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A "Cash For Caulkers" Portfolio
President Obama recently unveiled the latest program to stimulate the economy and help reduce America's energy consumption. The "Cash for Caulkers" program would provide tax rebates and incentives for Americans to retrofit their existing homes and businesses. Homeowners would add things like new appliances, windows and HVAC units in order to make their dwellings more energy-efficient. This would lead to lower electricity bills for consumers, lower emissions and more jobs for the men and women doing the physical installation.
A $23 Billion Jolt
Both the Department of Energy's Secretary Steven Chu and top presidential advisor Rahm Emanuel have publicly supported the plan and said that serious consideration is being taking for it to be the next stimulus idea. While, the plan is still in its infancy, there are a few major models being considered. Green venture capitalist John Doerr's plan entails $23 billion in incentive payments spread over two years. Homeowners would pay for at least 50% of the weatherization project's total cost and receive $2,000 to $4,000 back for their efforts. An additional $3 billion would be used to market and promote the plan. The second, created by former President Bill Clinton, would use money already allocated to the pool of stimulus money for renewable energy.
The plan would also expand to businesses and commercial buildings and adds a special tax incentive in case they sell the building before the project recoups its cost; homeowners could add the project's cost to their long-term property tax bill. This would effectively split the cost with the next owner of the structure. New York State already has similar Cash for Caulkers programs in which homeowners find a contractor licensed to do an energy audit, the contractor performs the needed weatherization work and files the paperwork, and then the owners receive up to a $3,000 check from the state government. This New York State model is also being considered for the countrywide program. (Learn how global warming is starting to heat up America's corporate climate, see Can Business Evolve In A Green World?)
Adding "Caulkers" to a Portfolio
While there hasn't been a formalized bill yet outlining the program, adding companies that provide supplies and know-how for the plan to a portfolio makes sense. Regardless of any incentives, many American homes and businesses are looking for ways to save money on ever increasing energy expenses and many have goals of reducing their own carbon emissions. These stocks will see a boost in sales regardless of whether the bill goes through.
FLIR Systems (Nasdaq:FLIR) makes one of the most important components in providing home energy audits; infrared cameras. These devices show the heat differential across surfaces and cracks, allowing auditors the ability to prescribe the required fixes. The company has seen impressive growth for its products, experiencing a 28% annual sales growth rate for the past five years. In addition, the company provides its technology to various governments for defense. FLIR is currently trading at a P/E of around 20 compared to the industry average of 14.
Aside from Scotch tape, 3M (NYSE:MMM) makes an impressive list of energy-efficiency products. These include easy to install window films that attempt to reduce the heat lost through windows. This helps heat stay in during winter and reduces air conditioning costs in the summers. The stock is well off its 52-week lows, and it still offers a 2.5% dividend yield. (Learn more about this metric in Investment Valuation Ratios: Dividend Yield.)
Investors took Owens Corning (NYSE:OC) to the woodshed during the housing crash, but the stock has rallied the past year. As the leading maker of fiber glass insulation, roofing and masonry products, the company will surely see increased sales as homeowners look for higher R value replacements.
And finally, the easiest way to reduce home energy expenses comes from Cree's (Nasdaq:CREE) LED light fixtures. The price of LEDs has dropped considerably over the course of the past few years, making them affordable for homeowners. Cree's products are being sold through avenues such as Lowe's (NYSE:LOW) home improvement stores.
Bottom Line
With the Cash for Caulkers plan set to be in motion, many stocks in the home efficiency market place stand to benefit. Even without the incentives, many homeowners and businesses are looking for ways to reduce costs and improve their own carbon footprints. The previous stocks are great examples of how to cash in on the trend, stimulus or not.
A $23 Billion Jolt
Both the Department of Energy's Secretary Steven Chu and top presidential advisor Rahm Emanuel have publicly supported the plan and said that serious consideration is being taking for it to be the next stimulus idea. While, the plan is still in its infancy, there are a few major models being considered. Green venture capitalist John Doerr's plan entails $23 billion in incentive payments spread over two years. Homeowners would pay for at least 50% of the weatherization project's total cost and receive $2,000 to $4,000 back for their efforts. An additional $3 billion would be used to market and promote the plan. The second, created by former President Bill Clinton, would use money already allocated to the pool of stimulus money for renewable energy.
The plan would also expand to businesses and commercial buildings and adds a special tax incentive in case they sell the building before the project recoups its cost; homeowners could add the project's cost to their long-term property tax bill. This would effectively split the cost with the next owner of the structure. New York State already has similar Cash for Caulkers programs in which homeowners find a contractor licensed to do an energy audit, the contractor performs the needed weatherization work and files the paperwork, and then the owners receive up to a $3,000 check from the state government. This New York State model is also being considered for the countrywide program. (Learn how global warming is starting to heat up America's corporate climate, see Can Business Evolve In A Green World?)
Adding "Caulkers" to a Portfolio
While there hasn't been a formalized bill yet outlining the program, adding companies that provide supplies and know-how for the plan to a portfolio makes sense. Regardless of any incentives, many American homes and businesses are looking for ways to save money on ever increasing energy expenses and many have goals of reducing their own carbon emissions. These stocks will see a boost in sales regardless of whether the bill goes through.
Aside from Scotch tape, 3M (NYSE:MMM) makes an impressive list of energy-efficiency products. These include easy to install window films that attempt to reduce the heat lost through windows. This helps heat stay in during winter and reduces air conditioning costs in the summers. The stock is well off its 52-week lows, and it still offers a 2.5% dividend yield. (Learn more about this metric in Investment Valuation Ratios: Dividend Yield.)
Investors took Owens Corning (NYSE:OC) to the woodshed during the housing crash, but the stock has rallied the past year. As the leading maker of fiber glass insulation, roofing and masonry products, the company will surely see increased sales as homeowners look for higher R value replacements.
And finally, the easiest way to reduce home energy expenses comes from Cree's (Nasdaq:CREE) LED light fixtures. The price of LEDs has dropped considerably over the course of the past few years, making them affordable for homeowners. Cree's products are being sold through avenues such as Lowe's (NYSE:LOW) home improvement stores.
Bottom Line
With the Cash for Caulkers plan set to be in motion, many stocks in the home efficiency market place stand to benefit. Even without the incentives, many homeowners and businesses are looking for ways to reduce costs and improve their own carbon footprints. The previous stocks are great examples of how to cash in on the trend, stimulus or not.
by
Aaron Levitt
Aaron Levitt is a SABEW investment journalist and analyst living in State College, Pennsylvania. His work appears in several high profile publications in both print and on the web. Aaron is a graduate of The Pennsylvania State University where he studied Economics and International Business and he is an advocate for long-term investing with a global framework. You can follow his picks and pans at @AaronLevitt
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