MUMBAI: Investors will benefit from buying into companies that produce windmills and solar panels since soaring demand for energy will push businesses to seek an alternative to fossil fuels, says legendary investor .
Agricultural commodities like rice and sugar are in a sweetspot since demand from emerging markets may lead to short supply, pushing their prices up, he says.
“There is enormous potential in alternative energy,” says Mr Rogers, a former business partner of hedge fund icon . “Some day, I will come to Mumbai and I am going to see windmills or solar panels on all roof tops.” Global production of crystalline silicon cells, essential for solar power generation, has surged six times between 2004 and 2008. With more governments pursuing better environment, the demand for such sources are set to surge, improving prospects for companies in the sector. The windmill sector also has favourable tax treatment.
Some of the companies that fall in the definition are the debt-laden windmill maker Suzlon Energy and the recently-listed photovoltaic cell manufacturer , which fell more than 10% on its debut on bourses. These stocks have underperformed either because the valuations are steep, or the companies have high cost of operations, or they are in a financial mess. So investors, including Mr Rogers, believe that it may be a while before they yield returns.
“But some day is a long way from now,” says Mr Rogers, the author of Hot Commodities. “But if you can find good companies in the shale gas, windmill or in the solar panel business, you will probably make a lot of money because they have a great future. Find somebody who can produce alternative energy relatively cheap and you will make a fortune.”
Although he favours alternative energy, his heart lies in sugar, rice and silver as he continues to preach the coming global shortage as nearly two billion people from and race to join the splurging Western consumers.
“Sugar is going to go much higher over the next few years,” says Mr Rogers who carries some sugar or gold in his coat pocket most of the time. “I am ecstatic to hear that your government is losing up on anything. This is one of the most restrictive and controlling governments in the world. There’s lots of money to be made in sugar unless your government does something foolish again.”
Commodity market regulator on Thursday lifted the ban on trading in sugar futures, as retail prices of sugar have dropped by almost 40% since January and production is expected to surge after bountiful monsoon. With both gold and silver surging as investors stack up fearing inflation and the lack of confidence in other assets, Mr Rogers bets more on silver than on the yellow metal. “If I were to go to precious metals, I would rather look at silver than gold. Silver is still 60% below its all-time high,” he says. “Buy yourself some silver chopsticks or some silver cutlery and buy yourself some rice, and you will be very rich in five or 10 years.”
He believes the next market to pop may be the US government bonds. “I know a bubble is forming in the United States government bonds, long-term bonds if not there yet. We do not have the end of the bubble, yet that is certainly one of the few bubbles I see forming.”
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