Stock Choices for the Bold and Cautious Investor
Ballard Power Systems of Vancouver, Canada is arguably the most exciting company that environmental investors have ever seen. What makes Ballard (stock symbol: BDLP) so appealing is that its fuel cells can generate clean power without combustion. Eventually, fuel cells could provide energy for everything from cellular phones to automobiles and homes.
Although it’s also in the residential and home appliance business, Ballard’s core expertise is in developing and manufacturing fuel cells for cars and buses. Its product promises to radically change the automobile industry. Instead of spewing out carbon dioxide and a cocktail of toxic chemicals, cars run on hydrogen-powered fuel cells emit only water. And since hydrogen is the most common element on Earth, securing a supply won’t inspire geopolitical jockeying.
Ballard has contracts with half of the world’s largest automobile manufacturers. Their continued improvements in cheaper, more powerful fuel cells have helped it position itself as the Intel of the industry. This significant niche, however, isn’t expected to translate into actual profits until 2003. So while Ballard’s future looks rosy, its stock can be mighty volatile.
The alternative energy stock sector is hot. Ballard has accelerated with a speed that would make its product proud—going from 23 to 80 in less than a month. Some of Ballard’s run up can be attributed to a recent announcement of significant improvements in the size, cost and efficiency of its fuel cells. But it seems that the current feverish pitch of alternative energy stocks in general (which includes other fuel cell companies, like Plug Power, as well as solar companies), has more to do with stock-du-jour investing than technological breakthroughs.
With the values of Internet stocks pumped up beyond the ozone and word on the street that Bill Gates has invested in fuel cell companies, investors hungry for the next new thing are turning their eye to other areas with promise—and no need to deliver immediate earnings. By the time this article hits the newsstands, these sizzling alternative energy stocks could be double—or half—the price they are now.
Since roller coaster rides aren’t for everyone, many investors should sit this one out. But if you can’t resist the allure of profiting from truly clean energy, at least proceed with a plan. Bob Beaty, worldlyinvestor.com’s Canada editor, recommends: “The smart money way to invest in Ballard is by dollar-cost-averaging. That is, buy small positions over a period of perhaps several years, no matter if the stock moves up or down.” This strategy allows long-term investors to participate in Ballard’s improving fortunes while reducing your risk of getting caught holding expensive stock.
Red Carpet Stock
If you prefer investing in a company with a more established sales history, but which is still environmentally progressive, consider Interface (IFSIA). Interface is the world’s largest manufacturer of carpet tiles—obviously not a classically green industry. In fact, in turning petroleum into floor coverings for its corporate clientele, Interface, still contributes its share of pollution. In 1998, the Atlanta-based company’s 26 factories (on four continents) produced more than 605 million gallons of contaminated water, 704 tons of toxic gases, and 62,800 tons of carbon dioxide. But Interface is changing rapidly.
In many ways, Interface is a radical company in the best sense of the word. After reading Paul Hawken’s The Ecology of Commerce almost six years ago, Interface founder and CEO Ray Anderson had a green conversion experience. He has since joined Hawken in the pantheon of green business heroes by actually putting sustainable principles to work in the marketplace and by putting environmental accountability at the forefront of his company’s mission. Anderson is gunning for making his petrochemical conglomerate 100 percent environmentally benign. “I want to pioneer the company of the next industrial revolution,” says Anderson.
Interface has taken its eco-makeover seriously. The company has institutionalized recycling, improved its energy-efficiency, and reduced or eliminated many toxic chemicals used in the manufacturing process. Since 1994, its North America divisions have kept 608,000 square yards of carpet out of the landfill. Fifty-six percent of the worn carpet the company collects is now recycled or down cycled, and its Guilford, Maine operation has been totally revamped. Most significantly, the company’s overall measure of energy and material efficiency has improved 26 percent. “In other words,” says Jim Hartzfeld, senior vice president of Interface Research Corporation, “we’re 26 percent closer to becoming material and energy sustainable.”
Interface’s stock price, which was recently trading around 4 1/2, has suffered over the last 18 months along with the whole corporate floor covering industry. “With businesses investing so heavily in Y2K preparedness, expenses such as floor coverings got put on hold,” explains Ray Anderson. “We’ve also made long-term strategic investments, which will help ensure the financial health and sustainability of our business, but in the short-term hurt profits.” Knowing that carpets eventually wear out, Anderson is confident business will rebound strongly. Since this past summer Anderson has personally bought almost 100,000 shares of his company’s stock. While no one can say how long it will take before the stock rebounds, with a four percent dividend, you can get paid while you wait.
MARSHALL GLICKMAN’s book, The Mindful Money Guide: Creating Harmony Between Your Values and Finances (Ballantine Books/Wellspring) offers investor guidelines for choosing stocks.