Last week, President Obama announced his plans to reduce our reliance on foreign oil through a new energy policy, more realistic and applicable than past options. Within the plan, Obama discusses a number of methods employed to cut back on imported oil, including more aggressive drilling of reserves of natural gas and oil within U.S. borders, greater integration of alternative energy sources already available to us and increasing the number of electric and energy efficient cars on the road. The new multi-prong plan, should it prove more successful than its earlier and more idealistic counterparts, introduces a number of new money-making avenues on the market.
Determining the exact worth of investments in any of the industries discussed above is impossible given the volatility of the markets and the shifting prices, but it seems a worthwhile endeavor to discuss investment options likely to see a boost from the new plan.
Among the first elements the President discussed in his speech was the increase in electric vehicles he’d like to see on the road. There are certainly public companies that would be expected to see revenue growth from the tax credit the President has proposed, but they’re not as obvious as they seem. The most visible producers of electric vehicles are American car companies like General Motors (NYSE: GM) and Japanese automakers like Nissan (NYSE: NSANY), who recently released the Leaf. In the case of both these companies; however, the electric car is just one option on a huge list of products. Their standing can be improved on the basis of sales of electric vehicles but it is not dependent on it. Both these companies have been experiencing better sales and increased revenues of late, but the improvements will not be as dramatic or connected as with a company that producers either electric parts of only electric cars. In the latter category is Tesla (NYSE: TSLA), a silicon valley start up producing exclusively electric sports cars that are as well-designed as they are fuel efficient. The cars, sold in 17 stores nationwide will likely catch on increasingly as people become more trusting of electric cars and their capacity for performance equal to that of traditional vehicles or Hybrids. Shares of TSLA shot up considerably following the speech and will likely continue on this trajectory among greater financial and infrastructural support for electric cars.
Alternative Energy ETFs
Other beneficiaries of the new plan would be alternative energy companies specializing in wind and solar. Wind and solar companies have proved volatile for the past two years as contradicting reports and legislative actions have pushed them higher only to abandon them. In 2008, alternative energies were at the forefront of Obama’s energy plan, but when no solar or wind company has managed to create a product as cost-efficient as traditional fossil fuels they were largely abandoned. As a result, many Silicon Valley alternative energy attempts ended in a bust.
Investors interested in this sector may want to consider ETFs and consider them as a long, rather than short term investment. What is pronounced, especially with solar ETFs (NYSE: TAN) is that it first increased far beyond the SPX only to fall several months later. It is still low, but now has the chance to rise back up as the energy plan brings new hope. Comparatively, wind energy (NYSE: FAN) has never reached the high-highs of its solar counterpart, consistently underperforming, but already appears to be on its way up, adding 10% in the past six or so months. Those considering investments in either of these need to recognize that should they put their dollars in alternative energy ETFs that they need to hunker down and commit. Given that oil will eventually run out, and that even tapping into American resources won’t expand its lifespan for too long, there is an obvious draw for these companies. How soon the masses will start viewing them as the future of energy rather than a passing trend is up for grabs and investors should be willing to wait it out. The ETFs aren’t the only option here, but they are an effective means of gauging the rest of the industry.
Natural gas is another option for investors looking to cash in on the new energy plan. In the hours after the speech, natural gas ETFs and a number of other companies in the industry saw considerable improvements in share prices. Following the massive supply being discovered in the U.S., the price of natural gas sunk considerably. Since last summer, the prices of natural gas, or at least the U.S. Natural Gas Fund (NYSE: UNG), declined by 35%, but that may just be an excuse to buy, not to steer clear. Chances are, with greater integration of natural gas into the energy agenda, the demand will go up and help balance out high supply, pushing up prices. The timeline for this is unknown but as long term investment the natural gas ETF and related companies could end up being more profitable. Already, shares of the natural gas company the Gloval Clean Energy index Fund (NASDAQ:CLNE) have ramped up considerably and gained greater visibility. Today, share prices rose nearly 7%.
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