Finding top quality firms that are also socially responsible is tough, says Steven Goldberg on Kiplinger.com, but not impossible: there are about 250 pure play, small-cap firms "doing something positive about the environment". They fall into two broad categories: alternative and renewable energy, and natural and organic food.
A good example of the first category, say managers at the Winslow Green Fund, is Fuel-Tech (FTEK, $11.75). Fuel-Tech makes use of a technology that removes pollutants from oil and coal-burning power stations. The firm "has just started making money" and, with the trend towards "clean" coal technology, "should earn $1 a share" in two or three years.
Color Kinetics (CLRK, $18.00) is another to look at: it's "on the verge" of using light-emitting diodes to make "super-efficient" white light. This is significant because lighting consumes a quarter of all energy used in the US. Current estimates are for Color Kinetics to make 24c to 40c in earnings per share this year, followed by 47c to 57c in the 12 months to December 2007. Its price/earnings to growth (PEG) ratio is 1.19 (according to Yahoo), based on the average of forecast five years earnings growth (anything on a PEG of around one is generally considered to offer good value).
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Gregg Greenberg, writing on TheStreet.com, is keen on American Supercomputer (AMSC, $10.40), an "electricity solutions" firm that makes products "for improving the cost, efficiency and reliability of systems that generate, deliver and use electric power".
He also points to Q-Cells (QCE.F, e78.00) and Evergreen Solar (ESLR, $13.86), both of which give investors exposure to growing worldwide demand for solar cells. Q-Cells is a German company specialising in the production of highly-efficient solar cells, which are then incorporated into Evergreen products using the latter's String Ribbon technology.
An oblique way to benefit from solar, says William Gabrielski, also on TheStreet.com, may be via the shortage of the silicon that is a crucial component of solar cells. Traditional demand from the semi-conductor industry also remains "strong" and yet "there is no additional capacity expected until 2008". Producers for the semiconductor industry, such as MEMC Electronic Materials (WFR, $32.24), are likely to benefit.
Charles has previously written for the MoneyWeek, giving readers his share tips regularly and covering other topics on the side such as stock markets and the economy. He has also written for The Business, Shares, Investors Chronicle and The Evening Standard, and Charles has presented on LBC and been a guest on BBC One and BBC World. Aside from his journalist background, Charles graduated as a chemist from the University of Oxford specialising in ligand gated ion channels.
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