Tuesday, May 21, 2013

Investing in Energy Efficiency

One of the most promising investment areas for 2013 may come from the area of energy efficiency. Unlike some other investments, this compelling investment opportunity is being driven by companies seeking immediate cost savings. For the investor this can translate to a shorter payback period. According to most estimates, global power needs are expected to rise more than 50 percent in the next few decades. This growing investment arena will increase the market demand for energy efficient lighting, engines and buildings.

Energy efficiency companies tracked by the Roen Financial Report have done extremely well in the past three months. Almost three quarters of stocks have been gainers, and 45 companies, or fully 20 percent of those energy efficiency businesses covered, have gained over 25 percent for the quarter.

Here are two long-term energy efficiency investments: A. O. Smith Corp. (AOS) and Tetra Tech, Inc. (TTEK). AOS is in the commercial and residential water heating business, which has a strong balance sheet, excellent sales growth, reasonable debt levels, and its stock is considered undervalued in the high 60 to low 70 price range. TTEK is an engineering and management firm whose services include water resources, energy efficiency and carbon management. It is a very well-managed company with excellent free cash flow, but its stock is considered overvalued at current prices. If it dips to the mid to low 20’s, TTEK would merit a look.

As with all investments look for energy efficiency companies with good products, capable management and strong balance sheets.

© 2013, Richard Matthews. All rights reserved.

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