One of the best ways to profit from investing for the long-term is to buy shares of companies that will do well from major societal changes that are taking place.
Obvious examples from the past abound: Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC) and Apple (AAPL) in the early days of the high-tech industry. Google (NASDAQ: GOOG) when it went public to revolutionize the search engine apparatus is another time when huge profits were made by those recognizing a major change for the internet.
It can be also be businesses that are going out of style, too. As Lawrence “Larry the Liquidator” Garfield, a corporate raider, said in the play Other People’s Money about a firm going under that was run well but outmoded, “I’m sure the last buggy whip company made a damn good buggy whip.”
With climate change upon us, there are companies to invest in for the long-term that will profit from this unyielding global condition along with those to avoid that make “a damn good buggy whip” in a doomed sector.
Early Entrants in the Climate Change Game
Many are well-known names, such as Honeywell (NYSE: HNL), which has almost half of its products in the area of saving natural resources. Others are niche companies in profitable areas, such as Blue Earth Energy (NASDAQ: BBLU) in energy efficiency. Natural gas entities are doing well as it is “the clean energy.”
By contrast, there are those to avoid, such as coal industry stocks. The exchange-traded fund for the coal industry, Market Vectors-Coal (NYSE: KOL), has fallen more than 25% for 2013 as the Dow Jones Industrial Average has surged more than 16% for the same period.
The energy efficiency industry provides an apt contrast with coal for those looking to profit from climate change. The Obama Administration is very hostile to the coal industry. Some have even termed the actions of the Obama Administration to be a “war on coal.”
Looking at Energy Efficiency Plays
It has been exactly the opposite for energy efficiency.
Like alternative energy, a great deal of support has been channeled toward energy efficiency. Unlike alternative energy, there has been a strong performance. Much of that has to do with the wide range of actions that constitute energy efficiency measures.
Both Honeywell and Blue Earth Energy are active in building retrofitting. This is a simple, easy way to achieve greater energy efficiency. Structures have new systems installed and other improvements to streamline the usage of energy. Honeywell typically does it through energy performance contracts (EPCs), which cover the costs through guaranteed performance standards. As another commercial example, Blue Earth Energy is moving forward with a project to install six solar PV projects in New Jersey that has revenues from energy efficiency programs increasing for the company.
The Future of Investing in Climate Change
Like all major societal changes, there will big winners and big losers from climate change.
The coal industry is certainly suffering at this stage, with the natural gas energy benefiting. Energy efficiency firms are doing well, and should continue to prosper due to the cost-effectiveness of the programs.
Investing to profit from the evolution in the market as a result of climate change should allow for a portfolio to weather any financial conditions over the long-term.
What are your thoughts on the companies that service the green sector? Can you profit from climate change?