The hedge fund circle has been placing a greater focus on investment opportunities in the clean energy space, and hedge fund veteran Richard Bookbinder is at the forefront of this trend.

IN PICTURES: 20 Tools For Building Up Your Portfolio

On The Radar
Bookbinder is the managing member of Bookbinder Capital Management, which he formed over 10 years ago. His firm focuses exclusively on investing in hedge funds and recently rolled out TerraVerde Capital Partners, a fund of funds that invests only in green hedge funds. "As part of our overall research process, we started looking at the green space about two years ago," Bookbinder said in an interview.

A key driver advancing the clean energy theme that Bookbinder points to is the rising price of fossil fuels. The United States Oil Fund (NYSE: USO), which tracks the price of crude, has gained 75.5% since bottoming out in mid-February. This price movement, taken together with a growing global awareness of the need to reduce carbon emissions, bodes well for companies positioned in the green space. "It's the perfect storm for clean energy investing," Bookbinder said. (For related reading, check out Go Green With Socially Responsible Investing.)

Corporate America Goes Green
With a Senate panel slated to begin climate hearings later this month, Bookbinder acknowledges that the political climate for clean energy is improving. In the meantime, Bookbinder expects that the green movement will continue to grow given the contributions of other stakeholders. "I think the real progress here in the U.S. is being made at the state level," he said. "California, in particular, has been very active in this area over the past twenty or so years."

Government action is only one piece of the equation that Bookbinder believes will benefit the green movement over the long term. The more important part of the theme is Corporate America beginning to step up, he said.

Bookbinder cites General Electric (NYSE: GE) CEO Jeff Immelt as a major proponent in Corporate America for clean technology. GE's Energy Financial Services arm has made significant equity investments in A123 Systems (Nasdaq: AONE), a maker of next-generation lithium-ion batteries that has seen its stock price soar 38.8% since its IPO in September.

Abundant Alternatives
Individual investors interested in green investing but with no access to hedge funds still have plenty of options available. For example, the PowerShares WilderHill Clean Energy Fund (NYSE: PBW), which has risen 91.2% since March 6, is an ETF that holds a basket of stocks focused on the clean-energy space.

In terms of individual stocks, First Solar (Nasdaq: FSLR), a leader in the solar module market, is just one example of a solar company that has seen its profits trend upward as it continually refines its manufacturing process. (For further reading, check out Spotlight On The Solar Industry.)

Bottom Line
Although Bookbinder has an outlook generally favorable toward green energy, he acknowledges that companies positioned in this space will not have it easy. "A lot of these companies aren't going to make it," he said. "Investing opportunities exist on the short side as well."

The notion that the clean energy movement has attracted the interest of hedge fund money adds legitimacy to the space and indicates the trend is gaining momentum. As green technologies continue to evolve and become more profitable, as has been the case with solar power, investors who got in at the ground level stand to reap significant gains. Potential new investors should do their own due diligence before investing in clean energy. Bookbinder's mention of short opportunities in this area underscores the risk level associated with clean technology plays.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  2. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  3. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  4. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  5. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  6. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  7. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  8. Professionals

    How Brokers are Candy-Coating Alternatives

    Alternatives have become a sexy choice for many advisors. But they also come with additional risks that are not always clearly spelled out to clients.
  9. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  10. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  1. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>
  2. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  3. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!