Capitalism and Renewables March 4, 2006
Posted by CamdenKiwi in : Environment, Investing , trackbackI’ve spent most of this afternoon trying to work out how to invest my pension contribution for 2006, and have managed to sort out about 2/3 of it.
I am fairly happy with a reasonable level of risk, but I’m aware that the market has been bullish for a while now, and there are some indications that it may slow down a little this year. Certainly, this week’s issue of Investor’s Chronical was rather bearish, with comments on the way cash was flowing into managed funds and ordinary investors (like me) were coming back into the market in a way that they hadn’t since the dot.com bomb.
I intend to invest about half this year’s contribution in green small stocks, and the rest in more diversified funds to keep some balance. Most of my assets are very conservative and long term (London flat, a few hectares of farm forestry and a share of a house in New Zealand which I doubt I’ll sell in the next twenty years), so a little riskiness for improved return is probably a good idea.
For the diversified funds, I’ve chosen Fidelity’s Special Situations Fund, which is one of the few to consistently outperform the relevant index (FTSE250) through both good times and bad. I am astounded at the number of these funds that do no better than, or indeed even worse than, the index. I went to an IFA a couple of months ago, thinking he could help me pick something better than I would myself, but he presented me with three funds, none of which outperformed their relevant index, and then had the cheek to tell me that if I bought funds independently, the fees would be higher. Obviously, the poor chap had never heard of a fund supermarket and through my broker, Squaregain, all the fund fees were cheaper than his quote as well.
This is the biggest fund in the UK, and has been doing well for years. It’s fund manager is close to retirement though, which does present a risk, and the fund will be split at the end of this year. I’m fairly confident he will have trained his successors well though, and I like the very open way Fidelity are managing this transition.
I had a happy time looking at various renewable energy shares on the AIM market. I was looking for something that was fairly diversified across the different renewable sectors, because I think wind may run into trouble with planning permission and reliability issues, and also because all these technologies are so new that its hard to see which will prove to be winners. I wanted something that seemed to have a strong management team, a fair bit of liquidity and at least some postive cashflow. I’m not expecting dividends - these companies ought to be reinvesting any profits.
Two companies have caught my eye - Renewable Energy Holdings, and Novera Energy. I also considered Clipper Windpower, but they are only in wind, and it’s difficult to find much solid information on them. Both the companies I’ve chosen have a range of technologies, wind, wave, biomass. Novera Energy is a little larger and actually made a profit last year, while REH has just started to see some money come in from wind farms in Germany. They both seem to have a nice balance of engineers and accountants on their boards, and good general energy sector expertise. I’ve put bids in for them for Monday morning, so my SIPP portfolio will be on its way very soon.
Next week, I’m going to look for one more stock, possibly TEG Environmental, which was tipped by the Investors Chronicle a couple of weeks ago, or something similar. I need something out of the energy sector, because I’m getting rather over-exposed there, as I also have an ISA holding in BG Group.
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