What Good Is Shareholder Advocacy?
By Marc Gunther. Last week, ExxonMobil added Susan Avery, a physicist, atmospheric scientist and former president of the Woods Hole Oceanographic Institutions, to its board of directors. Shareholder advocates, led by the Interfaith Center on Corporate Responsibility (ICCR), which has been organizing shareholder campaigns at ExxonMobil for nearly two decades yes, two decades welcomed the appointment. Tim Smith, the director of environmental, social and governance (ESG) shareowner engagement at Walden Asset Management, said in a news release: “This action by the board is encouraging for shareowners and we want to commend Exxon for this prudent and...
This Isn’t What Green Money Management Looks Like
Tom Konrad, Ph.D., CFA
I don’t spend much time reading investment company ESG reports, but a friend asked me to take a look at a copy of the TIAA’s 2021 Climate Report. I was deeply unimpressed. Here are a few things in the report that triggered my greenwashing radar:
TIAA wants to work with companies to improve their behavior. They call this company engagement. “e do not expect to account for the majority of our emissions reduction — we are primarily focused on company engagements” page 9.
Much of TIAA’s emphasis is on reducing emissions from their own operations,...
SALT: Buying the Balitc Dry Dips
by Tom Konrad, Ph.D. CFA
The Baltic Dry Index (BDI) is a shipping and trade index created by the London-based Baltic Exchange. It measures changes in the cost of transporting various raw materials, such as coal and steel.
Since the BDI is a measure of the income which firms that own dry bulk cargo ships can earn, changes in the BDI tend to drive changes in the stock prices of such companies.
Stock Price Correlation
Until recently, one such company was Scorpio Bulkers (SALT), one of my Ten Clean Energy Stocks for 2021 picks. The chart below shows the last 5 years, with...
A Quick Clean Energy Tracking Portfolio
Yesterday, I outlined a strategy to approximately replicate the performance of a Clean Energy mutual fund at much lower cost, with only a couple hours of effort. I gave a cost example based on $5000 invested in 5 stocks, with another $1000 worth of a single stock added in each subsequent year. This is the procedure I would use to select the initial five stocks. Collect all the top five or ten holdings of the available Clean Energy mutual funds. This data is available from Morningstar, and on fund sponsor's home pages. A few of these holdings may...
Short Demand for Cree High and Rising
I got a call from my broker this morning asking me if I'd be willing to loan out my shares of Cree, Inc. (NASD:CREE) to a short seller. Since the only cost to me is that I will not be able to vote my shares, and I will earn 2.5% per annum on the value, I said "yes." Normally, brokerages get the shares they lend out to shorts from margin accounts with a margin balance. Since I never carry a balance (although I do have a margin account in order to trade options) they must ask my permission...
My #1 Rule of Investing
Tom Konrad CFA Rules of Investing Warren Buffett says "The first rule of Investing is don't lose money; the second rule is don't forget rule #1." Jim Hansen at Ravenna Capital Management and publisher of the Master Resource Report about oil and other energy news has a "prime directive" (a la Star Trek) about oil prognostication which is "never predict prices." These rules have to be taken metaphorically, not literally. Buffett's rule is too general to be useful. I take his message to mean that care to avoid losses is more effective than...
Money Managers See Value in Clean Energy Sector, but Hesitate to Call the Bottom
Tom Konrad CFA Three green stock specialists see individual stocks at attractive values, but think it's too soon to call the bottom for the sector as a whole. Last month, I wrote that I'm again finding clean energy stocks that I think are bargains, and listed ten. I was not ready to call a bottom for clean energy, and in fact said I expected the market to get worse before it gets better, so investors should keep some money on the sidelines to wait for more opportunities to emerge. In a little over a month...
Opportunity Hiding in Plain Sight
Information asymmetry, climate investing and the active management edge.
By Garvin Jabusch
The theory of efficient markets says all stock prices are perpetually accurate, because investors always have complete and up-to-date information about their holdings.
But as any casual observer knows, information and topical awareness are not evenly distributed, even among professional analysts. Reality is always far more complicated than equity markets can quickly assimilate, meaning information asymmetry is a constant. While usually considered a type of market failure, information asymmetry is frequently used as a “source of competitive advantage.” The person with the most information is best equipped to make the best...
The Trump Trade
by Garvin Jabusch The first two weeks under the Trump administration have been a shock to the system. With the change in administration, how will you approach your stock portfolio(s)? For starters, your fundamentals should remain unchanged. For me, that means looking for great companies in expanding markets that are enabling long-term economic growth, and reducing systemic risks. Of course, this also means buying these stocks at low valuations. Benjamin Graham and Warren Buffett were right about ‘wonderful companies at fair prices.’ That is never going to change. With that said, let’s look at what has changed and...
Do You Need To Invest In Oil To Benefit From Expensive Oil?
Two months ago, Tom told us how he'd dipped a toe into the black stuff (i.e. bought the OIL etf) on grounds that current supply destruction related to the depressed price of crude oil would eventually lead to the same kind of supply-demand crunch that led oil to spike during the 2004 to mid-2008 period. If you need evidence that the current price of crude is wreaking havoc in the world of oil & gas exploration, look no further than Alberta and its oil sands. The oil sands contain the second largest oil reserves in the world after...
How to Beat the Market: Less Money and More Judgement
Last week, I looked at how a small investor could gain an advantage in the market by understanding the other players. The most important other players are institutional investors such as hedge funds, pension funds, mutual funds, and investment banks who have considerably more resources and valuation skills than the individual investor, and so trying to take them on directly to beat them at their own is likely to be an expensive exercise in futility. Two Exploitable Weaknesses On the other hand, I argued that institutional investors have certain handicaps and biases which do allow small investors to enter...
Green Energy Investing For Beginners, Part I: Stocks, Mutual Funds, or ETFs
Tom Konrad CFA Investing in green energy can be good for both the climate and your wallet. How good depends on choosing the right investment vehicles (mutual funds, ETFs, or stocks) and sectors to invest in. This will get you started. More and more investors are investing in green energy. According to the Cleantech Group, the Cleantech sector is now the largest sector for venture capital investment. Green Energy is not just for venture capitalists. Small investors have done well in 2009. Since the market bottomed at the start of March, the average green energy mutual fund topped...
Green Energy Investing For Beginners: How Many Stocks Should You Own?
Tom Konrad, CFA In stock portfolios, deciding how many stocks to own involves weighing a trade off. A smaller portfolio can be built (and sold) with fewer commissions, and also requires less time to research. On the other hand, a portfolio with fewer stocks will gain fewer benefits of diversification, and likely be both more volatile and harder to sell in a crisis. These trade offs are also affected by the size of the portfolio, and the market capitalization and liquidity of the companies in the portfolio. Diversification is widely accepted as a nearly costless way to reduce...
Why Do Green Energy Experts Buy Solar Stocks?
Tom Konrad CFA Green energy experts accept that solar panels are one of the least cost effective ways to reduce your carbon footprint. Nevertheless, many buy solar stocks. They should rethink their investment strategies. I recently spoke on "Stock Selection in the Era of Peak Oil and Climate Change" at the ASPO 2009 International Peak Oil Conference. Whenever green energy enthusiasts find out that I analyze green energy stocks professionally, they react in one of two ways. Many want to know my top stock pick in general (New Flyer Industries NFI-UN.TO/NFYIF.PK) or in their favorite sector (see below.) ...
2023: Looking Up Like the 2009 Disney Movie
There is no shortage of things to worry about as we start 2023. The Federal Reserve is (rightly, in our opinion) worried about inflation becoming entrenched, and so is likely to continue hiking interest rates for much of 2023. Putin looks unlikely to concede defeat in Ukraine, and his desperation may lead to escalation, potentially even of the nuclear variety. California seems to be washing away while remaining in a drought.
China has loosened the zero-Covid policies that helped the country continue functioning during the first stage of the pandemic, while much of the rest of the world shut down. ...
Why I Sold My Utility Stocks
In times like these of financial uncertainty, regulated utilities have traditionally been considered a safe haven. But that is changing. The Dow Jones Utilities Average was down 30% in 2008, vs. a 34% drop in the Dow Industrials. Not much of a safe haven. In a recent interview, utilities analyst Daniel Scotto noted, that the utility industry offers "a lot less security" than it used to. His reasoning is based mainly on the fact that the regulated portion of utility company's business is smaller than it has been in previous recessions, making them vulnerable to lower growth (or even...
