3 Stocks to Buy This Earth Day
Apr 22nd 2012 10:51AM
Updated Apr 22nd 2012 10:52AM
It's Earth Day, a great time to reflect on some good things corporations are doing for the world and how we can make some money alongside their success. Environmental impact and corporate social responsibility aren't usually the first thing investors think of when we look into companies, but they can be just as important as the income statement or balance sheet. A positive impact on the world can lead to higher margins, lower risks, and investments that outperform the market.
Since Earth Day is about considering both the good and the bad, I'll also call out an entire industry that gets my thumbs-down this Earth Day.
A new kind of grocery store
The environment is at the heart of everything Whole Foods (NAS: WFM) does, from the food it sells to the way it operates. The company is an advocate for organic foods, a reduction in hormones and antibiotics in meats, and a decrease in and safer use of pesticides. Organic and natural foods are not only better for its customers; they also allow Whole Foods to charge a premium that keeps margins well above the competition.
The company also thinks about its impact on the environment beyond food. It purchases enough wind-energy credits to offset 100% of its electricity use, ensuring that even the power that lights its stores is sustainable.
The trend toward higher-quality, more sustainable food sources has taken the country by storm. Chipotle has shown that this same focus can lead to market-crushing returns in the restaurant setting, and Whole Foods continues to make traditional grocers look like a dying breed.
Unleashing the power of the sun
If we're ever going to reduce the use of fossil fuels for transportation and power, the sun is going to have to provide most of the energy. Last year I showed how the Mojave Desert alone could provide 264% of the United States' electricity needs, and how there's enough solar energy hitting the earth in a single hour to power the world for an entire year.
Leading the charge into solar energy is SunPower (NAS: SPWR) , one of the world's largest manufacturers of solar modules. The company competes with First Solar (NAS: FSLR) and Suntech (NYS: STP) , which make thin-film and polysilicon modules, respectively. Suntech and SunPower's modules fall in the same family, but SunPower's modules are the most efficient in the industry, giving it a leg up on the competition.
The reason I like SunPower over the other players in the industry is the backing Total has given as the company's majority owner and the innovation the company brings to the table. Unlike Chinese manufacturers, which have lower costs, SunPower spends millions on R&D that's bringing new opportunities for growth. The company's C7 Tracker was recently launched and uses mirrors to bounce the sun's rays onto a solar cell. This method allows the company to use fewer solar cells to generate the same amount of power and should lower costs for installers.
Solar power is not only good for the environment, but it's also growing jobs quickly even in a rough economy.
Betting on the EV revolution
Who said being green couldn't be sexy? Tesla Motors (NAS: TSLA) is making one of the most stylish cars on the market and has a very stylish sedan due to launch this year. Its Roadster is built more like a BMW than a Prius, going from 0 to 60 miles per hour in less than four seconds.
If you didn't know that Tesla was an electric-car company, you might mistake it for simply the coolest car company around. Tesla is in such high demand that 500 people were willing to plop down $5,000 to reserve a Model X electric SUV in the first week after it was announced, two years before deliveries are expected to begin.
The electric-vehicle revolution has been bumpy, but Tesla appears to be getting it right. Focus on style, performance, and range will keep the company ahead of the curve.
An industry to shame on Earth Day
There are also businesses that have a negative impact on the environment, some more significant than others.
Fracking for both oil and natural gas has exploded in the U.S. over the past few years, and while it has had a positive impact on jobs, the economy, and our dependence on foreign energy, it has also been terrible for the environment in some places. Some companies have resisted disclosing the chemicals they put into the ground (with good reason, because they're nasty), and contamination of water sources has been reported across the country. The documentary Gasland very publicly highlighted the enormous negative impact in the Marcellus Shale and other parts of the country.
As bad as polluting water is, it's not the reason shale fracking gets a wag of my finger this Earth Day. No, fracking gets the evil eye because of a possible link to a drastic increase in earthquakes. Yes, chemicals used in fracking that are disposed of far below the earth's surface may be the cause of increased seismic activity. The U.S. Geological Survey said that in the three decades before 2000, the U.S. averaged 21 seismic events per year. In 2009 that figure jumped to 50, then 87 in 2010, and 134 last year. These quakes are usually small, but what happens when a city that isn't normally rocked by earthquakes is hit with one that causes real damage?
No matter what, I'm not buying stocks in an industry that could be causing earthquakes, not matter how small the tremors are.
What companies do you think are making an impact on the world this Earth Day? Leave your thoughts in our comments section below and check out our new free report titled "3 Stocks To Own For The New Industrial Revolution."
At the time this article was published Fool contributor Travis Hoium owns shares of SunPower in personal and managed accounts. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.The Motley Fool owns shares of Chipotle and Whole Foods. Motley Fool newsletter services have recommended buying shares of Total, First Solar, Whole Foods, Tesla Motors, and Chipotle, as well as creating a bear put spread position in Chipotle. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.