or Mean Returns -
Investing In The Environment
Mooche - Axcess Business News
is affected by rules and regulations. Environmental issues are becoming
of greater importance as more and more regulations go into effect.
Cleaner air, water, pesticides even the garbage we throw away is
regulated. Do you think much about it?
Even the oceans
are cause for environmental regulation. The resent oil tanker that
broke in two off the coast of Spain has become world news and threatens
the eco system and industry. Its industry's concern from an investment
perspective as losses can run into the multi-millions, such as the
fishing industries risks off the coast of Spain. I saw on the news
that they stand to loose at least 0 million over the current
strife off Spain's coast line when that oil tanker split in two
In 2015 all
oil transport ships are to be double hulled. That's the current
regulations and they're already talking about reforming that act.
That spill is going to force those regulations to be changed and
rapidly. What that means is more ships will have to be built sooner.
But it will also increase the cost of transporting oil in the short
term and that means YOU are going to pay more for heating oil and
gas for your car.
brings me to the point of this article. The environment can provide
green investments or mean investments, depending on which end of
the spectrum your on.
industry off the coast of Spain is going to suffer, ship builders
are going to benefit, the transportation industry is going to suffer
and then the micro economic effects begin to (pardon my pun) spill
over to smaller businesses.
environmental companies that are charged with clean up is a pretty
safe bet. But only those that are consistently involved are
the safest investment and have the greatest chance for growth; better
green than mean. Go for safe, consistent segments.
What do we mean
by a safe investment? In the environmental industry there are certain
sectors where demand for their services are growing, especially
since regulations began to be enacted to deal with the mounting
waste issues. Two of the safest areas we've found are in
the recycling field. Automotive byproducts, tires, are one
of the more consistent demands in recycling. It's a green
investment! The other is toxic metals and water. Very consistent
demand, another green investment!
News looked at two green investments in the recycling industry,
Greenman Technologies, Inc. and KBF Pollution Management, Inc. We
recently interviewed the CFO of Greenman
Technologies, Inc. (AMEX: GRN) in Axcess Business News
Inside Wall Street column and had selected it as one of our "best
picks" in our Small Cap Corner.
The other company, KBF Pollution Management, Inc. (OTCBB: KBFP)
is also in our Small Cap Corner's "best picks" column.
GRN recycles tires and KBFP cleans up toxic metals and waste water.
Two environmental companies in the recycling sector, both with consistent
demand for their services. Green investments!
GRN and KBFP
By The Numbers
Classification: business services. In the first row are the
Industry Averages and in the second row are Greenman Technologies,
Source: Market Guide as of 11/17/02
Management , Inc.
Classification: waste management services. In the first row
are the Industry Averages and in the second row are KBF Pollution
Management, Inc. numbers.
Source: Market Guide as of 11/17/02
Below is a 3-month
chart of Greenman Technologies Inc (AMEX:
GRN) compared to KBF Pollution management, Inc. (OTCBB:
KBFP) and the Pollution Index (POL).
for the Green
First of all,
"classifications" can be confusing. GRN is classified
as "business services", yet their S&P Company Report
classifies them as "capital goods: environmental services"
and KBFP is classified as "waste management services".
the numbers is another issue. Market Guide portrays the information
to be current, yet based on their recent announcements of sales
and earnings for the 3rd quarter ending Sept 30, neither GRN or
KBFP's is exact. Data often isn't enough, you have to look deeper
to find the green.
companies are undervalued. Their industry classifications
show very high P/E ratios. Makes you think your looking at Microsoft's
numbers about 10 years ago. GRN is outperforming its industry average
and based on those averages, if it traded equal to its peer group
the stock should be priced around .50 not .00 where it currently
trades. KBFP on the other hand has an even higher P/E ratio for
its industry classification; Market Guide's figures appear
to be wrong. KBFP announced
on 11/14/02 that its sales had increased 50% for the quarter
in comparison to the same period in the prior year and its earnings
were reported to be 3,508 for the period ending compared to 9,700
for the previous year! So based on that recent announcement, KBFP
is also undervalued. If it traded equal to its peer group the stock
should be priced around A_RTICLE.10 not A_RTICLE.06 where it currently trades.
why Axcess Business News believes these are safe investments. The
five year earnings per share growth estimates for GRN's industry
classification is 17.67%. Is your sagging portfolio of Telco stocks
giving you that? I don't think so! GRN has debt, yet they've been
very aggressive in expanding through acquisition and only recently
listed to the AMEX from the OTCBB in September. KBFP's industry
classification (5yr earnings per share growth estimates) is 25.93%.
We like those kinds of numbers even better.
Both of these
green investment companies have been aggressive and showing stellar
improvements in their sales and earnings. They both have a lot of
debt. But they both have a consistent market and most likely Market
Guide's 5-year industry averages are close to reality. Give
those 5yr averages a 50% haircut and you've still got a good return.
Better than the DJIA, certainly better than money markets or certificates
of deposit and there's room for appreciation as both companies are
trading about 50% lower than their industry average.
News thinks that KBFP may be on the same path as GRN. They too are
postured for growth and if they begin to go after acquisitions and
list up to AMEX (remember, GRN was on the OTCBB) it could easily
catch up to its peer group. GRN on the other hand has a head start
and based on its prior growth investors may see more acquisitions
News will continue to report on the activities of these companies
for our readers as it's sure to interest investors. Members should
watch for an Axcess News Alert in their in-box! If your not a member,
now and you can get these great market alerts too!
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