Finding Growth and Value in Alternative Energy and Alternative Tech

Kevin Landis, one of the best technology investors around, is spending a lot of time and money these days at the place where tech and energy, specifically renewable kinds like solar, wind and geothermal, converge.

These alternatives to fossil fuels are clean and available in nearly inexhaustible supplies yet are usually so expensive as to be commercially unviable. Landis, who manages several portfolios for the Silicon Valley firm Firsthand Funds, believes that money can be made in shares of companies involved in technologies that he expects to make renewable energy as cheap as the commonplace, high-pollution kind.

These companies have solid long-term growth outlooks, in his view. An added appeal, especially for contrarian investors, is that while mainstream tech and energy stocks are hardly cheap, many of the ones at the cusp of the two sectors have fallen out of favor and may prove to be bargains.

Describing his investment process and stating his case, Landis told MoneyWatch: "It's becoming more and more about alternative energy and the technologies that wring costs out so that someday soon they won't have to worry about subsidies. A lot of that is material science; how do you make a solar panel thinner and more productive? It's really, really neat stuff."

Still, that's not bad considering the dismal run of solar energy stocks during that stretch. The sector had been hot, pardon the expression, as the broad bull market was peaking two years ago.

Then came the collapse in oil prices and the stock market, plus the credit crunch (solar is a capital-intensive industry and needs repeated rounds of financing to develop new technologies and build arrays of panels). These developments have left solar stocks trading far closer to their lows of the last several years than their highs.

Yet as Landis has it figured, the future is set to be a better place for solar than the present. Solar panels are made mostly from silicon and, like their close cousins microchips, come under the jurisdiction of Moore's Law: Just as the amount of information that can be stored on a chip continually increases while the cost goes down, sunlight can be captured by solar cells ever more cheaply and efficiently.

So while solar remains one of the least commercially viable sources of renewable energy, it may be able to cut its losses faster than others. That could give it the best long-term investment prospects of all forms of renewable energy.

On Thursday: more about the investment outlook for renewable energy and details of Landis's portfolio.