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Rise of the Green Chip Stocks

April 22nd, 2010 1 comment
Girl Smiling Carrying Recycled Bag

Consumers are making corporations go green. (Photo: Getty Images)

To some people, talking about stock market investing on Earth Day would seem a bit odd, if not entirely antithetical. After all, one might ask, aren’t the most profitable companies the ones that can get away with polluting the environment and screwing local communities? Well, not necessarily. Consumers are becoming more and more environmentally aware and voting accordingly with their wallets. Meanwhile, more companies and countries are realizing the benefits to cost efficiency of going green. The Obama administration has been putting real support behind the growth of green industry, and if you think the green movement is more than just a fad (which I do), then we might be seeing the beginning of a seriously profitable investment strategy that doesn’t compromise green values.

With that in mind, I have put together a list of companies that I believe are not only promising stock investments, but also good news for the Earth. None of them are formal recommendations, but ideas to get you thinking. (And if you aren’t already invested, you might want to get started – it’s fun and I hear pensions aren’t exactly growing on trees anymore). Anyway, here they are:

  1. Waste Management (WM) – Although garbage collecting doesn’t sound green, remember that Waste Management is the largest recycler of municipal solid waste in North America. All of their trucks run on natural gas and they are already finding ways to produce bio-energy off of their landfills. The need for their services is only going to keep growing. Add to that good management and a steady, ever-increasing dividend, and you have a recipe for the type of green you can put in your pocket.

  2. Veolia Environmental Services (VE) – Veolia is a French company that operates a variety of services in North America, including water purification and decontamination, as well as solid waste management services. The selling points for Veolia are very much the same as Waste Management, except Veolia has much more exposure to clean water needs.

  3. Wind turbines on a hill

    (Photo: Wiki Commons)

  4. A-Power (APWR) – Wind energy is hard not to like, and China loves it. The Chinese government is putting a lot of money behind going green, and A-Power, the largest provider of distributed power generation systems in China, is getting a chunk of it. Their main push has been in developing wind turbines, but they also have projects for solar, biomass and geothermal energy, and have plans to expand into the US. Unlike Waste Management, this is a young company and a riskier investment, but one with huge potential.

  5. US Ecology (ECOL) – Nuclear energy is definitely going to be part of our movement away from fossil fuels. With that in mind, you might want to consider a company like US Ecology, which is the nation’s most comprehensive supplier of radioactive waste treatment and disposal. We’re going to need companies like this to keep radioactive waste out of our backyards, and since it’s not an easy industry to break into, US Ecology might be a good bet. Plus it pays you a nice dividend while you wait.

  6. Whole Foods (WFMI) – You can roll your eyes or clap with glee. Either way, Whole Foods has made a niche for itself and crafted a positive brand image with a growing segment of the population. The organic/grow local movement it’s helping lead is even making Walmart rethink its ways. Whole Foods is continuing to expand and might have a lot more room to run.

  7. Index Funds and ETFs – I didn’t put any solar companies down here because I think the arena is far too fractured and competitive right now to pick winners. A lot of people feel the same way about most of the green energy field. So the smart way to go might be investing in index funds or ETFs like FAN and TAN (First Trust ISE Global Wind Energy Index Fund & Global Solar Energy Index). These give you exposure to a basket of different stocks in their respective fields. Here’s a article that goes into more depth about it.

So I hope that gives you some ideas. Remember, the stock market’s had a good run since last year’s lows, but we’re still in a recession, so that means there’s plenty more growth if you’re willing to think past the short term.

Happy Earth Day everybody!

(Full disclosure: I own shares of Waste Management, and a family member owns shares of Waste Management and A-Power)