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Ethical investing: Are US alternative-energy companies a good buy?

About a third of these firms are in the US, but some overseas prospects are too good to pass up, according to fund manager Carey Callaghan.

August 11, 2008

'If the United States takes a willful, smart approach to this, there is absolutely no reason we can't be energy independent.' – Carey Callaghan, American Trust Company

Ann Hermes

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Alternative energy is one of the hottest trends on Wall Street. But for America's ethical investors, it mostly means buying stock in foreign firms. Now, companies in the United States are making a bid to take a bigger piece of the market. Is it time to invest in US alternative-energy funds? The Monitor's Laurent Belsie recently talked about that possibility with Carey Callaghan, co-portfolio manager of American Trust's Energy Alternatives Fund. Here's an edited version of their conversation. Can America become a leader in alternative energy?

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I think it can, but we've got some work to do. We look at a universe of 125 companies that are squarely focused on renewable energy globally. Of those, 41 are in the United States – or about a third. But if you look at the value of those companies, it's only about 25 percent.

What areas in particular in the US show promise?

The US has a number of advantages that will play out in the next few years…. We have one of the best wind corridors in the world in the area east of the Rockies from the Dakotas all the way down to Texas. It's very windy when you get up to 60, 80 meters, which is the height of modern-day wind turbines. Then from a solar perspective, we have the US Southwest, which has one of the best areas in terms of number of days of sunshine and solar intensity, coupled with geothermal [sources] on the coast. [Also] we have the leading position in semiconductors, which is a cousin to the photovoltaic market. We're a leader in power-generation technology…. We also have a leadership position in materials science.

What are the obstacles out there?

If you look at many of the companies that are out there, they're from Germany, Japan, Spain. And there's a very good reason for that, because the costs of some of these technologies are not yet competitive with technologies such as burning coal. However, if you would give these industries a subsidy, as is done in the case of both wind and particularly solar in these other countries, it can flourish. So that's why the US has lagged. It's really a public-policy question. But both presidential candidates have endorsed green technologies, so I think that may change coming next year.

Are there certain companies that you like in solar?

In terms of US companies, there's a company called SunPower. It trades on the NASDAQ. The ticker is SPWR…. A couple things about SunPower. It does have a leadership position in terms of efficiency. It has a 22 percent conversion rate from the power that's coming in in the form of solar photons that's translated into electricity.

What about in wind?

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