FUND VIEW - Schroders Green Fund Waits On Solar Valuations
Date: 17-Feb-09
Country: CHINA
Author: Leonora Walet
HONG KONG - Renewable energy stocks are likely to fall further in 2009, with solar stocks particularly vulnerable, although a sharp correction should offer a buying opportunity for long-term investors, a fund manager with Schroders said.
"This is the year that's going to create great long-term buying opportunity for investors in the renewable sector," Simon Webber, manager of the Schroder ISF Global Climate Change Equity fund, told Reuters in an interview.
"There's going to be profit warnings in the best wind and solar companies and this is a good opportunity to begin holding on that weakness," said Webber.
Globally, Schroders manages assets of $200 million in climate change-related companies.
Germany-based Munich Re, which reinsures risks including those arising from the use of genetic engineering and information technology, and uranium miner Energy Resources of Australia were among the fund's top 10 holdings as of end December.
"I still believe that the market is underestimating much of the impact of global warming and therefore there are undiscounted investment opportunities around climate change," said Webber.
Solar stocks, which were among the worst-performing equities last year, are vulnerable to further declines as fundamentals remain unattractive, said Webber.
"Solar is expensive as a power generation technology -- around 5 times more expensive than wind power, and therefore will require a lot of subsidy. Subsidy, these days, is harder to come by," said Webber.
However, Webber, whose fund does not hold solar stocks, is convinced about the long-term growth outlook of the sector and is open to gaining exposure in some solar companies before the end of the year.
Webber's $125 million fund has fallen 39 percent in the past 12 months, but still outperformed the MSCI world stock index, which was down 41.4 percent in the same period.
Its largest holdings include China's Guangdong Investments, whose core business includes water supply management, German engineering firm Siemens, and power and gas company E.ON.
Webber likes companies that promote efficient use of resources, including technologies or products that curb air travel, a main source of greenhouse gas emissions.
The fund holds stocks in video-conferencing companies like Polycom Inc and Tandberg whose technologies enable workers to communicate over distances.
"Video conferencing is holding up very well. It's an area we're very interested in. Efficient cars that help save money and cut fossil fuel use are also companies that we're currently looking at," said Webber.
The fund holds shares in China's BYD Co Ltd, a maker of rechargeable batteries and electric cars.
(Reporting by Leonora Walet; editing by Simon Jessop)