01/03/2005 05:46 PM
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How to Build Your Sustainable Portfolio
by Rona Fried
|A version of this article originally ran in Progressive Investor, our monthly sustainable investing newsletter. It provides on-going analysis of clean tech investment opportunities: renewable energy, fuel cells, organics, forests and emerging areas on the private and public sides.|
This holiday season as you are evaluating your financial position, you may be considering converting your investment portfolio to sustainable companies. Over the years that we have published Progressive Investor, our analyst partners have recommended many stocks, most of which have done very well for subscribers.
Some of the many stocks we've discussed are:
United Natural (UNFI): largest US natural products distributor
Whole Foods (WFMI): largest natural products supermarket chain
Strategic Diagnostics (SDIX): test kits for GMOs & safety
Canadian Pacific Railway (TSE:CP)
Air Products & Chemicals (APD): makers of hydrogen
Deere & Co. (DE) : equipment manufacturer
Hydrogenics (TO:HYG): fuel cells
Intermagnetics General (IMGC): grid reliability
Itron (ITRI): grid efficiency
Kyocera (KYO): solar
Philips Electronics (PHG): electronics
Plug Power (PLUG): fuel cells
Quantum (QTWW): hydrogen tanks for vehicles
Baldor (BEZ): efficient motors
Power Integrations (POWI): efficiency
STMicroelectronics (STM): electronics
Cuno (CUNO) : water filtration
Trojan Technologies (TO: TUV): water filtration
Zenon (TO: ZEN): water filtration
Harris Interactive (HPOL): polling company
Johnson & Johnson (JNJ): medical devices
Sonosite (SONO): hand held ultrasound
Tips for Converting Your Portfolio
1. Create your universe of stocks
Make a list of companies you would feel excited about investing in. As a Progressive Investor subscriber, you'll learn about many potential stocks. You can also learn about them by reading our daily news on the homepage or in other financial outlets.
For this first pass it doesn't matter if a company is large or small or from a particular industry type.
2. Understand a company's business
It's important to understand what a company's business is about. If you shop in Whole Foods Market's (WFMI) stores you will understand their business model - they sell natural food to American and Canadian people, and now English people. If you like the concept and believe the market for natural foods will continue to grow, put it on your list.
Sometimes a company is in several businesses or has numerous product lines. Often it's hard to understand what the company does or you might understand part of one of the things it does. If you don't understand a company's products or services well enough to be able to explain it to someone, you can't really analyze the company, so don't invest in them.
3. Research the companies you like the best
Within your list of say, 100 stocks you'd be happy to own, there is a subset that you get really excited about. You understand what these companies do - what their business is about. This is the group of stocks to research further.
It is one thing to like a company; it is another to know that it is a good investment. You can like a company and buy its products to support that company's growth - if you are going to invest in a company you want to know your investment will grow.
Is this too obvious? So many people like wind companies, for example, because they want to participate in the growth of sustainable energy. You can buy wind energy to power your home or business and benefit that way. But to invest your money in a wind company stock is a very different story.
You need to have some basic knowledge about investing. Learn the basics of company analysis: its size, PE ratio (price per earnings now and projected PE ratio), EPS earnings per share, how it has performed and the like. You can learn this in any basic investors book or website.
Read the news about the company (eg., at Yahoo, CBS Marketwatch); learn what they have been doing and what their plans are. The more familiar you are with a company the more you can make sense of its stock movements. Also look at how the company fares compared with its peers.
4. Decide whether now is the time to Buy.
After learning about a particular company, you decide you do want to invest in them. Is now the right time?
A company may be great, but the price may be too high because other people like it too and it is way overbought. We see that a lot with the fuel cell companies. They go through wild phases, going way up and way down.
One of our subscribers, Gilles Arbour explains, "I like Quantum (QTWW), but I don't like it at all price levels. I have bought it and sold it several times. When it goes sky high I sell, when it goes way down, I buy. I always keep a core amount of about 1000 shares, but I trade the rest."
When you watch a company for awhile you can get a sense for its price movements. Buy when the stock dips.