Companies that have adopted eco-friendly policies and programs are part of the ever-growing Green Movement; a popular trend that’s here to stay. “Going Green” has become so popular not just because companies think it’s the right thing to do, but also because it’s a great way to make money. Over the past few years there have been a tremendous number of businesses that have adopted environmentally friendly programs and, in fact, gone green. Now entire countries are starting to follow the trend. So what does this mean for you and how can these companies make you money? Through investing in green stocks.
The basic rule of investing in stocks is that profits are available when there are pricing inefficiencies or strong growth opportunities. Today, green stocks meet both these conditions. Many companies that have implemented green programs may be valued below their true earning potential (a pricing inefficiency) because the value of their eco-friendly programs has not yet been fully reflected in the stock’s price. On the other hand, companies that plan to implement green programs within the next few months may have significant growth opportunities which will help boost the stock’s price. But this doesn’t mean every stock that has gone green, or plans to, is a good fit for portfolio—you’ll still have to do your research.
Aside from making investment profits, buying green stocks also lets you help those companies that are trying to help our environment. Buying a share of stock is the same as being part owner of a company, and the money you pay for a share of stock allows the company you’re investing in to grow its operations, build new structures and hire more employees. So by purchasing a green stock you’re essentially helping build an environmentally friendly business.
To find out if green stocks are a good fit for your portfolio try this exercise: First write down ten companies that have either gone green or plan to soon. Consider starting your research with the following list of companies that have been called “Green Giants” by Fortune magazine: Honda, Continental Airlines, Suncor, Tesco, Alcan, PG&E, S.C. Johnson, Goldman Sachs, Swiss Re, and Hewlett-Packard. Next, go to a free stock research website like www.morningstar.com and find each company’s ticker symbol and business sector. Track these stocks by reading headlines and reviewing analyst reports and financial data. After tracking each stock for a few weeks, if you find one or two you’d like to own then considering purchasing them if they will diversify your existing portfolio.
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