Camino Energy

The Solar index has been updated and rebalanced for a net gain of 2 companies to 36 constituents.  Three companies were added:  Solargiga Energy Holdings (0757.HK), Shenzhen Topraysolar Co., Ltd. (002218.SZ), and Solar Integrated Technologies, Inc. (SIT.L).  One company, Spire Corporation (SPIR) was removed due to a decline in market capitalization.

The Renewable Electricity index has been updated and rebalanced. The index now contains 22 constituents reflecting the removal of Solar Millennium AG (S2M.DE) due to a decline in market capitalization.

The Biofuels index has been updated and rebalanced. The index now contains 14 constituents reflecting the removal of Nova Biosource Fuels, Inc. (NBF) due to a decline in market capitalization.

The Fuel Cell index has been rebalanced.  There were no changes in constituents.

The LED-Lighting index has been rebalanced.  There were no changes in constituents.

Broad market indices (Emerging Markets, EAFA, S&P500) all rose significantly this week. Camino’s PurePlay™ indices, with the exception of Fuel Cells, were up. Commodities (DJP) retreated slightly.

Read more here.

Camino has reconstituted and rebalanced its PurePlay™ indices effective March 29, 2008.  

Solar:  Two companies, centrotherm  (CTN.DE) and Day4 Energy  (DFE.TO) were added.  DayStar (DSTI) was removed due to its decreased market cap. 

Renewable Electricity:  Five companies,  Ibedrola Renovalbles (IBR.MC), Goldwind (002202.SZ), Hanwei (HE.TO), Novera (NVE.L), and EarthFirst (EF.TO) were added.   Repower (RPW.DE) was removed due to its control by Suzlon.

Biofuels:  US BioEnergy (USBE) was removed due to its acquisition by VeraSun (VSE).

Fuel Cells:  No changes were made to the constituents.

by Mark Henwood 

Twelve months ago biofuels were dominated by companies producing ethanol from corn and sugar cane.   The situation is evolving with a growing number of public companies using bio-oil or bio-waste energy sources to compete with a broader range of fossil fuels.  In addition to ethanol producers we now have public biodiesel producers and bio-gas producers.   To reflect this progression we have renamed our index “Biofuels” and expanded it to include companies that use bio-waste, biomass, corn, sugar cane, sugar beets, or bio-oils to produce biodiesel, ethanol, or methane.

As a first step in refining the index we reviewed the market and our database to identify public companies with significant exposure to biofuels.   We then subjected the 77 potential companies to our standard PurePlay screens to identify the constituent companies.   Sixteen companies passed our energy source/product, exposure, size, liquidity, exchange, and business type screens.  We have removed Sunopta (STKL) from the index because of their very small (and decreasing) business exposure to ethanol.   Five biodiesel producers were added:  Biopetrol (B2I.DE), Brasil Ecodiesle (ECOD3.SA), Gushan (GU), Nova Biosource (NBF), and VERBIO (VBK.DE).  Two biogas producers were added:  EnviTec Biogas (ETG.DE) and Schmack (SB1.DE).   

Sixteen companies are insufficient to construct a properly diversified (5/50 rule) modified market capitalization index so the index continues as an equal weight tracking index.  We expect more companies will enter this area to compete with increasingly expensive transportation and gaseous fuels.   We also note that efforts to produce fuels from biomass, rather than bio-waste or bio-oil, have not yet produced a company able to pass our index screens.  In our view a breakthrough is needed to propel this sector beyond the confines of its current resource limitations. 

PS - by bio-oils we mean either plant or animal derived oils.  

JASO underwent a 3:1 share split effective closing 2/7/09.  The solar index was adjusted accordingly.

Our fuel cell index kept pace with the broad S&P 500 index this year.   With no significant new entrants the same seven companies passed all our screens and remain in index and the index was rebalanced January 1, 2008.   We exclude Hoku Scientific due to their rapidly declining fuel cell business (six months revenue ending 9/30/07 was off 57% according to their Nov 07 10-Q), their hydrogen based technology, and their continued push into the polysilicon supply business.  

Companies using hydrogen as a fuel source continue their decline in market cap share.  We discussed this trend with Haitham Haddadin of Reuters on August 31, 2007 and Bob Keefe of Cox News on September 9, 2007 and we see no abatement as shown below: 

Source:  Camino Energy

What is the future of the fuel cell segement?  With Ballard’s exit from the auto market  it doesn’t appear to be the major transportation market.  In our view the longer term promise lies with companies using readily available fuels, such as natural gas, but the promise requires significant cost reductions and improvements in reliability.  If these happen, fuel cell’s inherent efficiencies, quiet operation, low emissions, and potential for heat recapture will help the technology find broader markets.

Renewable Generation has shown stong, consistent performance the last two years returning 19.2% in 2006 and 29.0% in 2007.   With low correlation to the broader US market (100 day beta of .328, 500 day beta of .523 against the S&P 500) this sub-sector looks like a good candidate for inclusion in portfolios.  

Recognizing the long term growth in renewable electric generation Camino has expanded its selection criteria to also include companies that supply generation equipment to renewable generators.   This expansion, and growth in the sector, has allowed 19 companies with USD 68.5 billion in market cap to pass all the Camino index screens.  With this number of companies we are now able to use our modified market capitalization methodology for this sector effective January 1, 2008.  Numerical and graphical values represent the spliced result of the previous equal-weight index and the Jan 1 modified market cap methodology.  

The solar industry has undergone dramatic growth in 2007.   Reflecting this growth is an increase from 24 to 33 companies passing Camino’s index screening methodology.  As a result we have decided to discontinue our solar tracking index in favor of our modified market cap index. The index was reconstituted and rebalanced as of January 2, 2008.  

We have computed the index since October of 2007 and back-tested the methodology to April 10, 2007.   Prior to April 10 we spliced the former equal weight tracking index as a good proxy for solar industry performance.   During the April - July 2007 overlap period, as prevously reported in our October 29, 2007 posting, we saw good agreement between the indices. 

With the index representing USD 122 billion in market cap this is the real deal.

The equal weight ethanol tracking index was updated effective January 2, 2008.   After applying our screens the index now consists of ten (10) companies with market cap of USD 8.4 billion.   Abengoa S.A was removed because only about 20% of its business is ethanol related.   Great Plains (GPRE) and BlueFire (BFRE.OB) were removed because their market cap is now below USD 100 million.   Biofuel Energy Corp. (BIOF) passed all our screens and is now included in the index.

Consistent with our index methodology, when needed we will modify our indices between reviews.   In this case PNE3.DE (Plambeck Neue Energien Ag) was removed from the Renewable Genco index due to small market capitalization.   This change resulted from an improvement in our market capitalization computation that more accurately valued the company.   A more complete review of index members for all indices will be conducted during our January update.