystocks.com/comm/content/rampower/">RAMPF.PK)
reporting href="http://af.reuters.com/article/metalsNews/idAFSGE7160B420110207">large

cost overruns in the company’s flagship San Jacinto-Tizate
project in Nicaragua, followed by the resignation of the
company’s CEO href="http://www.altenergystocks.com/archives/2011/07/drill_for_geothermal_power_in_developing_countries_and_on_king_street.html">Hezy

Ram.  Ram later told me that he left over
“Irreconcilable differences with the board and controlling
shareholders, about the future course of the company and how to
get there.”

The news at Nevada Geothermal Power ( href="http://www.altenergystocks.com/comm/content/nevada-geothermal/">NGPLF.OB)
was even worse.  In May, the company announced a power
production shortfall and forecast a gradual temperature (and
output) decline at their href="http://www.altenergystocks.com/archives/2011/05/blue_mountain_dissapoints_nevada_geothermal_power_looks_like_a_takeover_target_1.html">flagship

Faulkner 1 geothermal plant at Blue Mountain. 
According to Nevada Geothermal CEO Brian Fairbank in a personal
conversation, the problem was that fractured rock at Blue Mountain
allows water from reinjection wells to travel much more quickly
than anticipated to the production wells, which has the effect of
cooling the produced water over time.

Bad news for specific stocks did not stop with these.  In
April, American Superconductor, now renamed AMSC ( href="http://www.altenergystocks.com/comm/content/american-superconductor-corporation/">AMSC)
admitted that their major customer href="http://www.altenergystocks.com/archives/2011/04/american_superconductor_reading_the_tea_leaves.html">had

refused shipments and had not paid for some previous shipments. 

As details emerged, the news only got worse.  Sinovel had
been href="http://www.altenergystocks.com/archives/2011/05/is_sinovel_planning_to_replace_american_superconductor_1.html">helping

to set up a Chinese supplier whose products competed with AMSC’s,
with some of the new rival’s technology href="http://www.masshightech.com/stories/2011/09/26/daily8-Former-AMSC-worker-pleads-guilty-in-espionage-case.html">stolen

from AMSC by a former employee.  AMSC is now pursuing
Sinovel in Chinese courts, but Chinese courts are not known for
their diligence in the protection of international intellectual
property.

For stock-by-stock performance, see the chart and table below:

src="http://www.altenergystocks.com/archives/10%20for%202011%20Q4.png"
height="832" width="520">

cols="10">

	Q1 change	Q1 div	Q2 change	Q2 div	Q3 change	Q3 div	Q4 change	Q4 div	Total Return
WFIFF	align="RIGHT">7%	align="RIGHT">0.9%	align="RIGHT">-12%	align="RIGHT">0.9%	align="RIGHT">-29%	align="RIGHT">0.9%	align="RIGHT">-9%	align="RIGHT">1.0%	align="RIGHT">-39%
COMV	align="RIGHT">-36%		align="RIGHT">-22%		align="RIGHT">-2%		align="RIGHT">-12%		align="RIGHT">-72%
ENOC	align="RIGHT">-19%		align="RIGHT">-15%		align="RIGHT">-19%		align="RIGHT">10%		align="RIGHT">-44%
CVTPF	align="RIGHT">10%		align="RIGHT">-17%		align="RIGHT">-26%		align="RIGHT">-8%		align="RIGHT">-41%
TLVT/NFYEF	align="RIGHT">9%		41%		align="RIGHT">-47%	align="RIGHT">5.5%	align="RIGHT">-7%	align="RIGHT">3.9%	align="RIGHT">6%
PCH	align="RIGHT">20%	align="RIGHT">1.6%	align="RIGHT">-10%	align="RIGHT">1.6%	align="RIGHT">-30%	align="RIGHT">1.6%	align="RIGHT">-1%	align="RIGHT">1.0%	align="RIGHT">-16%
NGLPF	align="RIGHT">-11%		align="RIGHT">-66%		align="RIGHT">-9%		align="RIGHT">-4%		align="RIGHT">-89%
RAMPF	align="RIGHT">-35%		align="RIGHT">-43%		align="RIGHT">-4%		align="RIGHT">4%		align="RIGHT">-78%
AMSC	align="RIGHT">-18%		align="RIGHT">-51%		align="RIGHT">-15%		align="RIGHT">-1%		align="RIGHT">-84%
VE	align="RIGHT">4%		align="RIGHT">-1%	align="RIGHT">5.8%	align="RIGHT">-55%		align="RIGHT">-12%		align="RIGHT">-58%
Portfolio	align="RIGHT">-6%	align="RIGHT">0.2%	align="RIGHT">-20%	align="RIGHT">0.8%	align="RIGHT">-19%	align="RIGHT">0.8%	align="RIGHT">-5%	align="RIGHT">0.6%	align="RIGHT">-48%
PBW	align="RIGHT">1%		align="RIGHT">-14%		align="RIGHT">-35%		align="RIGHT">-4%		align="RIGHT">-52%
Russell 2K	align="RIGHT">4%		align="RIGHT">1%		align="RIGHT">-27%		align="RIGHT">12%		align="RIGHT">-10%

Outlook for 2012

With fully 30% of the companies in my list suffering from
unanticipated bad news, I’m a bit shocked that the portfolio still
managed to beat its benchmark.  But with my portfolio down by
almost half, this is a victory of the “Win the battle, lose the
war” variety, and not one I care to repeat.  Fortunately, I
don’t think I’ll have to. 

With so many clean energy stocks having fallen so far, I have
been finding stocks which I consider good values for much of the
last 6 months.  While 2011 href="http://www.altenergystocks.com/archives/2011/10/trade_like_its_2008.html">
felt a lot like 2008, I think 2012 has the potential to be a
lot more like 2009 than any other year since I started this
series.  In 2009, my picks were up 57%, while PBW was up
27%. 

Expect to see my new list for 2012 in the next few days.

DISCLOSURE: Long VE, RAMPF,
NFYEF, WFIFF, CVTPF, and calls on AMSC. style="font-style: italic;">


DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad CFA

My clean energy portfolio outperformed again in 2011, but it was
a Pyrrhic victory.

Without a doubt, 2011 was a horrible year for Clean Energy
stocks, href="http://www.altenergystocks.com/archives/2011/10/10_clean_energy_stocks_for_2011_its_2008_all_over_again_1.html">nearly

as bad as 2008.  The difference was that, in 2008, the
entire stock market was crushed, while this year, the broad market
ended with only modest declines compared to clean energy stocks.

Based on 2010 and 2011 closing prices, the broad market (as
measured by the performance of the Russell 2000 index), was down
10%, while clean energy stocks were down 52%, as measured by the
most widely held href="http://www.altenergystocks.com/comm/content/etfs/">clean
energy ETF, the Powershares Wilderhill Clean Energy ETF ( href="http://www.altenergystocks.com/comm/content/powershares-clean-energy-etf/">PBW),

which I use as a benchmark for the sector.   For the fourth
year running since I began publishing an annual list of picks, my
portfolio again beat my clean energy benchmark, but only because
of the miserable performance of PBW.  The portfolio as a
whole lost 48% after taking into account the effect of
dividends.  (My portfolio exceeded its benchmark by href="http://www.altenergystocks.com/archives/2008/12/update_ten_speculations_for_2008.html">12%

in 2008, href="http://www.altenergystocks.com/archives/2009/12/in_review_10_clean_energy_stocks_for_2009.html">45%

in 2009, and href="http://www.altenergystocks.com/archives/2010/12/ten_clean_energy_stocks_for_2010_the_year_in_review.html">10%

in 2010.)  You can find the original article
introducing href="http://www.altenergystocks.com/archives/2011/01/ten_clean_and_green_energy_stocks_for_2011_1.html">2011′s

clean energy picks here.

What Happened?

I attribute my superior performance in previous years to better
sub-sector selection.  I generally avoid href="http://www.altenergystocks.com/comm/content/solar-stocks/">solar

stocks because I have long felt that the solar sector was href="http://www.altenergystocks.com/archives/2009/10/why_do_green_energy_experts_buy_solar_stocks.html">
too popular among people who should know better and href="http://www.altenergystocks.com/archives/2010/03/solar_headwinds.html">too

competitive for companies to retain consistent long term
margins.  Declining solar manufacturing margins arrived with
a vengeance in 2011, causing an implosion of solar stock prices,
including a couple high-profile bankruptcies.

href="http://www.altenergystocks.com/comm/content/energy-efficiency-stocks/">Energy

Efficiency stocks are usually central to my portfolios,
since energy efficiency has better economics that other energy
technologies (including fossil fuels), although this year I chose
to include two demand-response stocks EnerNOC ( href="http://www.altenergystocks.com/comm/content/enernoc/">ENOC)
and Comverge ( href="http://www.altenergystocks.com/comm/content/comverge/">COMV)
among the energy efficiency picks and got badly burned, as
demand-response seems to be becoming commoditized as well.

Despite the fact that I managed to squeak out a win over PBW, I
consider 2011 my worst year to date.  Not only did I make the
inauspicious choice to bet on demand response, but I also picked
two geothermal developers, in the href="http://www.altenergystocks.com/archives/2011/02/outlook_for_geothermal_energy_stocks_in_2011.html">expectation

that 2011 would be a good year for geothermal stocks. 
In fact, not only did geothermal stocks fall even further out of
favor in 2011, but both of my picks suffered from nasty surprises
early in the year, with Ram Power ( href="http://www.altenergystocks.com/comm/content/rampower/">RAMPF.PK)
reporting href="http://af.reuters.com/article/metalsNews/idAFSGE7160B420110207">large

cost overruns in the company’s flagship San Jacinto-Tizate
project in Nicaragua, followed by the resignation of the
company’s CEO href="http://www.altenergystocks.com/archives/2011/07/drill_for_geothermal_power_in_developing_countries_and_on_king_street.html">Hezy

Ram.  Ram later told me that he left over
“Irreconcilable differences with the board and controlling
shareholders, about the future course of the company and how to
get there.”

The news at Nevada Geothermal Power ( href="http://www.altenergystocks.com/comm/content/nevada-geothermal/">NGPLF.OB)
was even worse.  In May, the company announced a power
production shortfall and forecast a gradual temperature (and
output) decline at their href="http://www.altenergystocks.com/archives/2011/05/blue_mountain_dissapoints_nevada_geothermal_power_looks_like_a_takeover_target_1.html">flagship

Faulkner 1 geothermal plant at Blue Mountain. 
According to Nevada Geothermal CEO Brian Fairbank in a personal
conversation, the problem was that fractured rock at Blue Mountain
allows water from reinjection wells to travel much more quickly
than anticipated to the production wells, which has the effect of
cooling the produced water over time.

Bad news for specific stocks did not stop with these.  In
April, American Superconductor, now renamed AMSC ( href="http://www.altenergystocks.com/comm/content/american-superconductor-corporation/">AMSC)
admitted that their major customer href="http://www.altenergystocks.com/archives/2011/04/american_superconductor_reading_the_tea_leaves.html">had

refused shipments and had not paid for some previous shipments. 

As details emerged, the news only got worse.  Sinovel had
been href="http://www.altenergystocks.com/archives/2011/05/is_sinovel_planning_to_replace_american_superconductor_1.html">helping

to set up a Chinese supplier whose products competed with AMSC’s,
with some of the new rival’s technology href="http://www.masshightech.com/stories/2011/09/26/daily8-Former-AMSC-worker-pleads-guilty-in-espionage-case.html">stolen

from AMSC by a former employee.  AMSC is now pursuing
Sinovel in Chinese courts, but Chinese courts are not known for
their diligence in the protection of international intellectual
property.

For stock-by-stock performance, see the chart and table below:

src="http://www.altenergystocks.com/archives/10%20for%202011%20Q4.png"
height="832" width="520">

cols="10">

	Q1 change	Q1 div	Q2 change	Q2 div	Q3 change	Q3 div	Q4 change	Q4 div	Total Return
WFIFF	align="RIGHT">7%	align="RIGHT">0.9%	align="RIGHT">-12%	align="RIGHT">0.9%	align="RIGHT">-29%	align="RIGHT">0.9%	align="RIGHT">-9%	align="RIGHT">1.0%	align="RIGHT">-39%
COMV	align="RIGHT">-36%		align="RIGHT">-22%		align="RIGHT">-2%		align="RIGHT">-12%		align="RIGHT">-72%
ENOC	align="RIGHT">-19%		align="RIGHT">-15%		align="RIGHT">-19%		align="RIGHT">10%		align="RIGHT">-44%
CVTPF	align="RIGHT">10%		align="RIGHT">-17%		align="RIGHT">-26%		align="RIGHT">-8%		align="RIGHT">-41%
TLVT/NFYEF	align="RIGHT">9%		41%		align="RIGHT">-47%	align="RIGHT">5.5%	align="RIGHT">-7%	align="RIGHT">3.9%	align="RIGHT">6%
PCH	align="RIGHT">20%	align="RIGHT">1.6%	align="RIGHT">-10%	align="RIGHT">1.6%	align="RIGHT">-30%	align="RIGHT">1.6%	align="RIGHT">-1%	align="RIGHT">1.0%	align="RIGHT">-16%
NGLPF	align="RIGHT">-11%		align="RIGHT">-66%		align="RIGHT">-9%		align="RIGHT">-4%		align="RIGHT">-89%
RAMPF	align="RIGHT">-35%		align="RIGHT">-43%		align="RIGHT">-4%		align="RIGHT">4%		align="RIGHT">-78%
AMSC	align="RIGHT">-18%		align="RIGHT">-51%		align="RIGHT">-15%		align="RIGHT">-1%		align="RIGHT">-84%
VE	align="RIGHT">4%		align="RIGHT">-1%	align="RIGHT">5.8%	align="RIGHT">-55%		align="RIGHT">-12%		align="RIGHT">-58%
Portfolio	align="RIGHT">-6%	align="RIGHT">0.2%	align="RIGHT">-20%	align="RIGHT">0.8%	align="RIGHT">-19%	align="RIGHT">0.8%	align="RIGHT">-5%	align="RIGHT">0.6%	align="RIGHT">-48%
PBW	align="RIGHT">1%		align="RIGHT">-14%		align="RIGHT">-35%		align="RIGHT">-4%		align="RIGHT">-52%
Russell 2K	align="RIGHT">4%		align="RIGHT">1%		align="RIGHT">-27%		align="RIGHT">12%		align="RIGHT">-10%

Outlook for 2012

With fully 30% of the companies in my list suffering from
unanticipated bad news, I’m a bit shocked that the portfolio still
managed to beat its benchmark.  But with my portfolio down by
almost half, this is a victory of the “Win the battle, lose the
war” variety, and not one I care to repeat.  Fortunately, I
don’t think I’ll have to. 

With so many clean energy stocks having fallen so far, I have
been finding stocks which I consider good values for much of the
last 6 months.  While 2011 href="http://www.altenergystocks.com/archives/2011/10/trade_like_its_2008.html">
felt a lot like 2008, I think 2012 has the potential to be a
lot more like 2009 than any other year since I started this
series.  In 2009, my picks were up 57%, while PBW was up
27%. 

Expect to see my new list for 2012 in the next few days.

DISCLOSURE: Long VE, RAMPF,
NFYEF, WFIFF, CVTPF, and calls on AMSC. style="font-style: italic;">


DISCLAIMER: The information and
trades provided here are for informational purposes only and are
not a solicitation to buy or sell any of these securities.
Investing involves substantial risk and you should evaluate your
own risk levels before you make any investment. Past results are
not an indication of future performance. Please take the time to
read the full disclaimer href="http://www.google.com/url?sa=D&q=http://www.altenergystocks.com/disclosures.html">here.

Tom Konrad CFA

Three stocks I sold recently, and
why.

Three years later, I’m still kicking myself that the href="http://www.altenergystocks.com/archives/2008/09/what_im_selling_and_will_be_buying_in_the_market_turmoil_1.html">severity

of the 2008 financial crisis and stock market collapse took me by
surprise. 

Not that I wasn’t in good company.  If a majority of investors
had been prepared for the crisis, it would never have happened in
the first place: The overpriced CDOs and other securities which were
a large part of the cause would never have become overpriced. 

But making excuses for past mistakes is not useful.  Learning
from them is.  This time around, when the market began to again
look overvalued in the latter half of 2009, I began hedging my
portfolio, increasing that hedge as the overvaluation became more
extreme over the last two years.  This has enabled me to
opportunistically buy fundamentally sound, high yielding stocks
among href="http://www.altenergystocks.com/archives/2011/08/trash_stocks_trashed_an_income_opportunity_1.html">waste

management companies, href="http://www.altenergystocks.com/archives/2011/09/two_high_yield_energy_efficiency_stocks_with_a_free_call_option_on_housing.html">energy

efficiency companies,  href="http://www.altenergystocks.com/archives/2011/09/dividends_and_value_among_renewable_energy_power_producers.html">renewable

energy power producers, and a href="http://www.altenergystocks.com/archives/2011/10/inverter_stocks_a_value_bos_play_on_solar.html">solar

balance of systems play over the last two months, because my
hedges produced liquidity as the market fell.

I expect that the market has farther to fall, so my hedges are still
in place, although I have not increased them to reflect my recent
purchases. 

Despite the success of my hedging strategy (at least so far), last
week I realized I was making one of the same mistakes I made in
2008: I had money tied up in companies that require functional
financial markets to succeed. 

Any company which needs to raise money over the next year or two
will almost certainly face significant share dilution in order to
attract new capital.  Hence, I’ve taken the opportunity of this
week’s mini-rally to sell the companies I was holding that will need
to raise new capital in the near future.  Even though these
companies are already trading significantly below the value of their
assets, shareholders are not likely to be able to realize the value
of those assets if the companies cannot raise new funds and outside
buyers do not appear. 

These companies are href="http://www.altenergystocks.com/comm/content/comverge/">Comverge

(COMV), href="http://www.altenergystocks.com/comm/content/enernoc/">EnerNOC

(ENOC), and href="http://www.altenergystocks.com/comm/content/nevada-geothermal/">Nevada

Geothermal Power (NGLPF.OB, NGP.V), which I said I was holding
in my href="http://www.altenergystocks.com/archives/2011/10/10_clean_energy_stocks_for_2011_its_2008_all_over_again_1.html">quarterly

review of my ten clean energy stocks for 2011.  The
parallels between 2008 and 2011 which I noted in writing that
article, as well as some href="http://www.economist.com/blogs/dailychart/2011/10/financial-markets">similar

parallels noted by the Economist got me thinking about other
parallels between the two years. That thought, in turn, led me to
decide to dump these three stocks despite their current cheap
valuations.
There’s no law that says a cheap stock can’t get cheaper, and when
funding dries up, cheap companies that have to rely on external
funding almost invariably get cheaper.  That’s why I href="http://www.altenergystocks.com/archives/2010/01/the_year_of_the_balance_sheet.html">called

2009 the “Year of the Balance Sheet.”  I now expect 2011
will also be a year of the balance sheet, and probably 2012 as
well.  Which is why I’ve decided to grit my teeth and take my
rather significant losses in these three stocks. 

I initially included Comverge and EnerNOC in my href="http://www.altenergystocks.com/archives/2011/01/ten_clean_and_green_energy_stocks_for_2011_1.html">ten

picks for 2011 because I was looking for smart grid stocks for
the portfolio, and I did not see many others which looked like good
values.  These two companies had fallen in late 2010, so they
seemed relatively attractive.  When they continued to fall in
early 2011, I href="http://www.altenergystocks.com/archives/2011/03/ten_clean_energy_stocks_for_2011_buying_opportunities_1.html">began

to buy them myself.  Nevada Geothermal was included
because I thought a small rally in geothermal stocks starting in
late 2010 was the start of something bigger.  The opposite
turned out to be true, partly because of a raft of bad news at
geothermal companies, not least at Nevada Geothermal.

In short, I let my enthusiasm for particular industries lure me into
investments in particular companies.  Letting our enthusiasm
for an industry or technology cloud our judgment about individual
companies is also a common mistake in investing, especially among
those of us drawn to clean energy. 

Lesson learned, I hope that admitting that mistake to myself (and
you) will keep me from letting my enthusiasm for clean energy from
doing my stock picking for me again.

DISCLOSURE: None.

DISCLAIMER: The information and trades provided here are for
informational purposes only and are not a solicitation to buy or
sell any of these securities. Investing involves substantial risk
and you should evaluate your own risk levels before you make any
investment. Past results are not an indication of future
performance. Please take the time to read the full disclaimer

href="http://www.google.com/url?sa=D&q=http%3A%2F%2Fwww.altenergystocks.com%2Fdisclosures.html"
style="font-style: italic;">here.

Tom Konrad CFA

Corrected version 8/11/2011

Apologies to readers who have been missing my articles
recently.  I’ve had little time to write as I have been too
busy trading.  Long-time readers know that I’ve been bearish
since the summer of 2009, and it has been a painful two years as I
maintained my short positions and puts in the face of a generally
rising market. 

Market Outlook

In my opinion, we are still a good distance from the bottom. 
The rise of the stock market over the last two years has been
predicated on stimulus spending at the Federal level and
Quantitative Easing (QE) from the Federal Reserve (Fed). 
Today, not only has stimulus spending ended, the recent debt limit
deal sets the Federal government on a decidedly contractionary
path.  While reducing government spending is prudent in the
long term, it is bound to have negative effects in the short
term. 

On the monetary side, href="http://www.forbes.com/sites/greatspeculations/2011/08/09/hopes-high-for-more-quantitative-easing-dollar-weaker/">rumors

were circulating that the Fed  might announce a third
round of QE at their meeting on Tuesday, but instead the chose to
keep interest rates at record low levels into 2013.  As Chris
Gaffney, CFA href="http://dailypfennig.com/currentIssue.aspx?date=8/10/2011">wrote
in the Daily Pfennig, “the Fed was basically admitting the US
economy will be stuck in a rut for the foreseeable future.” 
While low interest rates generally do provide a stimulus to the
economy, that stimulus acts by stimulating borrowing.  But both
taxpayers and governments are borrowing less in an attempt to get
out of debt, meaning the stimulative effect of continued low
interest rates is likely to be muted.

With that backdrop, and business confidence undermined by the
current decline in the stock market, a double-dip recession seems
likely, assuming you believe we ever left the recession.  This
should lead to further market declines over the coming quarters, so
I don’t think that we have reached a bottom by any means. 

Buying Opportunities

On the other hand, the rapid declines over the last two weeks have
lead to a combination of panic selling and forced selling due to
margin calls, which is pushing many stocks out of their fair value
range.  Further clean energy stocks had already been pummeled
by significant declines over the last two years, even as the broad
market was rising.

I now believe that selected clean energy stocks are trading at
prices that we are unlikely to see again because of indiscriminate
selling to meet margin calls.  What follows is a list of stocks
I’ve purchased over the last couple weeks, and why I think they
represent good values now.
href="http://www.altenergystocks.com/comm/content/new-flyer-industries/">
New Flyer Industries
(NFYIF.PK/NFI.TO)
New Flyer is currently going through a conversion from its former
unusual stapled security structure to a more traditional structure
(see href="http://www.altenergystocks.com/archives/2011/06/questions_about_dividend_spook_new_flyer_investors_why_im_buying.html">here

and href="http://www.altenergystocks.com/archives/2011/08/new_flyer_an_offer_you_cant_refuse.html">here.)

After conversion, management says that the stock will pay a dividend
of approximately half the current level, or about C$0.48
annually.  With the stock trading at C$6.59 as I write, that’s
an annual dividend yield of 7.3%, which should be well covered by
earnings.   I most recently bought shares for US$6.66 on
Wednesday.

Note: If you plan to buy before the conversion deadline of Aug 18th,
make sure that your broker has not set an earlier deadline. 
Unconverted IDS’s will be worth less than the exchanged
shares.  However, if you can buy IDS’s for C$6.50 or less, I
think they will still be a excellent value even after the href="http://www.altenergystocks.com/archives/2011/08/new_flyer_an_offer_you_cant_refuse.html">
dilution caused when other New Flyer IDS shareholders exchange
their notes for additional shares.

href="http://www.altenergystocks.com/comm/content/beacon-power-corporation/"> style="font-weight: bold;">Beacon Power Corporation (BCON)
Beacon has been operating their first commercial scale 20MW flywheel
energy storage plant  since early this year style="text-decoration: line-through;"> without mishap,
achieving full capacity in June.  They are set to begin
construction of their second 20MW plant later this year, 54% of the
$53 million cost of which will be covered by state and federal
grants, making the funding of the plant practical even for a company
with a high cost of capital like Beacon.  If both plants
continue the relatively trouble-free operation seen so far, that
experience will pave the way for less capital-intensive turn-key
sales for flywheel energy storage plants worldwide.  I most
recently bought shares of BCON for $0.85 on Tuesday.

CORRECTION: There was a href="http://eastwickpress.com/news/2011/07/a-mishap-at-the-beacon-power-frequency-flywheel-plant/">“mishap”
at Beacon’s Stephentown plant on July 27.  Since this
undermines my thesis for buying the stock, and there are many other
opportunities, I have sold my positions.  The fact that this
was not mentioned in management’s discussion and analysis section of
the most recent quarterly report is troubling, in that it shows a
lack of commitment to full transparency.  I did find it in Item
1A. Risk factors: “In July 2011,
one of the 200 flywheels in Stephentown failed.  We are
currently investigating the root cause and the appropriate
corrective action for this failure. Our system operated as
designed, and no other equipment was damaged.  However, over
the life of the plant, if we incur significantly higher than
anticipated repair and maintenance costs, it could have a
materially adverse effect on our business.”

Thanks to the commenter who href="http://seekingalpha.com/article/286605-4-clean-energy-value-stocks-i-m-buying-now#comment-1825838">brought
this to my attention.

UPDATE 8/18/11: An in-depth look at the implications of the Stephentown “mishap.”

href="http://www.altenergystocks.com/comm/content/gldd/">Great
Lakes Dredge and Dock (GLDD)
When I href="http://www.altenergystocks.com/archives/2010/07/great_lakes_dredge_and_dock_gldd_an_oil_spill_cleanup_stock.html">wrote

about GLDD last year as part of my href="http://www.altenergystocks.com/archives/2010/05/peakoil.html">Peak

Oil investments series, I said it seemed like a bargain at
$4.50.  The combination of disappointing second quarter results
due to equipment downtime and the general market decline dropped the
stock back below $4.50 on Aug 8th, when I made my most recent
purchase.  I’m not sure where the bottom for this stock lies,
so that was a small purchase which I expect to add to if the stock
continues to decline. 

href="http://www.altenergystocks.com/comm/content/waste-management/">Waste

Management (WM)
Last week, I wrote about href="http://www.forbes.com/sites/tomkonrad/2011/08/04/trash-stocks-trashed-an-income-opportunity/">trash

stocks as possible income investments on Forbes, just as the
market was beginning the current downward leg of its decline. 
My top pick at the time was WM due to a low debt to equity ratio and
a relatively high dividend reasonably well covered by cash flow and
income.  I bought some at $29.60 on August 8th, and plan to buy
more if the stock declines further.

Conclusion

Market panics are always a good time to pick up solid income
investments at discounted prices, a description which applies to
both New Flyer and Waste Management.  Great Lakes Dredge
recently raised their dividend to $0.08 annually, for a 2% yield at
$4.50, and the dividend is very well covered by last year’s earnings
of $0.59 and even this year’s expected earnings of $0.35, which does
not make it an income stock, but does make it look like a good value
bet.

The sole speculative company is Beacon, which is currently trading
well below its book value of $1.19, and is in the process of rapidly
increasing revenues, which give it significant upside potential.

In the current market climate, any of these stocks could fall
significantly lower: panic selling and margin calls pay no attention
to valuation.  But if they do fall farther, I will be buying
more, at even better values than today.

DISCLOSURE: Long NFYIF, WM, style="text-decoration: line-through;">BCON, GLDD.

DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results. 
This article contains the current opinions of the author and such
opinions are subject to change without notice.  This article
has been distributed for informational purposes only. Forecasts,
estimates, and certain information contained herein should not be
considered as investment advice or a recommendation of any
particular security, strategy or investment product. 
Information contained herein has been obtained from sources
believed to be reliable, but not guaranteed.