Investing in environmental stocks may be good for your conscience, but stock analysts warn against some unpleasant surprises.
Hamburg (dpa) – Rapidly rising oil prices and Germany’s planned phased withdrawal from nuclear energy are giving ecological-oriented shares a huge boost.
Going against the sombre mood on stock markets lately, shares of companies which are involved in alternative methods of power production are on the rise.
Whereas classic energy giants and power utilities like E.ON and RWE are struggling with the problem of too much production capacity in a liberalised electricity market in Germany – a struggle reflected in dropping share values on the stock market – numerous companies involved in the ecology niche have found favour with investors.
Companies specialising in renewable energy are rightly in the focus, says Karin Meibeyer, an analyst for the north German state bank NordLB.
In view of plans in the European Union for 12 per cent of energy consumption to be covered by renewable energy sources by the year 2010, the branch is profiting from state financial backing. In addition, wind power technology has now matured and the sector now beckons with attractive long-term profit prospects.
Beyond this, with the phasing out of atomic power plants, alternative energy technology can only stand to gain.
But the latest surge in oil prices has also triggered interest in shares in companies offering renewable energy, says Detlef Fersing of the Frankfurt savings bank Frankfurter Sparkasse.
Despite declining profits, for example, the price of shares of the Plambeck Neue Energie AG has jumped from 10 euros (8.70 dollars) in early September to 15 euros.
Plambeck, a manufacturer of wind power generators, admitted that its net profit in the first half of 2000 fell from 1.524 million marks to just 388,000 marks, but said this was due to start-up costs om biomass power and solar energy projects.
Other suppliers of alternative energy are also riding on a wave of “angst-ridden purchases due to the high price of oil”, Fersing says.
For example, Energiekontor AG and Huechelhovener Umweltkontor Renewable Energy AG, which offer technical equipment for renewable energy production, saw their stock market value skyrocket by 150 per cent during the recent wave of protests around Europe against high oil prices.
Besides shares of energy companies, those of companies involved in water treatment have also profited by their being associated in investors’ minds with “ecology stocks”. Stock profits of several hundred per cent have been realised by the Wedeco and Aquatec firms.
Part of the sudden rise in share values has to do with purchases by newly-founded investment funds which focus on ecology stocks, says Maja Brauer of the Hornblower Fischer company. One of the newcomers in the secondary 70-share MDAX index, Wedeco has now advanced to a middle ranking in terms of stock market value.
Analysts warn that there are risks, however.
“You might soothe your conscience by buying a ‘green’ share,” says Wilhelm Hufnagel of the M.M. Warburg bank in Hamburg. “But you often will also be struck like a bolt out of the blue.”
Hufnagel points out that trading in environmental stocks is low volume. This means that even with small demand a share might suddenly jump by 20 to 30 per cent. But it can just as quickly go down in the other direction when a company reports business results fall which fall short of expectations.
Enthusiasm for ecology shares will only first find broad investor support when they promise similar growth prospects as logistics or Internet stocks.
“Your conscience is not only not a very good investor, but it is also a shaky foundation for share value,” Hufnagel warns.
But the Frankfurter Sparkasse’s analyst Detlef Fersing says he expects a further upwsing in environmental stocks. Many investors are looking for “clean” shares.
He said investment funds, using the slogan “get rich and also do good”, are seeking investors who still want to keep their distance from what they regard as the “greed” seen in usual stock market business.
