Alternative Energy Investments

Nick Hodge

Updated May 21, 2008

Another day, another record.

Before the coffee even began to drip this morning, I discovered that both oil and gas had broken new records. You may have done the same.

Oil hit a record $130.47 per barrel this morning—for the now hackneyed reasons of supply concerns and a weak dollar.

Let me tell you something, folks. We had better get used to these ‘supply concern’ issues; they aren’t going away anytime soon.

Gasoline, for its part, climbed to a national average of $3.83 per gallon.

Oil has hit a trading or closing record eleven times in the past 13 days.

The new highs for the fossil fuels led most morning market reports to indicate a down day on The Street.

While that may hold true for traditional sectors, alternative energy investments love a new oil record.

Alternative Energy: Record Oil Incites Change

Oil at these levels is driving change in many areas of the country.

In a recent Reuters poll, for example, almost half of the respondents said they are driving less to compensate for high fuel prices.

And sales data serves to validate that consensus. For the week ending May 16, U.S. consumers pumped 7% less gas than they did the same with in 2007.

So far this year, Americans have purchased 1.7% less gas than they did last year.

High oil prices are also causing a stir in Congress, where recent bills haven taken aim at stopping the filling of the strategic petroleum reserve and allowing the Justice Department to pursue energy antitrust and price fixing cases against OPEC.

In my opinion, those efforts do more to appease voters than they do to assuage energy prices. What Washington really needs to do is extend the production and investment tax credits for alternative energy by any means necessary—whether it be by taxing windfall oil profits or the more recently proposed closing of tax loopholes for hedge funds.

The most recent form of energy legislation in the House calls for:

  • extending $54 billion in expiring tax breaks for renewable energy

  • extending federal tax deductions for state and local sales taxes

  • tax breaks for coal gasification projects and

  • a three year extension of a $1.01 per gallon tax credit for non-corn ethanol

The passing of those measures would be a boon to investments in alternative energy. But right now, the price of oil itself is serving as a catalyst for alternative investment growth.

Investment Attitudes Toward Alternative Energy Also Changing

Beyond consumer behavior and legislation, high oil prices are also causing changes in investors’ strategies.

As a sign of the times, Solarfun Power Holdings (NASDAQ: SOLF) was trading nearly five million more shares than Exxon Mobil (NYSE: XOM) in early trading today.

And US Geothermal Incl (AMEX: HTM) and Quantum Fuel Systems (NASDAQ: QTWW) were among the top 25 big movers across all exchanges.

Naturally, oil stocks responded positively as well. It is, after all, their bread and butter that is rising in price.

But the takeaway here is that high oil means you can take handsome profits from other energy sectors as well.

Who wouldn’t want that? You can have your proverbial cake and eat it too.

And Solarfun has been some pretty delicious cake!

Since recommending it to my Alternative Energy Speculator readers in March, we’ve seen gains in excess of 200%, as the stock soared from under $10 to over $28. Check it out:

solarfun power holdings
Of course, Solarfun isn’t the only big alternative energy winner. The portfolio boasts ten other double-digit winners as well.

But we’re just getting started. As the price of oil continues to rise, so to will the bottom line of the Alternative Energy Speculator, which already stands at 26%.

The open positions are only headed higher and new investment recommendations are constantly being added.

Folks, the fish are in the barrel. Make sure you get the next one.

Call it like you see it,

Nick

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