Tom Konrad CFA
Green
2014 image via BigStock
Being green is not all about wind turbines and solar panels.
In fact, it’s usually greener to be smarter about using what
we have than to replace it with something new, no matter how green.
My panel of professional green money managers understands this.
When I asked them each for their top three green stock picks
for 2014, there were as many picks focused on smarter resource use
as there were solar stocks.
I recently gave you their three
green income stocks here, and I’ll write about their three
solar picks in a future article. Here are three companies
that help us use resources more efficiently by applying
information technology to better target the resources we have
already.
Garvin
Jabusch of Green Alpha Advisors
Garvin Jabusch is cofounder and chief investment officer of Green Alpha ® Advisors,
and is co-manager of the Shelton Green Alpha Fund (NEXTX),
and the Sierra Club Green Alpha Portfolio. His “smart”
pick for 2014 is Digi International (NASD:DGII).
He says,
Digi is an interesting
firm in the machine-to-machine (M2M) Internet space, and, as a
smaller firm at only $300 million in market cap, I feel like
it’s a little below the mainstream radar, and has yet to have
its growth prospects (including takeover potential) be fully
appreciated. The growth potential of M2M communications itself
is appreciated though, with estimates that up to seven billion
devices will be connected to the Internet by the end of next
year, and that this “Internet of things” has realistic
potential to transform most economic sectors by adding real-time
efficiencies to almost any operation. In this sense, that we as
a society can thus squeeze ever more economic output out of
fewer economic inputs, M2M technology is also a key, innovative,
driver of sustainability. M2M is beginning to bring efficiency
gains to dozens of applications including connected cars, smart
energy metering, building automation and smart cities, microgrid
infrastructure, energy transmission efficiency, security,
traffic management, inventory management, food production and
many more. Looking forward, additional applications of M2M
technology may encompass nearly every aspect of a modern
economy. That macroeconomic picture is compelling.
Almost limitless
applications means great growth potential. We’ve been aware of
the potential of M2M for a while now, but this is the first year
we’ve become confident enough to start expecting more robust
growth as the underlying technology becomes more mainstream and
ultimately indispensable. The two main drivers are the rise of
cloud computing and the gains in both coverage and speed of the
mobile internet, both cell network and satellite enabled.
On the value side, DGII
is trading at slightly under three times cash and at (or just
below) its book value. With no debt and EPS positive and guided
to grow 61% in 2014 and 36% in 2015, DGII looks like a good
intersection of growth and value.
Rafael
Coven of The Cleantech Group
Rafael Coven is Managing Director at the Cleantech Group, and
manager of the Cleantech index (^CTIUS) which underlies the
Powershares Cleantech ETF (NYSE:PZD.)
Coven picked two companies that use information technology to
make our economy smarter and more efficient, but he did not have
much to say about them. HE told me that he had to be careful
about what he says in the lead up to rebalancing the Cleantech Index
on December 24th.
His picks are Trimble Navigation Ltd.
(NASD:TRMB)
and MiX Telematics Limited (NYSE:MIXT and
JSE:MIX).
MiX describes itself as “a leading global
provider of fleet and mobile asset management solutions delivered
as software as a service to customers in 112 countries. The
company’s products and services provide enterprise fleets, small
fleets and consumers with solutions for safety, efficiency and
security.” The company is green in that the information
collected from vehicles helps drivers reduce fuel use, as well as
increasing safety. While it’s obviously green to save fuel,
avoiding traffic accidents may be even greener, since the damage
requires resources which we’d rather use elsewhere.
Trimble describes itself as “a leading provider
of advanced location-based solutions that maximize productivity
and enhance profitability. The Company integrates its positioning
expertise in GPS, laser, optical and inertial technologies with
application software, wireless communications, and services to
provide complete commercial solutions.” Trimble serves
agriculture, engineering and construction, transportation, and
wireless communication industries. By using location based
technologies, all of these industries (and many others) can
deliver material more precisely, reducing both waste and mistakes.
Trimble just announced the acquisition of a private
agricultural information firm C3, which will allow the company to
integrate more detailed and precise soil data into the solutions
it provides to farmers and related industries.
Conclusion
Of all the picks I got from my panel, these three are the ones
I’m most interested in adding to my own portfolio. Reducing
waste has long been a central theme of my own green stock
portfolios, and these companies seem to be trading at fairly
reasonable multiples of earnings.
Don’t be surprised if one or two appear in my own annual list of
ten picks for 2014.
This article was first
published on the author's Forbes.com blog, Green Stocks
on December 18th.
DISCLAIMER: Past performance
is not a guarantee or a reliable indicator of future
results. This article contains the current opinions of the
author and such opinions are subject to change without
notice. This article has been distributed for
informational purposes only. Forecasts, estimates, and certain
information contained herein should not be considered as
investment advice or a recommendation of any particular
security, strategy or investment product. Information
contained herein has been obtained from sources believed to be
reliable, but not guaranteed.