The Only ‘Green’ Stocks That Work?
Web Editor, "Mad Money"
“It isn’t easy being green,” Cramer told viewers on Monday, especially when it comes to investing. In that case, “Brown defeats green any day of the week.”
Fossil fuels are just too ingrained in the American system, thanks to their low pricing and an uber-powerful lobby in Washington. And the political will does not exist enough to make a serious change. This is why investing in environmentally conscious companies hasn’t really panned out.
Cramer has highlighted lithium-ion batteries, but they don’t work. Aside of the fact that electric cars still plug into a coal-based system for their recharging, the batteries themselves don’t last long enough and the companies depend on government subsidies.
People may like the idea of wind power, but they hate the idea of windmills in their backyards. So these stocks haven’t performed well either.
Nuclear power, too, has seen setbacks of late, as a result of project cancellations and what Cramer described as “huge technological difficulties.” Solar power looks to be making progress, but the sector’s still been a money loser for as long as “Mad Money” has been on the air. And corn-based ethanol has more to do with the powerful farm lobby, which politicians bow to once every four years during the Iowa caucuses, than it does earth-friendly fuels.
“That’s what we’ve learned from the past performances of all things green,” Cramer said. “It is sobering.”
Still, there is one “semi-green angle” investors can play, though, that could make them money: power management, as in the technologies that allow people to use less fossil fuels. Think climate control, different kinds of motors and straight power-management products. This is where the money is in the green space.
Cramer will spend all week highlighting the best names in power management. The first? Baldor Electric , maker of energy-efficient industrial motors, mechanical power-transmission products and generators. BEZ may be up 107 percent since Cramer’s July 8, 2009, recommendation, but he thinks it has still more room to run. Especially because it’s a play on new congressionally mandated energy-efficiency standards that will go into effect Dec. 19.
Even ahead of these standards, BEZ has been performed well, as the most recent quarter was a strong 7-cent earnings beat. Sales of the company’s most energy-efficient motor, the Super-E, jumped 19 percent. And in fiscal 2011, these motors should make up half of the Baldor’s sales, which is “huge,” Cramer said, given that they sell for a 20 percent to 30 percent premium versus similar but less efficient motors.
The stock itself, despite this outperformance, is still cheap. Right now Baldor trades at just 17 times earnings, though its long-term growth rate is 34 percent. Typically, Cramer defines inexpensive as any company trading at one times its growth rate, but half? That’s just too good to ignore.
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