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One of the growing trends in investing is environmentally friendly investing. And it is possible to make money by investing in environmentally friendly companies (or at least friendlier companies) and new energy sources. But, as with all investments, it is important to be careful. In many cases, some of the investments are risky.

So, in honor of Earth Day, here are some ideas for environmentally friendly investing:

1. Solar power. Solar energy is becoming more and more efficient. Advances are being made nearly every day in terms of making solar panel and cell technology better — and less expensive. And, as oil prices rise, solar stocks rise as well, since demand for alternative energy increases. But be warned: Some solar start-ups are risky. Carefully check your investment portfolio to make sure you have the risk tolerance.
2. Renewable energy funds. These are mutual funds and exchange traded funds that consist of renewable energy sources. They include companies that develop renewable energy, as well as companies that provide support services (such as manufacturing wind power turbines). Carefully choose these. They are popular right now, but you want to choose solid funds, since renewable energy investments are still volatile.
3. Biofuels. This is a very murky area of environmentally friendly investing right now. The biofuel conundrum is that some fuels, such as those made from corn ethanol or palm oil actually do more harm to the environment overall. But these are the most solid (especially ethanol, since it reaps the benefits of government subsidies to Big Ag). Other biofuels, such as jatropha, could make interesting investments, but they are also more risky.
4. Environmentally friendly companies. There are companies out there, like Nike and Google, that rate highly in terms of efforts to improve their environmental record. You can get a list of the most sustainable companies and consider investing in those. You’d be surprised by some of the solid names on the list.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss.

Tags: investing Earth Day, environmentally friendly investing, investing blog, investing ideas,
Earth Day, stock market blog, renewable energy funds

I have a reader question today. It has to do with one of the common stock market terms:

I hear a lot about “valuation” with regards to stocks. What exactly is valuation?

Basically, stock valuation represents attempts to determine the fair value of a stock. This means that valuation is the process of trying to determine how much a stock is worth — and whether its worth is in line with its price.

It gets a little complicated. Especially since there are several theories of stock valuation out there.

Efficient market

One theory is that if a stock market is well-organized, and if there are many transactions, then the stock price of a share will be in line with its value. This may not always be the case, though. As you know, though, the psychology of investors can play a role in inflating a price above, or in depressing a price to below, its true value.

Perceptions of how well a stock or a sector is doing can affect the stock price as people buy or sell in fear or in expectation.

Discounted cash flow

This method of valuation is a little different. The idea is to take into account a risk premium (or the expected rate of return beyond the risk-free interest rate) in a discounted set-up. Future profits and cash flow are discounted in order to offer a present value. The idea is that there is a time value for money, and future profits can be discounted according to such factors as risk. This is the most commonly accepted method of stock valuation.

If you are still interested in learning more about stock valuation, you can watch this video explaining the basics of stock valuation:

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss.

Tags: stock valuation, stock market terms, stock market blog, investing blog,
stock market, discounted cash flow, market efficiency

One of the big stories in the tech world right now is the fact that Yahoo! (YHOO) is running test ads for Google (GOOG). That’s right, Google is placing text ads on Yahoo! The two companies are considering a partnership — something that Microsoft (MSFT) has got to be freaking out about this. After all, the whole point of Microsoft’s bid for Yahoo! is so that it can compete with Google head on.

Is it just me, or is Yahoo! trying its best to inflict as much psychic damage on Microsoft as possible?

Indeed, the whole point seems to be for Google to spread its influence even further while Yahoo! does its utmost to remain, well, independent. Or maybe Google would buy Yahoo! But, what would the federal regulators say?

At any rate, the test ads may be the first step for Yahoo! to actual outsource its search advertising to Google.

Of course, this still doesn’t make Yahoo! worth what the company (if no one else) thinks it should be. The latest is that Yahoo! is below $29 a share, and even the news that the test ads have been deemed a success so far hasn’t been able to give YHOO a boost. BloggingStocks points this out about Yahoo!’s aversion to the Microsoft offer:

Since no one other than Microsoft wants to buy the portal, the answer is that Yahoo! has lost all options to defend its present strategy. A deal with Google does not, in any way Yahoo! can explain, make the company worth $30 a share.

So, will Yahoo! ultimately allow Microsoft to buy it? Or will it retain its independence until someone else makes an offer?

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss.

Tags: Google deal Yahoo, stock market analysis, stock market blog, investing blog,
GOOG, YHOO, MSFT