Hope for Stimulus Spreads to Cleantech Investors

With the private sector shrinking instead of growing, any hope for the economy will likely come from public stimulus. That has fueled a discrete guessing game among investors as to which companies would benefit. After all, it would be nice to have at least a few stocks in a portfolio this December that are green, and not just red, red, red.

With the stimulus package proposed for next year lurching toward $850 billion, or 6 percent of the U.S. economy (last year’s $14 trillion economy, that is, not this year’s slimmed-down version), the discussion is heating up. One thing that hasn’t changed: much of that cash will go toward a smarter grid (or at least bettering the current power-transmission system) as well as rebuilding schools and other buildings with an eye on energy efficiency.

Tom Konrad at Alt Energy Stocks compiled a list of potential beneficiaries that ran from building retrofits to grid infrastructure. Among the retrofitters, he says:

Companies which sell services and equipment for building retrofits should be well placed to take advantage of these programs. Such companies include Johnson Controls (JCI), General Electric (GE), Owens Corning (OC), Philips (PHG), United Technologies (UTX), Waste Management (WMI), and Honeywell, Inc. (HON).

Konrad says he believes that even if an initial stimulus package doesn’t focus very much on improving power transmission, some smart-grid-related companies could see some money later on.

From my list of Solid, Clean picks, those companies best positioned to benefit from this sort of spending are Quanta Services (PWR), General Cable (BGC), Siemens (SI), The ABB Group (ABB), and National Grid (NGG). Quanta and General Cable perhaps the best positioned of these.

His colleague, Charles Morand, has some ideas that he believes are central to a smart grid. But he sees risk alongside opportunity. He favors three smart meter companies — EnerNOC (ENOC), Itron (ITRI) and Comverge (COMV) — and on the subject of the only one with a profit so far (Itron), he says:

This company is a leading maker of smart meters, the key tool on the consumer end of a smart grid. ITRI is a stock that I’ve found richly-priced for as long as I’ve followed the alt energy sector, and at a trailing PE of about 70x, I continue to find it very expensive.

Cleantech investors wary of awaiting a rally in solar stocks might be relieved to hear of some alternative that may have better prospects under a stimulus plan. All this talk of cleantech stocks with growing profits must sound refreshing.

Still, doing homework on companies before committing to invest is as true now as it’s ever been. Even brand-name GE is exposed to financial risks, and deserves a careful study of its financial health by investors, large and small alike.