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-- Posted Thursday, 26 August 2010 | | Source: GoldSeek.com
"Ubika" is an ancient Sanskrit word meaning growth. Ubika Research Cofounder and Managing Director Vikas Ranjan knows investors covet growth, so Ubika covers companies in sectors with tremendous growth potential. In this exclusive interview with The Energy Report, Vikas offers some strategies on how to play the cleantech sector.
The Energy Report: Today, The Energy Report talks cleantech with Vikas Ranjan of Toronto-based Ubika Research. What does it mean to be a cleantech company?
Vikas Ranjan: Cleantech is the development of the whole range of technology that will enable humankind to basically conduct life in ways that are more eco-friendly and sustainable. It's a fairly broad term. For example, alternative-energy generation companies (i.e., wind, solar and geothermal companies) all fall into the cleantech category.
TER: Are you noticing any trends in that market segment?
VR: Yes, absolutely. A couple of years ago when you talked about cleantech, the discussion mostly centered on alternative energy with a focus on wind, solar and, to a certain extent, geothermal companies. But in the last three years or so, there's been an acknowledgment that cleantech is much more than renewable power generation. This move toward a broader classification is a really big change.
Another big change would be the growth of a whole set of companies that focus on very basic problems, for example, methods of providing clean drinking water to the vast majority of the global population, and more efficient technologies for waste management, especially in developing countries.
We are seeing a growing acceptance of clean technologies in these areas, and you can see increased participation among the governments, especially in the developed world. Governments are actively supporting this sector through various programs and some subsidies.
TER: The sector includes quite a few companies now. Is there an index that measures the performance of the cleantech sector?
VR: That's a good question. Determining what is considered a cleantech company is difficult, and I believe that makes it harder to construct an index. However, the Toronto Stock Exchange (TSX) recently launched a cleantech index. The TSX claims there are about 125 clean technology–focused companies listed on the Toronto Stock Exchange and the TSX Venture Exchange, and it selected 21 of those companies for its index.
Deustche Bank and NASDAQ OMX also recently launched an index that consists of 119 companies from around the globe.
We believe many more indexes will be launched as this sector gains attention from a range of investors.
TER: There's risk associated with investing in all companies, but when it comes to cleantech, the risk is significantly higher because these companies often do not have proven business models. Why should investors risk it?
VR: This is an excellent question and a question every investor should ask. To start, I would suggest investors think of the cleantech sector from purely an investment standpoint, excluding the ethical side, which certainly has a positive bearing from an investment point of view. From purely an investment perspective, an investor should think of cleantech as an emerging area that will inevitably go through many changes.
If you want a decent return on your portfolio, one of the things that you should do is look for emerging growth industries. There is no question that cleantech is an emerging growth industry. If you believe that premise, then it makes sense to have some exposure to cleantech. The extent of exposure will depend on each individual investor's personal situation and investment preference.
TER: Looking historically at other sectors, can you compare where the cleantech sector is at?
VR: You will remember the dot.com industry, which saw rapid growth and attracted many early-stage companies in the 1990s, but also witnessed a rapid transformation that left only a few companies with sustainable business models as winners.
We believe that cleantech will go through a similar process, and over time you will see only a select few come out on top. If we have to pick winners, we will bet on those areas that are focused on solving problems that affect the masses, not only in wealthy countries, but also in emerging and developing countries.
A quick example is the battery industry, which is a cleantech sector that attracts lots of investment. There are lots of companies producing batteries for electric cars, which is supposedly a huge growth area for cleantech companies. If you look closely, however, I would say that the jury is still out about the size of the end market. Electric cars are priced pretty high. Even the GM Volt, which will be available in 2011, will have an MRSP of $41,000, high by pricing standards for a compact car. All of these vehicles are supported by heavy government subsidies and incentives. If that market doesn't take off, what do you think will happen to the cleantech companies focused on manufacturing these electric batteries? It won't be good.
That is something investors should keep in mind. What seems "hot" today may or may not be very much in focus a couple of years down the road; whereas, if you look at areas that are focused on solving issues like water contamination or excess waste, they have more sustainability. Even companies focused on Smart Grid technology, which allows new sources of renewable energy to be supplied to mainstream power systems that distribute electricity, are good prospects. Companies with effective and commercially viable technologies in these areas will have a sustainable and large market to cater to. Those are, in our opinion, areas that will probably do well and will be sustainable in the long term.
TER: What percentage of an investor's portfolio should be in cleantech?
VR: Considering all the novelty related to the sector and a lot of unknowns, I would not recommend that investors should put more than 10%–15% of their stock portfolio in cleantech companies. But that may change over time as the sector matures. The extent of exposure also depends on each investor's personal situation and investment preferences.
TER: Do you have some parting thoughts on cleantech?
VR: Typically people think of cleantech as renewable energy plays, but we believe it is a much broader term. Investors should look for those sectors that address issues faced by mass markets, and select companies in those areas that have sustainable, long-term business models. If investors follow this approach, we believe investors could do well in this sector.
Vikas Ranjan is a management and investment professional with over 15 years' experience in diverse areas of investment management, finance, customer analytics and investment research. Vikas is a principal of Ubika Research, a specialized research and analytics company with a wide range of small-cap clients and operations in Toronto and Vancouver. Vikas' previous experience includes various management positions in companies such as TAL Global Asset Management and Bank of Montréal. Vikas has a strong knowledge of financial markets and has researched and analyzed companies in diverse industry sectors and markets. He holds a BA in Economics (Hons.), Masters in Management Studies from the University of Mumbai, India and an MBA in Finance from McGill University. Prior to cofounding Ubika, Vikas cofounded P2P Systems Inc., a company acquired by Toronto-based technology company Microforum Inc.
Ubika Research specializes in small-cap companies where market capitalization amounts to less than $500 million and offers market insights to end investors and market participants.
Ubika Research provides access to all research reports and investment ideas through www.smallcappower.com. Users can sign up to receive free daily emails on small-cap stock picks, research and investment ideas.
SmallCapPower.com (SCP) is a leading resource for small-cap investing. As an interactive website with rich investment content and dynamic functionality, SCP brings investors and financial industry professionals together to discover and communicate with small-cap companies. Streetwise - The Energy Report is Copyright © 2010 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part. The Energy Report does not render general or specific investment advice and does not endorse or recommend the business, products, services or securities of any industry or company mentioned in this report. From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise. Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported. Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734. Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.
-- Posted Thursday, 26 August 2010 | Digg This Article | Source: GoldSeek.com
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