Sure signs of an alt-fuels investment bubble
I’ve written a handful of times in the past year about signs of a green backlash and a bubble in alternative-energy investments. I’m not one of those global-warming deniers, though. Nor do I think reducing carbon emissions is a waste of time and money. (After all, I spent oodles of time co-writing generally favorable articles about ethanol in 2006 and Al Gore in 2007.) I just know a good old-fashioned investment bubble when I see it. A smart idea first attracts true believers, then clever opportunists, then momentum investors and finally the rubes who invest their money at the top of the cycle. Bubbles are productive, by the way, as they usually lead to positive change. You just don’t want to be the investor left holding the bag.
I gained more confidence in my thesis this week when I learned that Firsthand Funds, a San Jose, Calif.-based mutual fund company, has started a new Alternative Energy Fund (ALTEX). Firsthand is a near-perfect bubble indicator. It’s run by a smart guy named Kevin Landis who has been particularly adept over the years at starting new funds and attracting new investors to them.
Three important disclosures. First, Kevin’s a nice guy who, back when I started covering stocks in Silicon Valley, was always generous to me with his time — though media exposure, of course, is central to the mutual-fund game of attracting more assets and collecting more fees. Second, Kevin’s performance, especially at his only big fund, the Technology Value Fund (TVFQX), hasn’t been half bad. Its 15.3 percent annualized return since its inception in 1994 has trounced the 10.8 percent performance in the same time frame of the Nasdaq composite index. As you can see here, its 1-, 3-, and 5-year performance has been great too. Only Tech Value’s 10-year numbers stink. Which leads to my third important disclosure: I bought into the fund in 2000, when its net asset value per share was twice what it is now. I’ve hung onto the investment as a reminder of the perils of buying a hot sector fund.
The Firsthand Funds lesson, though, isn’t so much about Tech Value, which at $300-some million in assets is a shell of its formerly hyped self. It’s in the other funds Landis has started along the way. Importantly, it’s also about when he started them. The Global Technology Fund, for example, launched in Sept. 2000. Ooops. It has had good years and bad, but it’s down overall and has just $13 million in it. Similarly, the e-Commerce Fund looks great if you’ve owned it for five years. If you bought when it began in Sept. 1999? Not so much.
Which gets us back to the new alternative energy fund. Landis started it in October. This week he disclosed its top holdings include the likes of Applied Materials (AMAT), Corning (GLW) and Suntech Power (STP). (Corning is a top holding in two other Firsthand Funds, which is how you know Landis really likes it.)
What’s funny about all this is that Landis always billed himself as an expert in information technology, which is why investors should trust his, ahem, first-hand knowledge. In this regard he’s no different than the scores of other Silicon Valley professionals who are busy re-branding themselves as alternative-energy experts. (Landis has help in this fund, by the way, who presumably have first-hand knowledge of their own. They are the noted investors Audubon, Defenders of Wildlife, National Wildlife Federation, the Sierra Club and World Resources Institute.)
Will the new fund do well? Who knows. Is this a time when everyone and their sister are investing in alternative energy? Sure feels like it. Has Kevin Landis called a top in a market again by starting a new fund? That’s what potential investors will need to judge for themselves.
I sure as hell wouldn’t be relating his story of holding on to a losing fund for years in the same piece I’m offering “analysis” purporting to support an “alt energy bubble”. I hope fortune didn’t pay for this. FSLR is overpriced right now because of their unique position in the solar industry, but the price will adjust accordingly. The monumental forces pushing the move to alt energy are too numerous to mention in this post. Suffice it to say it’s a sea change and we already are decades into it.
If you read Motley Fool you bought STP around $25 and have tripled from one year ago. But if not and you think this is a top, then sell these ALTEX stocks short. Put your money where your moputh is and cover up that complaining sound please.
A great company with a bright future in a hot industry can still be overvalued. I’m a believer and investor in the solar sector, but if you aren’t worried that the stocks are ahead of themselves and ripe for a dramatic pullback, you’re kidding yourself.
Adam’s “thesis” posits that an alternative energy investment bubble exists. His “theory”.Not based on hard,economic FACTS! This fool,who appears on FOX,has no credibility at all. He still owns a LOSING fund from the 2000 technology debacle. Another who bought high and still hoping it’ll come back.He holds onto a money losing fund ,as a reminder. What a fool moron!Anyone who follows his “advice” is going to lose their money,too. He’s doing PR for Kevin Landis.So what if Kevin Landis uses you to do PR for his funds.That means you’re a glorified hack!!! Big deal.Not impressed.And you’re not a source of valid,credible ,factual information. The majority of mainstream media are reporters who couldn’t question their way of a hole in the ground…Don’t listen to them: they’re mostly full of themselves and their “advice” is even worse.
if anyone is interested in checking out my social network that is focused on alt energy/solar, feel free to visit it at:
http://growthportfolio.ning.com/
thanks guys
scott
The bay area is the VC capital of the world, not just the internet capital of the world. In fact the internet was just the *last* boom that came out of the bay area, prior to that were PCs, chips etc. whose businesses are dramatically different than internet and media. So why wouldn’t greentech, an industry that has plenty hooks in technology (solar cells for example) start here too? I am so fed up with this constant drumbeat of a bubble. Its obvious greentech has barely started, with a 2500GW market for electricity in the US, China and India alone and greentech accounts for 20MW, this is the place to be- good for Landis in adapting, and thanks to the VCs in the bay area for funding some great startups like Ausra…. and you, Adam GET WITH THE PROGRAM
I agree with you that Kevin Landis and people like him should not be managing money. I lost a ton with First Hand Funds too. I just hope someone in Congress or SEC will look at the miserable performance of funds like First Hand and boot guys like Landis from managing other people’s money.
The author lost by investing at the last peak into a fund he misread. Now, that’s how bad your investiment skills speaks. After all, it is YOU who pikced that particular fund out of thousands.
While ALTEX is heavily into technology companies, some of which have dubious connections to alternative energy, there is no reason to believe the alternative energy is in a bubble. Has the author checked the price of oil? We are running out of the black stuff that runs our modern world, and it’s going to take a lot of new and alternative energy solutions to replace the depleting oil. Alternative energy stocks have just begun to run. The world needs energy and many of these companies will grow tremendously as they supply the world what it wants. PBW might be a purer alternative energy fund to play this sector, and it has lower fees.
I see no ’sure signs’ described in the article. An inflammatory header without any supportive content is a ’sure sign’ of a BS article with an agenda.
Adam Lashinsky’s Credentials
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Unless this article was since edited - the author has identified the symbol STP as being Suntech Power?
The article appears to be a commentary without real investment advice, but I believe this to be the intent.
I don’t see you bring up any support of your statement of “sure signs of an alt-fuels investment bubble”. Where are the “sure signs”? You mostly talked about TVFQX and its performance thru the .com bubble. So what? Anybody who bought tech stock during the high of 1999-2000 would have hard time to recover their loss. What’s your point?
And btw, STP is not Sunpower. Do you homework on them first before barking.
Sunpower is (Nasdaq: SPWR), while Suntech power is (NYSE: STP)
No biggie….
The author would have more credibility if the symbol for Sunpower was correct–rather than being the symbol for Suntech.
if you still hold a fund from 2000 that is at a loss, you are one of the rubes you speak of. solar will be the biggest business of all time. yes, people will get burned, but no this does not end here.
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Wall Street watchers think of capital markets and financial players out west as being on the "other" coast. That's not how it's viewed in the Pacific time zone. From the venture capitalists of Sand Hill Road to the bond kingpins of Orange County to the corporate finance department at a certain software company in Redmond, Wash., there's plenty going on "out there." Adam Lashinsky should know. A native of Chicago, he has covered West Coast finance for a decade, with an emphasis on money matters in Silicon Valley. If it involves money and it's happening west of the Mississippi, look for it in Go West. 
Adam, how are the alternative energy funds doing during this bear market?
If, as part of my diversification strategy, I wanted a small portion of my portfolio in an alternative energy investment, which ones do you recommend for long-term holding?
Thank you.