Like most conglomerates, United Technologies Corporation (UTC), (NYSE:UTX) won’t be found in any of the Clean Energy indices, but its growing portfolio of clean energy businesses makes it fit well into a diversified portfolio with a clean energy tilt. A conservative capital structure and solid earnings and cash flow, and a decades long history of constantly increasing dividends make this a company that I’m comfortable holding for the long term.
In terms of sustainability, the company has been recognized by Dow Jones as in the top 10% of the world’s most sustainable companies. Long before it became fashionable for companies to greenwash by reducing their environmental impacts, UTC pledged in 1996 to reduce their power and water usage by 25%, and they have met these goals while growing their business. Their long track record of reducing their energy usage gives them a significant head start against rivals who have only recently jumped on the climate change bandwagon.
Of the company’s eight major business units, UTC Power and Carrier are both crucial to how we generate electricity and how we use it. Carrier has a history of pushing for more stringent energy efficiency and environmental standards for air conditioning, a strategy which helps their business strategy since UTC’s scale and research allow them to remain on the technological forefront.
UTC Power has a large portfolio of products which will help modernize our energy infrastructure. They supply microturbines and Solid Oxide fuel cells, as well as integrated combined cooling, heating, and power products, which I feel are likely to become much more popular as more companies seek ways to lessen their environmental impact and energy bills at the same time.
With their PureCycle binary cycle turbine, UTC introduced the benefits of volume production to geothermal power by making slight modifications to an existing line of Carrier’s industrial chillers which allow them to operate in reverse. Raser Technologies (RZ) plans to use this technology in their aggressive plans to develop a large number of lower temperature geothermal resources throughout the Southwest. According to a personal conversation I had with a Raser employee. UTC’s ability to deliver the turbines quickly, and willingness to guarantee performance was key to Raser’s selection of that technology in preference to rival products.
One other technology likely to be of great interest to clean energy investors is their molten salt storage technology, which provides a rare opportunity for a US-based public investor to participate in what I consider to be one of the most promising solar technologies: Concentrating Solar Thermal Power (CSP). The thermal storage provided by molten salt gives CSP the potential to provide power on a dispatchable basis, allowing it to compete directly with expensive electricity from natural gas turbines.
Other divisions of UTC, such as the Sikorsky helicopter division, are major military suppliers, so traditional socially conscious investors may wish to avoid UTC. On the other hand, the short supply of helicopters needed in modern warfare (as well a a large backlog in their Otis elevator division) have propelled strong earnings growth, while even relatively efficient air conditioners could not prevent Carrier from being hurt by the housing slowdown. Such are the benefits of diversification.
At roughly $74, and a 17.3 P/E, UTX is not currently cheap. I currently have only some out-of the money short puts on the company, but it’s one that I intend to continue writing puts on until the stock falls and I’m assigned shares.
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DISCLOSURE: Tom Konrad and/or his clients have long positions in UTX, RZ.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.
I have owned some shares of UTX for a few years now and have been very pleased.
I’d like to point out that even though Sikorsky helicopters are bought and used by the military they are also widely used by search and rescue and also for personal, governmental and corporate transportation.
There are many things to like about UTX. For example; Otis is making a new generation of highly efficient elevators that significantly reduce energy consumption. The company pays for their employees to continue their education at colleges and universities world-wide.
Thanks for your comments John C, and your clarification regarding Sikorsky. I hope not too many readers got the impression that I would advocate avoiding the stock because it is a military supplier. I do not.
I do understand that many of my readers will be uncomforatble with any company which supplies the military. However, a strict avoidance of military suppliers will be extremely difficult to maintain in an alternative energy portfolio, simply because the military is one of the largest consumers of renewable energy and energy efficiency products because of their justified concern about energy security.
Tom, as resident of the Nutmeg state, I have been neighbors with United Tech for a long time. What Nutmeggers will tell you is that as goes the military, so goes United. When the shrub’s misadventure in Iraq comes to and end, all those maintenance contracts for Pratt and Whitney and Sikorski engines are finished. Pratt’s engines are also riding the aircraft boom of the last three years. If you believe that aircraft are not cyclical and the world has decoupled, then aircraft will keep booming. Or you could look at the Boeing chart. Otis is another cyclical, tall building are dependent of bully times. I wish it were not so, for the sake of the Nutmeg stae..
I had opined in the August that a huge fiscal stimulus to Alternative Energy was our only chance to avoid recession. I wish that it had happened. As it is, I have trimmed my longs and opened up several big shorts on things out of the alt eng space and into huge multiples. Do you think casinos should be trading at sixty heading into a financial contraction? Keep up the good work with the alt energy space! FCEL and CPTC and CYBL will have their day.
Other investors take note, calvino’s probably right: this series will include many stocks like UTX: we’re waiting for a market collapse to buy. I totally agree with calvino that we’re unlikely to escape a recession, and the market will likely feel the pain as well.
When these stocks do feel the pain, that will be the time to buy.
My grandfather bought me UTX back in the 1970’s for around 4.50 a share. Needless to say, it was a very good investment. I have owned the stock happily, not thinking to much about it. I am in the process now of moving most of my capital into technology and alternative energy and much to my surprise UTX came up on my radar. I think the stock is cheap now and I am looking to pick up more.