Welcome to the fourth installment in our model portfolio of green stocks . Our fourth pick is Peerless Manufacturing (NASDAQ:PMFG) Peerless is a manufacturer of filtration and purification systems for liquids and gas, and it its industry, its name is appropriate.

Peerless’s products are used in a wide variety of industrial applications. Just imagine all the industries which would value liquids or gases that are free from pollutants and impurities. But it is the company’s work in water purification and reducing air pollution that are of particular interest to us. The world-wide shortage of clean, fresh water is approaching crisis proportions, and while the story isn’t getting much press here in the U.S. right now, it won’t be long before it does. The U.S. water infrastructure is not aging well, and home demand for Peerless’s filtration products can only rise. And as awareness of climate change is (finally) spreading to the mainstream, demand for PFMG’s air filtration systems should continue to rise as well.

In short, Peerless is a play on clean water, clean air, and cleaner energy production. It’s on the list of companies that are building a cleaner future, and if Obama wins the election, the future will look especially bright for such companies.

At its present price, PMFG still has a smallish market cap of $352 million, so we can expect significant volatility, but that also means there’s plenty of room for growth. It’s trading at 25 times earnings, which is not out of line for a small growth stock, especially one that is debt-free like PMFG.

Solid green credentials, zero debt, and strong growth. PMFG belongs in our portfolio.

Author holds no position in PMFG at the time of writing.

Let’s face it - the stock market has been rough lately. Uncertainty over our monetary policy, skyrocketing commodity prices, inflation fears, and worries about the future of the world’s oil supply have all lent a hand to making this one of the most unpredictable market environments in memory. It’s difficult to know what action to take. And make no mistake - from a short-term perspective, we can’t offer much in the way of guidance.

A Long-Term Approach to Green Stocks

Our model portfolio demonstrates this well. It seems we didn’t time the market very well for its launch, and entered a couple of our picks right before a general precipitous decline in the market as a whole, and banking in particular. In short, we’re barely out of the gates and already in the red. Were we to take a short-term perspective, we’d probably already have closed these positions out. But that’s not our strategy at Renewable Wealth. (Not that short-term trading strategies can’t work - it’s just not our focus here.)

Current Green Stock Picks

Let’s look over the choices we’ve made so far: regional banking, geothermal energy, and timber. Rayonier , our timber pick, is actually showing a small profit at the time of writing. Timber is a “forever” investment in our mind, and this perspective is only bolstered by the growing possibilities for biodiesel and cellulosic ethanol generated from timber. RYN is in our portfolio to stay.

Next we have U.S. Geothermal ( HTM ). We predicted from the outset that this micro-cap company would be volatile, and we were right. Big moves on a daily basis have been the rule, and we’re presently in the red by a good bit. But the reasons we bought into HTM have no changed. In fact, as oil continues to creep up, prospects for alternative energy continue to look better and better. HTM is a long-term hold.

Lastly we have the regional banks. The beat-down of KRE continued, and even accelerated for a while, dragged down by the shake-up at fifth-third bank. But once again, the reasons we bought in the first place have not changed. Lower sub-prime exposure, a huge dividend, and over-all solid financials. We’re holding KRE as well.

There’s always the risk when you buy that a general selloff will happen the next day. It’s the nature of the beast. But we only sell on such events when there’s some indicator that our initial analysis was wrong. So far we’ve seen nothing like that for any of our picks. So we’re hanging tight for now.

By the by, now would be a good time to remind our readers that our model portfolio is just that - a model, and does not constitute individual investment advice.

Hang in there. We know it’s tough right now. But tough times can spark innovation, and our fondest hope is that the boom in green enterprise will continue. We will be adding new picks to the model portfolio soon. Stay tuned!

Author is long RYN, KRE, and HTM at the time of writing

Welcome to the third installment in the Renewable Wealth model portfolio. Our third pick focuses on clean energy. The alternative energy sector is red-hot right now, boosted by high oil prices and rising consumer awareness. We’re starting out in an area that’s hot both literally and figuratively: Geothermal Energy.

How Does Geothermal Energy Work?

Like many forms of energy production, geothermal energy is really just a fancy way of heating water. Water is pumped down far beneath the earth’s surface, where heat seeping up from the earth’s core is plentiful. This heat can be harnessed to create energy in a variety of different ways, but at its core the concept is always the same: harvest and use the heat energy that’s waiting there beneath the surface.

Of course not all areas are suited to geothermal energy. Much depends on the geological makeup of a particular area. Iceland, for example, is well known to have huge amounts of geothermal capacity — in fact, it now generates all its residential power using geothermal.

As it turns out, the U.S. also has great geothermal resources — mostly concentrated on the West coast. Our next pick, U.S. Geothermal ( HTM ), owns the rights to a good chunk of these resources, and looks to be another excellent long-term addition to our green stock portfolio.

A Great Time to Get In

U.S. Geothermal has been in the build-out stage for a while now, but production is starting to ramp up. As you might imagine, it’s expensive to get a geothermal plant up and running, so the numbers didn’t look great in years past, but that’s all about to change. HTM owns the rights to a number of excellent geothermal resources which are just about to start bearing fruit. Their Raft River, Idaho facility is now online, and has sold 10 MW out of an estimated 40-110 MW capacity. Another plant in Neal Hot Springs, Oregon is slated to come online within the next few months, delivering 26 MW of capacity. HTM is also in the process of acquiring smaller plants, like their recent purchase of an operating 3.6 MW plant in Nevada just a few weeks ago.

Volcanic Volatility

At $172m in market cap, you can expect HTM to be volatile in the short term. Don’t let that spook you. Use dips as opportunities to add to your position, and plan to hold for the long term. As oil grows more and more dear, times can only get better and better for alternative energy, and geothermal is a proven technology. The future looks bright for this sector.

Author Holds No Position in HTM at the time of writing.

Welcome to the second entry in the Renewable Wealth model investment portfolio! Our second pick is an ETF of regional banks, called the KBW Regional Banking SPDR. It trades under the symbol KRE .

Local Banking is a Socially Responsible Investment

You’re probably wondering how a collection of local and regional banks fits into a portfolio focusing on environmental and socially responsible investing. We consider this investment to be a vote against the big international banks that are the root of many of the oppressive financial problems our country is presently facing.

The subprime mortgage meltdown, for example, is a creation of the international banks, who played on investor greed by bundling up large collections of risky mortgages, securitizing them, and labeling them as ultra-safe, high yield investments, when in fact they were anything but. Because of the volume involved, and the huge profit potential for the banks and brokerage houses selling them, the banks didn’t bother to do their homework to ensure that these loans were in the best interests of the borrowers, the lenders, or the purchasers of the securities.

It’s just the latest in a long line of excesses by big banks and Wall Street stuffed suits that have rocked our economy and damaged our currency, and have burdened the American people with staggering costs. Meanwhile, the instigators can always rely on the Fed to bail them out and transfer the bulk of the losses to the rest of us.

Local is Better - This Goes for Banks as Well

Regional banks tend to be far more conservative about their investments than the big boys. They don’t tend to engage in the sort of financial hocus-pocus that always seems to get the Wall Street hogs into trouble. Case in point: Regional banks largely were not involved with the subprime mess, and most have little if any subprime exposure. Further, what subprime exposure they have is most likely to come from their own direct, face-to-face customers, and local banks are far more likely to have done all the research to ensure their borrowers can actually afford the mortgages they take out. By and large, they never suffered from the illusion that they could “diversify away” their risks from bad loans with massive roll-ups of lousy debt.

Of course that hasn’t stopped local bankers from being hit by a massive sell-off along with the entire banking industry. The shares are down well over 30% from their 5-year highs. It’s unfair, but it creates a nice opportunity for us to get in at a great price.

We could talk at length about all the other excesses of big banks, such as aggressive marketing of expensive debt, exploitation of the poor and uneducated, aggressive collections tactics, deceptive business practices, the funding of corporate abuses, and more, but we’re sure you get the picture. The point is that international banks are a scourge, and buying into local banks is a great way to vote for a better way.

A Huge Yield

Because of the recent beating in share price, KRE currently offers a huge dividend yield of 11.62%. The impressive yield, along with an excellent prospect for capital gains as the share price rationalizes, make KRE an excellent prospect. We are pleased to announce it as our second pick for the Renewable Wealth Model Portfolio.

Today we launch our Renewable Wealth model portfolio with our first pick: Rayonier . A timber company like Rayonier may be a controversial choice among some of our readers. If this is true for you, then you might want to have a look at our take on green investing to get an idea about our basic sustainable investment philosophy.

Why an Investment in Timber is a Green Investment

Timber is the ultimate renewable and sustainable resource. Most modern timber companies focus on cultivated timber, as opposed to harvesting old-growth trees, and accordingly their interests lie in preserving timberland. In our view, the best way to protect forests is to ensure that they have ongoing economic value.

Wood is renewable, 100% biodegradable, and its production and harvest help to sink carbon from the atmosphere back into the earth. Products made of wood are thus greener by nature than most alternatives, like metal or plastic. Furthermore, cellulosic ethanol produced by trees and tree-seed biodiesel both have great prospects to help ween us off of fossil fuels. Cellulosic ethanol in particular makes much more sense than corn ethanol, and if the technology takes off, timberland companies stand to profit handsomely.

A Rock-Solid Foundation for your Green Investment Portfolio

Timber as an asset class has outperformed the stock market for as long as records have been kept. Rayonier in particular has a long record of steady profits, and wise buying and selling decisions for its timberland holdings. It presently offers a nice dividend yield of over 4.5%

A Temporary Slowdown

Most timber companies are forecasting slower earnings in 2008, primarily due to the housing slump. RYN is no exception. That’s good news for investors - it gives us a great opportunity to get in at a good price. Rayonier closed at $43.63 today - down from its 52-week high of $49.55.

The beautiful thing about the timber business it that in slow years like 2008, companies like Rayonier can simply slow down their harvest of trees. This may cut down on current cash revenues, but the trees will continue to grow in the meantime, and will be worth even more when demand picks up again, as it inevitably will (China, in particular, is in desperate need of lumber, and its demand will only continue to grow). No matter what else is going on in the economy, when you own timber, your asset base just continues to grow every year.

Don’t expect any fireworks from Rayonier now or in the future. But do expect steady double-digit growth for many years to come.

Stay Tuned For More

Over the next few days we will be adding more picks to form a solid platform for our green investment model portfolio.

Until Next time!