The Paradigm Portfolio has a specific investment focus: pick the highest quality companies that are considered best positioned to benefit from the economic paradigm shift away from foreign oil and polluting coal and towards cleaner alternatives. These are leadership companies that play an important role in redefining our energy future
Stocks are rigorously screened to filter out only those businesses that offer the greatest long-term value to investors. Companies that form the portfolio are culled from almost 250 stocks that are the main players in the global clean energy market. What remains is a group of elite, hand-picked stocks specifically for the long-term investor.
The goal of the Paradigm Portfolio is to be a well balanced, diversified selection of the highest quality alternative energy companies. Companies are categorized by size, location, sector and industry. The graph below shows diversification within each category, which clearly shows the many ways the portfolio has been diversified. Most companies fit into more than one of these categories, since their operations cover several different job areas. The subscriber only area of the Roen Financial Report website shows more detailed information on how individual companies fit into the portfolio. Please visit Company Profiles area of the website for a list of sample profiles to be viewed.
Industry diversification (Solar, Wind, Alternatives Fuels, Energy Efficiency, Environmental and Smart Grid) is paramount so that the entire fate of the portfolio is not affected by fluctuations in a single industry. For example, wind power companies had a downturn in 2009-10, just when many solar companies started to take off. This allows the portfolio to cover a wide variety of sectors to take advantage of performance in a diversity of business areas. For more information on these sectors, please visit the Alternative Energy section of our website.
Companies in the portfolio are also categorized into 3 main areas: Large Cap Legacy, Small Cap Appreciation and Paradigm Pure Play.
Large Cap Legacy stocks are banner companies that are important leaders in their fields. Though many of these are diversified companies involved in more than one business, all have a leadership position in addressing our energy future. These are well-established, international companies with sales over $10 billion annually.
Small Cap Appreciation companies are also key players in their field. Due to their smaller size they are often more focused within their alternative energy sectors. Another benefit of having mid- and small-size companies in the portfolio is that these stocks have very good potential for growth.
Paradigm Pure Play companies are those whose sole product or service is directly focused on one area of alternative energy. These are small, more targeted investment plays in the alternative energy sector. These companies are directly involved in the shift away from inefficient, outmoded, conventional energy systems and towards cleaner, safer renewable alternative energy sources.
The Paradigm Portfolio is a diversified way to help investors participate in this exciting trend. Even though the Paradigm Portfolio is extremely well diversified within its sector, I do not necessarily suggest that an investor should use it exclusively to construct a portfolio. It may be appropriate to have the Paradigm Portfolio comprise a certain portion of an investor’s overall asset allocation. As always, consult with your financial professional before making any important investment decision.
I am not a fan of fad investing, and it is clear to me that alternative energy is not a passing fad. I believe we are still at the early stages of a long-term investable story. There is a paradigm shift under way to create innovate solutions leading to energy independence and reduced pollution. This trend will surely benefit the long-term shareholder in the right companies.