Recession Opportunities: Green Investing

May 13, 2009 - Farnoosh Torabi - MainStreet.com

For those with some money to invest, and an appetite for a little risk, it's easy being green.

The green industry, which not long ago was “getting hugged to death" by investors (at least according to one financial analyst), is very much in growth mode, despite an overall volatile investment atmosphere in 2009. The country’s millionaires recently agreed, in a new Fidelity survey, that “green tech,” along with health care and infrastructure, are the few sectors they’d like to invest in over the next year to prop up their beaten-down portfolios.

True, the astronomical returns have, for many green-related stocks and funds, subsided. First Solar (Stock Quote: FSLR), a poster child for the potential of green stocks, jumped almost 800%, from $28 per share to $250 per share between 2007 and 2008. Since then it’s made it way south to $200 per share.

That might be a little pricey for some, but with the Obama administration actively pushing for alternative energy sources and green initiatives, there are some investment opportunities for folks who want to do right by Mother Earth.

What Makes an Investment Green?
A “green” investment carries many shades. It may describe a company that tries to help lower toxic emissions into the atmosphere or reduce demand for natural resources. Think Toyota (Stock Quote: TM) with its hybrid vehicles or Honda (Stock Quote: HMC) and its new hydrogen fueled cars, which minimize the demand for oil.

In other cases, “green” means improving the quality of life, by “simplifying and encouraging folks to somehow have a smaller footprint,” says Andrew Bengle, senior research analyst with KLD Research & Analytics. A restaurant that uses only locally raised crops is an example of that, since it doesn’t need to use large gas-guzzling trucks to transfer ingredients across state lines. Green may also mean promoting a healthier lifestyle by manufacturing, selling or using all natural and organic ingredients like grocery chain Whole Foods (Stock Quote: WFMI) does.

Of course, no investments come without risk and green stocks are still considered speculative, as most companies in this niche are relatively young and small. Depending on your capacity for risk and what particular aspect of the green movement you like, you can choose to play in a variety of directions within the sector, from individual stocks to mutual funds and exchange-traded funds. The funds and stocks mentioned below are by no means recommendations. But if you’re in the market for green investments, these picks might help as you conduct your own research:

Green Mutual Funds
Green mutual funds are designed for the risk-averse investor who is convinced green is good, but may not want to allocate much to an individual stock. Instead, with these funds you can invest in a broad range of stocks, usually 30 to 40, for one price. The stocks chosen for a particular fund usually cater to a particular segment of the sector or a certain risk-strategy.

Winslow Green Growth Fund (Stock Quote: WGGFX) Investment type: A no-load mutual fund whose portfolio is a mixed bag of high-growth “smaller, riskier companies,” according to Morningstar, a fund ratings agency.

What they do that's green: “Green" to Winslow means promoting healthier lives, plain and simple. Some of the highest-growth players in the fund include Green Mountain Coffee (Stock Quote: GMCR), Chipotle Mexican Grill (Stock Quote: CMG) and Fuel-Tech (Stock Quote: FTEK).

Numbers at a glance: The fund hit its peak in October 2007 at $28 per share. Since 2008 the fund’s been on the decline and is now trading around $10 per share.