In-and-out strategies for alternative investment profits
Today's Financial News - Posted March 11, 2009
Alternative-energy investments are hot. But is the reward worth the risk. If a report released earlier this week is anywhere close to accurate, the answer is a solid no. It could be a decade until we see any solid growth.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): Alternative energy is hot stuff. Sure energy demand is waning during the economic downturn and crude prices have dropped to a third of their all-time highs, but we all know the bears will eventually fill their stomachs and move on.
At least that is what the folks investing in solar, wind, biofuels and geothermal technology are betting on.
There is a report out this week stirring their ambition. According to research released yesterday by Clean Edge, worldwide alternative energy revenues soared by 53% in 2008 to $116 billion. Not bad, but it pales in comparison to the $477 billion in revenues Exxon Mobil (NYSE:XOM) recorded during the same period.
Fortunately, the industry is expected to grow, but we will have to wait at least a year or so. The current recession has created a nasty speed bump for the “green” economy. Even with Obama’s massive spending efforts, it will be at least a decade until alternative-energy revenues double. Clean Edge estimates the industry’s revenues at about $325 billion by 2018.
Lots of risk, little reward
That is steady growth, but does not come anywhere close to matching the ambition held by so many investors that are planning to get rich overnight thanks to “green” growth.
Looking forward, we cannot be fooled into hoping for too much change. Five years ago investors (or was it politicians?) were claiming clean coal technology was going to power the nation in the near future. We all see how that industry is still lacking its formal introduction to the world.
Frankly, we can expect more of the same. Until crude prices soar to $150 per barrel again, we have absolutely no economic incentive to explore alternative fuels. Even with all of its subsidies, Washington will not convince the major players to make a move.
After all, if you were at the helm of Exxon and raking in hundreds of billions of dollars thanks to oil, would you weld the pipelines shut and build a couple of biodiesel plants in your backyard? The government may like you, but shareholders would have your head.
If you want to get rich off the alternative investment industry, do not look at it as a long-term investment. The undulations will make you nauseous and the risk created by picking just a handful of stocks is not worth the reward.
Instead, look at it as a trading opportunity. Play the trends and use the headlines to your advantage. In-and-out plays with just a few days or weeks of holding key positions are the way to play the industry. If you want the biggest profits, use options.
Do not get me wrong, there will certainly be winners in this industry over the next few years, but a decade is a long time and is filled with all kinds of risk. In order to find the winner, you have to be able to pick it out of a sea of hundreds of losers. Those are tough odds.
It can be done, but the smart money is using quick trading strategies. For those, you have come to the right place.
Next Article: Stem cell stocks: GERN, STEM, OSIR still riding high, but beware of politics
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