They do however correlate with the overall equity market, which is why we paraphrase Chairman Mao from time to time:
...The reason, to paraphrase Chairman Mao's statement "The guerilla must move amongst the people as a fish swims in the sea" is that climate/energy investments swim in the larger sea of the markets....The guys at AltEnergyStocks scare me, I sometimes think they are reading my mind. In May I noted:
AltEnergyStocks comes slamming home with the post I was going to do, but better, backwards and in heels:...Last week AES did it again. This time Charles Morand beat me to a graphic depiction of recent trends with "Alternative Energy & Conventional Energy: Is An Image Worth A Thousand Words?":
It wasn't long ago that people still believed the price of energy commodities - and crude oil in particular - had a greater impact on alt energy stocks than did general movements in equity markets or even fundamental factors.
The logic went something like this: even though oil and most of the sub-sectors that make up the broad alt energy space (e.g. solar) are not in direct competition with one-another, expensive oil is the number one driver behind governments searching for alternatives to the way we currently meet our energy needs. For a time, this theory may have held true as far as short-term movements in the prices of alt energy stocks went - but is it still the case?
About a quarter of the way through the book Technical Analysis for Dummies, there were no doubts left in my mind that technical analysis wasn't my cup of tea. Nevertheless, I do like data and enjoy looking at charts as far as general trends are concerned. I therefore thought I'd take a look at a few basic charts to see if, at least visually, there appeared to be any relationship between movements in energy markets and movements in alt energy equities....
His conclusion?:
...Of course, nothing conclusive can be drawn from this small exercise, and since I am a bottom-up stock picker I only partially care about what makes the market move in the near-term. My primary interest in doing this was to see if, should we enter into a period of energy price correction, I should keep my eyes open for promising companies that may trade at a discount due to non-fundamental factors (i.e. supply and demand in the market).
From this brief analysis it seems as though I might be better off with continued troubles in equity markets as a whole for finding alt energy bargains.
Go here for the charts and Tom Konrad's comment.
