Weekend: Everything Changes

Written By Nick Hodge

Posted December 26, 2010

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

Gone again is another Christmas, with a New Year fast approaching…

Looking back, 2010 was a whirlwind — an oil spill, a Toyota recall, a golf scandal, the World Cup, a European volcanic eruption, Chilean miners, meat dresses, Antoine Dodson, health care, the Ground Zero Mosque, Haiti, Mel Gibson, the end and beginning of Conan, Old Spice commercials…

All that and much more happened in the past 12 months.

It was a year dominated by gripping and fleeting news stories — horrifying and heartwarming, hilarious and harmful.

And the market was just as erratic as the headlines. The Dow looked like a SuperBall going from floor to ceiling:

Dow 2010

Point is, everything changes.

Shades of green

Five years ago, large European wind and solar firms were highly sought on the Street.

But companies like Danish Vestas (CO: VWS) and German Q-Cells (XETRA: QCE) have undergone a significant fall from grace.

Vestas and Q-Cells

The sector is alive and breathing; new stars are constantly being created and burning out with shifting energy trends and priorities.

Currently, with no firm global climate commitment and no U.S. energy bill, the industry is undergoing change again.

According to Vipin Ahuja, manager of the Allianz RCM EcoTrends Fund (AECOX), “Nobody’s questioning the long-term prospects, market share or gains of [renewable energy] sectors, but over the medium [term], it’s not been that good. So people are looking elsewhere for sustainable stories for the next couple of years.”

The Wall Street Journal underscored that theme, reporting green “funds are looking more at the natural-gas sector, and — in a theme several money managers repeated — also at so-called mainstream companies with a climate-change slant.”

Companies like Waste Management (NYSE: WMI), for instance, that — while not pure green — are profiting from sustainability (in this case, turning landfill gas into electricity).

There’s a reason it’s called the cleantech sector and not the clean energy sector…

So expect a lot more coverage of non-energy-producing green plays.

Shades of black

Things are changing in the fossil fuel world as well.

In the past year, shale drilling technology has really come of age. New estimates show North America has 1,000 trillion cubic feet of recoverable gas — a 45-year supply. Europe may have 200 trillion cubic feet of its own.

The WSJ predicts “shale gas will revolutionize the industry — and change the world — in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.”

And while natural gas prices will remain low thanks to this new supply, business will be booming at companies that know how to get it.

Same goes for oil.

Now that the peak of conventional oil production has passed, the same will go for companies with the technology to get the difficult stuff: the shale oil, the tar sands, the deep-sea deposits.

It’s why there have been several billion dollars’ worth of oil mergers and acquisitions the past few weeks.

And it’s why, as an investor, you need to jump on these themes sooner rather than later.

Constant coverage like that below will help you do it.

Call it like you see it,

Editor, Energy and Capital

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