Technology stocks are more than computers

A friend of mine recently asked me what was a good tech stock to purchase. As the discussion went forward I realized 2 things. One that they had no idea what a tech stock was, and second that tech stocks today encompass more companies than say 20 years ago.

The average person will think of a tech stock as just a computer company. And that is accurate. But it is limited. Right now computers include companies like car companies, oil drillers, wind energy, cell phones, even washers and dryers. So what might be a more accurate view of technology stocks?

The most accurate answer would be that it’s new innovations on technology. It’s not just computers, but how they are used, or how new things are crated and used.

Look at clean and renewable energy companies. There is the development of high density, long charge, rechargeable batteries. Solar energy has new developments in solar cells, and better transfer of electricity. Biomass turns garbage into a fuel source. Not to exclude the potentials still to be learned about oil shale, or ethanol derived from wood and grass.

That’s just one source, and it’s popular. Considering the numerous people that believe in ‘global warming’ (which I do not) and those that wish to clean up the earth, this is a sector that will not be going away. In fact we can be sure that more funding will be funneled into this arena no matter who wins the Presidential election.

[But if Democrats win it can be a real big area. Considering that Speaker Nancy Pelosi is making money from her investments in Clean Energy Fuels Corp., T Boone Pickens' company, you can count on the sector gaining a lot.]

But that is just one area.

Water purification, needed on a global and consumer level, is another concept. Cars are advancing technology as the hybrid cars are now being developed and improved. Pure electric cars are receiving a lot of research money as well. And what about service stations to fix and fuel these cars.

Or what about the engineering and construction companies that build the various plants and components needed. Or the ones that might be building newer, safer, nuclear and coal energy plants.

My point is this. The concept of technology stocks is not limited to just the latest version of modem, or processing chip that a computer maker comes out with. In fact computers need not be involved, or the primary component, of a technology company.

The big thing to keep in mind when buying any technology stock is the following

• Is the technology needed en masse


• Will funding come from private or government sources


• Is the technology building upon an existing product or service, or is it a new innovation that has to develop a market


• Does the technology have applications in other industries beyond the one it was made for


• Is the technology user friendly

Based on those answers you can weed out many different ideas and get a bit closer to what you believe is a good investment for you. Of course other factors are always important to keep in mind. Like the economy, competition, potential profitability, political environment, retail or institutional end use, executive management, size, and proof of concept.

Obviously I like some of the new technology in the energy sector. It covers several of my criteria. But that does not mean this is the only option out there. Do your homework and you may have a pleasant reward over time.

Remember that investing in technology stocks is like any other investment. Proper planning, time and management are critical to a positive return. Looking for a homerun usually winds up in taking on more risk than you really want and often does not provide a reward.

Jim Cramer - making money on ethanol when he doesn't want to

I was just watching Jim Cramer at 6pm on Tuesday. The stocks Cramer had been discussing included Monsanto, Potash and Deere. The subject was the increase in cost of food, international famine, and the glut of ethanol expected to be reported over the next several days.

The focus of the review of the potential for these stocks was primarily famine and the fact that because 35% of the grain production in America is being mandated to use for the creation of ethanol. There were in fact 5 stocks in the agricultural industry that were Cramer picks. Of note was the fact that Cramer mentioned that

“If I were a politician I would vote for ending using corn and grain, our food, for the production of ethanol… But I’m a broker so instead I will buy these stocks. If you want to help the world famine then buy these stocks and donate the profits to the U.N. world famine relief…” Paraphrased from the Mad Money program (if you have a video of this please let me know)

The argument is powerful and dramatic. Ethanol is a less effective means of fuel. That is a fact. And compounding that inefficiency by burning our food is in one point of view illogical. Especially when we have the example of Brazil where ethanol is created from sugar, thus not affecting the food supply or cost.

In watching this monologue from Jim Cramer I was struck by 2 things. I felt he really would rather that the world famine was being resolved by these companies as opposed to creating the roughly 164% aggregate increase in stock price since 2005 he noted. The other point was why other forms of renewable energy are not focused on.

In Florida nuclear plants shutdown and caused over 3 million to be without power mid-day. The price of corn is rising in commodity markets and supermarkets, as is beef. Ethanol is being mandated by the government even though it is more expensive and there is a glut of supply as it’s virtually impossible to find outside of the Midwest (mostly in 2 states).

Why then when all this is considered is the U.S. not seeking to promote wind energy, or solar, or any of a half dozen other ideas? Nuclear power is not green (due to the resultant waste) and problematic. Ethanol, as is currently being implemented, is counter-productive in multiple manners. What motivates the blind eye to all other forms of renewable green energy?

It doesn’t make sense to me. Ending corn as an ethanol base will not end world famine, but it may help deal with the problem. Wind energy does not harm anyone. Solar is plentiful and consistent. Biomass fuel is turning waste into a productive product. Shouldn’t we focus more on these answers?

I have to believe that when brokers, like Jim Cramer, are highlighting the fact that they would prefer to not make money in a stock or industry the public and government should take notice. When he, and others, would prefer to work harder to make money – which is his job – because of the international benefit then I have to say good for him and shame on the rest of us.

The options are there, and we need to take advantage of them.

Renewable portfolio standard: 2 sides in one nation

When it comes to alternative renewable green energy, in the United States there are basically 2 factions. I think that a good example of the 2 sides can be seen in Pennsylvania and Michigan.

Taking a look at Michigan, a state that has been devastated with lost manufacturing jobs; there is the fact of a lack of initiative. In 1991 Iowa became the first state to create a renewable portfolio standard, effectively requiring the state to seek out and generate a portion of it’s energy usage from wind, solar, biofuel and other renewable energy sources. 17 years later there are 24 states that have their own renewable portfolio standards; Michigan is not one of them.

The fact that Michigan continues not to have a renewable portfolio standard flies in the face of Republican Gov. John Engler’s effort with NextEnergy, a nonprofit that sought to accelerate development of an alternative energy industry in Michigan. Add to that the 2005 State of the State speech by Gov. Jennifer Granholm which pushed for the creation of a renewable portfolio standard.

Yet with renewable energy growing at a pace of roughly 30% a year and $9 billion invested last year in wind energy alone in the U.S., Michigan has yet to take part. But to be fair Gov. Granholm is recently quoted as stating that she is viewing this area in a Machiavellian manner,

“I think this is such a moment for us to capitalize on, creating this whole new sector here," Granholm added, warming to her cause. "And if other states have done it without the resources that we have, then we can certainly explode onto the scene."

On the other end of the spectrum is Pennsylvania. The State Senate has already passed legislation advancing wind power, and other clean energy sources like solar and biofuels. The State House is currently debating their version with $30 million for grants and loans to develop wind energy and the manufacture of wind energy turbines passed on February 13th by a landslide vote. In addition there was $5 million for low-interest loans to people who install more energy efficient systems to heat their homes. $25 million is to go for high-performance "green" buildings of which 300 buildings are estimated to be built.

In total the debate is currently centering on $850 million for the bill that would promote energy conservation and increase the types and amount of renewable energy sources. And with that improvement it is also noted that,

“For every dollar we spend in wind energy investment, we can leverage 12 in the private sector," said Majority Whip Keith McCall, D-Carbon.”

And there is the crux of the issue. Billions of dollars and new jobs are being generated by the use of renewable clean green energy sources. The mandate of states requiring generation from these sources has been beneficially working since 1991. And growth is rising at an enviable rate throughout the country. Yet 22 States continue to support a dependency on oil and coal.

Considering the 2 examples above, the reasoning of the remaining 22 states seems faulty at best. Maybe the Machiavellian view exposed by Gov. Granholm is in fact acting in the best interest of the people, and required by more Governors. But with so much growth and the resulting positive effects on the economy and environment, we can only expect that resistance will not endure.