Investment Articles

In today’s tough economic climate, people are looking for ways to get back some of their wealth that they lost over the last few years. Most conventional markets did not perform as well as they have in the past, which caused investors to lose a large sum of money. If more people would have invested in alternative markets, they would have been better prepared to weather the economic storm and would not have lost as much of their money as they did.

Outperform Traditional Markets

One of the best ways investing in alternative markets can help grow your portfolio is that these markets typically outperform conventional markets during bear markets. When every other investment opportunity is struggling to show a profit, alternative markets can be providing terrific ROI figures. It is because of this ability to return a positive ROI, even in a down economy, that every investor should add alternatives to their stock portfolio.

Independent of Other Markets

Another great reason for investing in alternative markets is to diversify your portfolio. All of the traditional markets such as cash, stocks, and bonds are intertwined and dependent on each other. When one of those markets starts to perform poorly, the others will tend to follow. If you had all of your money tied up in these traditional markets, you could potentially lose a large portion of your wealth whenever one of those markets started to perform poorly.

On the other hand, alternatives are not correlated to the traditional markets and therefore are not subject to their influence. If the traditional markets start to tank, alternative markets can still thrive. This will allow you to continue to see your investment portfolio grow even when traditional markets are tanking. Not putting all of your investment eggs in one basket is the only way to ensure you do not lose all of your wealth at one time.

Investing in alternatives is also a great way to take advantage of emerging markets. Most investors focus a large portion of their time and efforts into the traditional markets. Since these investors are not on the lookout for new markets to get involved with, you are able to take advantage of these new investment opportunities and get in on the ground floor. This could help you realize a tremendous return on your investment should you discover a highly profitable alternative market.

Developing a sound investment strategy is vital to your future financial independence. If you stick all of your investment eggs in one basket, you run the risk of losing all of your wealth when one of the traditional markets collapses. However, if you spread your investments around to include alternative markets, your chances of going broke are greatly reduced.

If you do not know which alternative markets you should invest in, consider seeking the advice of a company such as Altegris. This type of company can help invest your money wisely in alternative markets.

Investing in property, be it residential, commercial, agricultural, leisure, healthcare, student accommodation or some other niche property sector, is ostensibly the most popular and common form of alternative investment, and has been used as a low risk, long-term investment asset by many Investors. The main aim of the property investor is to capture income from rentals, and/or capital growth either through natural attrition or by adding capital value through development. Whatever the form or sector, property investments are solid, tangible and ‘real’ in that a property is unlikely to depreciate in the long term provided due care and consideration is given to due diligence in the acquisition stage.

Investment Strategy

The traditional form of property investment is the simple leveraged buy to let, where an Investor will acquire a property using a combination of cash and mortgage debt, and seek to cover the mortgage costs with rental income. This strategy is ideal for the long-term Investor with ample time to allow the rentals to completely pay off any mortgage debt. Older Investors should be wary of taking on long-term debt to fund property acquisitions. The buy to let strategy can be applied to residential, commercial, agricultural and other sectors including student accommodation and healthcare properties.

A more opportunistic approach is to identify and acquire distressed assets at heavy discounts, and aim to resell quickly in the open market in order to capture the inherent profit. This strategy removes the long-term financial liability associated with property ownership, and also removes reliance on capital growth as the main driver for profit.

Land development and planning are also valid property investment strategies, although these are often large and complex projects and not suitable for inexperienced Investors. One way for smaller Investors to participate in property development is to buy off-plan, where they receive a discount for agreeing to purchase the property before it is built, this again capture inherent profit, and the investor may choose to sell the property on completion of the building works, or they may choose to rent the property out. Other options for Investors seeking exposure to development property are smaller developments or refurbishments involving the renovation of property in order to add value.

Each strategy carries its own set of risks, and Investors considering adding property exposure to their portfolio should consider their end goals, be it income, growth or both, and seek out investment opportunities likely to deliver on those goals. As always, due diligence is required in the research, investment planning and acquisition phases of property investment, and often Investor will require expert help for legal and property professionals in order to properly identify the risks associated with the property or project in front of them.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in alternative property transactions in the real estate and natural resources sectors.

It wouldn’t be overstating the country’s historical importance to call Azerbaijan one of the very few cradles of human civilization in the world, and yet it remains a relatively unknown corner of Central Asia on the world stage.

The history of the nation is punctuated by ancient civilisations and a progressive nature that has seen Azerbaijan embrace and foster culture, the arts and democracy often more readily than many other states in the Muslim world. As the country re-establishes its prominence as a leading global oil and gas producer, so it has also seen a re-emergence and re-discovery of its rich cultural and artistic heritage. Azerbaijan’s hosting of the 2012 Eurovision Song Contest is a showcase event of just how far the country has developed in recent years.

Rich in more than just culture and history, Azerbaijan’s significant oil and gas reserves, as well as promising potential in the alternative energy sector such as wind, hydro and solar generated power are creating exciting investment opportunities to invest in Azerbaijan. The frontier investor unfamiliar with the country may do well to note that foreign investors are already thriving in what continues to be a hotbed for natural resource companies and supporting sectors, but also for technology, transport and infrastructure.

At the centre of all of this vibrant development is the country’s capital and business hub, Baku. Often dubbed “the next Dubai”, Baku is a thriving city, a poignant juxtaposition between the very old and the very new. The UNESCO world heritage site of the Old City sits against a backdrop of new glass and steel skyscrapers that are beginning to see Baku resemble the skylines of New York, Dubai, Hong Kong and Singapore. Foster + Partners, the critically-acclaimed and award-winning architectural firm of Sir Norman Foster, is busy at work with master plans and building designs that will rejuvenate some of the more run-down areas of the Soviet-era city developments.

Since becoming an independent state in the early 90s and beginning work on what was dubbed “The Contract of the Century” with the international consortium of oil and gas companies led by the UK’s BP, the growth of the Azerbaijani economy has been nothing short of phenomenal. Since declaring independence, the economy has grown over 500 per cent and the country survived the recent global financial crisis and subsequent recession relatively unscathed compared to some of its Central Asian neighbours. The greatest attraction for investors however is that Azerbaijan remains a relatively undiscovered market, leaving sectors outside oil and gas still open to significant growth and development.

Foreign investors are becoming a more common occurrence in Central Asian economies, and if there’s one country that deserves the growing attentions of the frontier market investors, it most definitely should be the exciting cultural and economic melting pot that is Azerbaijan.

Paul Henderson is an experienced frontier markets investor and has previously lived and worked in Central Asia for several years. He is currently an Associate with Sturgeon Capital, the leading investment management specialist focused on Central Asian markets.

Investment Options

Access to property investments is well-established, with a range of direct investment opportunities and collective investments available for both retail and institutional Investors alike. In the first instance we should look to the range of property sub-sectors available for consideration, and further investigate both direct and collective access points for the sector in general.

The main property sub-sectors that may be available for smaller investors are:

Residential
Commercial
Student Accommodation
Care Homes
Hotels
Leisure / Tourism
Development
Agricultural
Forestry

Within each sub-sector lies a range of possible entry points for Investors; broadly categorised as either direct investments or collective investments. Collective investments being either regulated or unregulated fund arrangements, where Investors capital is pooled so as to acquire a basket of assets, or participate in a project with a large capital requirement. Direct investments on the other hand are simply straightforward acquisitions of property assets by the Investor. There are, for example, funds for residential, student accommodation commercial and most other sub-sectors, and likewise, there are options for Investors to directly acquire investment properties in each of these sectors via freehold or leasehold title.

Direct investments – Simply the acquisition of property assets by the Investor, direct property investments take many forms; from the acquisition of property for improvement and sale; through to acquisitions for leasing/rental to a tenant or operator. For the Investors with sufficient capital or finance, direct investments remove the majority of risks specific to collective investment schemes where Investors are reliant on the external management of a property portfolio. Direct investments do however carry asset-specific risks; property assets can incur significant financial liabilities including on-going maintenance, tax and round trip purchasing costs (the cost of buying and selling an asset).

Property investments, especially direct property investments, provide the Investor with a level of security that paper-based investments do not due simply to the fact that quality property assets retain capital value throughout the long-term, which in the case of well-chosen properties in good locations, is unlikely to fall and cause the Investor a capital loss. Provided the Investor is prepared and capable of tolerating the illiquidity associated with physical property assets, this asset class provides true diversification out of traditional financial assets such as stocks bonds and cash.

For the direct Investor, careful consideration should be given to the due diligence process during the asset identification and acquisition stage, as in most regions this will require specific professional input from legal practitioners, surveyors, valuation agents, and in the case of niche property investment projects with a specific strategy Investors must also consider the counterparty risk in that in many cases Investors might be reliant on the performance of a strategy manager to achieve the expected returns from investing in their strategy.

Collective investments – Property funds come in all shapes and sizes, and invariably involve a Fund Manager acquiring a basket of properties in line with the fund’s investment strategy, and managing those assets on behalf of Investors in the fund. There are funds, both regulated and unregulated, that invest in all of the major property sub-sectors. One can find opportunities to invest in residential real estate, student accommodation, care homes, commercial real estate, shopping centres and property developments. Some of these funds cater only to large Institutional Investors, whereas other offer lower entry levels for smaller Investors.

The structure of collective property investments varies from fund to fund. Some are highly regulated affairs, established and operated by major asset management groups, others are small, niche operations established to capitalise on current short term opportunities or niche sectors or markets. Collective funds may be listed on an exchange, allowing smaller Investors to trade in and out of the fund as and when they please. This removes the potential illiquidity associated with the property asset class, however this also detracts substantially form the returns generated from the underlying property assets as some capital is never invested in order to ensure that redemptions can be made from cash without liquidating part of the underlying portfolio.

Whether listed or unlisted, regulated or otherwise, collective investments in property assets offer access to the asset class for the smaller Investors, although in many cases the cash flow dynamics of securitised investments differ greatly from direct investments in property assets.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in distressed real estate and productive natural resource properties.

This article addresses some of the risks associated with real-asset investment alternatives in general.

As with any potential transaction, all investments carry risk, and in the case of alternatives those risks are often very specific to the asset class, here we address some of the general risks associated with moveable and immoveable properties considered as alternative investments. This risk-set can be broadly defined and categorised as:

Sector Risk
Location Risk
Asset Specific Risk
Counterparty Risk

Sector Specific Risk

As is the case with traditional financial investments, hard-assets carry risks specific to their sector. For example, in the case of agricultural land, Investors must be aware that a variety of exogenous variables can affect the investment performance of the property. Weather, commodity prices, the cost of farming, and agricultural inputs all factor in the revenue potential and profit margins of a farm. As farmland values are dictated primarily by the income producing potential of the asset, poor on-farm performance can adversely affect capital values. The same can be said for gold; during period of growth in equity markets, gold values may fall as confident investors sell their gold and buy into equities in order to capture returns from raising markets. Subsequently gold values may fall as a result. In the case of timber properties, poor house building figures result in a fall in demand for construction timber, and in these circumstances Investor may not be able to secure the price they require for their timber, and may ultimately leave their trees to continue to grow throughout the downturn, choosing instead to harvest when prices are more buoyant and capturing the extra physical growth that has occurred in the interim.

Location Risk

In many cases, especially in the example of real-estate related investments, Investors may choose to acquire assets in countries other than their own domicile. Asset values in emerging markets are often lower, along with the price of labour, and demand in those markets might also be higher, so acquiring assets that form party of the emerging market supply chain is often a strategy to capture superior returns. Whilst man overseas locations offer security of ownership and a transparent business environment, any overseas investment carries risks specific to the country of operation, and developing economies often carry a much greater risk of political interference or security of ownership issues. This extra risk must be factored into the due diligence process, and the potential returns on offer weighed against this inherent risk to capital.

Asset Specific Risk

When acquiring a tangible asset, it is imperative that the investor has access to the requisite skill-set in order to properly identify any issues with the asset itself. This kind of due diligence is essential in order to establish value of money, and avoid costly investments into otherwise useless assets. In the case real estate based investment alternatives, there may be issue with title, access, planning or even financial issue like outstanding tax bills. In the case of niche property like farmland or forestry, there may be specific issues relating to soil quality or water supply which may ultimately cause the property to be less productive and profitable. In the case of other niche sectors like fine wine or collectibles, very specific experience is required in order to identify genuine investment opportunities, and Investors without access to quality, experienced advice may end up purchasing valueless assets for unscrupulous sellers out to make a quick buck.

Counterparty Risk

When investing in niche products, Investor will usually require the services of a professional to advise on the transaction, but also to operate or manage the assets as is the case with real estate or other assets that require ‘trading’ in order to capitalise on opportunities and minimise risk. In these cases, the investor is exposed to the professional capabilities and honesty of their partners, be they forest managers, fine wine investment managers or collectibles experts. Poor advice at the point of investment and bad or incapable on-going management can ultimately destroy the investment potential of any asset. Proper due diligence is required in order to establish the track record of all partners in their respective fields.

David Garner is Partner at DGC Asset Management, an alternative investments boutique specialising in property transactions in the agriculture and renewable energy sectors.

Alternative Investing has become a trend in recent years. The traditional market cannot compete with the returns available, which is why investors turn to alternative projects to make their money work harder for them.

A quick look at the investments available on the traditional market shows that the only way in which investors are making returns is to enter into high risk projects over a long period of time. The returns being seen are also reasonably meagre. With the rising cost of living and inflation, people cannot afford to lose money on investments. Now more than ever people need their money working harder for them, generating income and creating high returns. The stock market is underperforming and the traditional market faces issues of volatility and cannot deliver rates that are so needed.

Over ten years the S&P 500 is up just over 10 %, or about 1 % a year. On a five year basis it’s down about 18 %. Similarly the Australian Super this year has made a loss of 2%, and investors are told that they should be thankful that this was the only loss made.

The instability of the traditional market has smart investors turning away. Turning to other projects to diversify their portfolio and have their money working harder for them. A direction in which many smart investors are turning is towards the alternative investment market.

Due to the fact that alternative investments have low market correlation, they are safely distanced from the traditional investments and have therefore been far outperforming anything available on the investment market.

The most commonly approached Alternative Investment is that of property. However the Australian property market has taken a downturn lately. House prices are dropping and we are not seeing the stability that we have become accustomed to over previous years. Meanwhile other Alternative Investments are creating returns that are unsurpassed.

The Carbon Market for example is set to become the fastest growing market in the world. As a tradable commodity Carbon Credits are going to be the most sought after tangible asset. The introduction of the Carbon Tax in Australia on the 1st July 2012 has created an opportunity for Carbon Credits to be created and then traded on the open market; creating massive profits for those who own them. Capital Carbon Credits is an alternative project which creates these Carbon Credits. With the ‘Top 500′ emitters being forced to purchase Carbon Credits, this is a commodity market which is in high demand yet very low supply.

Another great example of an alternative commodity which is in high demand but in low supply is actually the commodity of food. 3.6 billion people in the world rely on rice as a staple of their diet, creating a yearly demand of 437 million tonnes of rice. Currently the world can only create 381 million tonnes a year, leaving a vast shortfall. Agri Capital is a project which is creating the biggest commercial harvest in West Africa, a harvest which will create 9000 tonnes of rice per year. Winning ‘Best Alternative Product of the Year 2011′ and with projected returns of 15 % per harvest with the last harvest creating 16.2%; this is an alternative investment which is outperforming anything on the traditional market.

A further reason that people are turning to Alternative Investments is due to the ethical side of the investments available. In recent years a lot of the big profits being made have been through mining and oil companies. Companies which pollute our atmosphere; destroying our environment.

The Capital Carbon Credits is creating clean air for Australia. Growing trees in the Gippsland of Victoria the project is taking pollutions out of the atmosphere and offsetting the damage that the ‘Top 500′ emitters are creating.

The Agri Capital Investment has an enormous social impact on the area in which it operates. Whilst generating rice, it also creates jobs, healthcare, education and local markets for the community in which it is based. Also Agri Capital set aside 60 metric tonnes of rice per year to be given back to the community at no charge. Feeding the poor and improving the lives of those in the community surrounding the project.

These investment opportunities are not only greatly surpassing any of the returns that people are managing to get on the traditional market but they are also low risk. With guaranteed exit plans and insurance in place for varying projects; Alternative Investments deliver high returns in an ethical project whilst safeguarding your initial investment.

For a free report on an ethical, safe and highly lucrative rice market which is available for a limited time visit http://www.capitalalternatives.co/australia/

Historically, wealth has always been stored in the capital values of assets like land, property and gold. Those were the assets on which kings built kingdoms, and as essential, non-perishable assets, ownership of large amounts of any of these things resulted in wealth and power. It is only since the recent (in historical terms) introduction of fiat currencies and financial markets that investors seek to build up piles of ‘currency’ instead.

Spurred by the recent global financial meltdown, most, if not all investors, hold less faith than ever before in entrusting their future to financial markets, with many having recently witnessed life savings and pension values collapse as the markets once again crashed. Now, investors are seeking alternatives investments, once again turning their focus to real, tangible assets with an essential function that are in low supply and high demand. Institutional investors are buying farmland, as a growing global population will always need feeding, and what little arable land there is will become ever-more valuable over time, in real terms and financial terms. Others are buying commercial timber properties in order to grow hardwoods to meet new demand from growing populations in China, India and Latin America, as these emerging markets forge ahead with resource intensive growth and development. Some investors are turning their backs on savings accounts and instead buying physical gold every month or year, building a portfolio of the precious metal that will likely generate a far superior cash value to traditional savings tools after ten years. There is in fact a whole field of investment alternatives to choose from,; including fine wine, renewable energy assets, and rare stamps and coins, all of which rise in value as their rarity increases and demand from new buyers emerging from ‘new wealth’ economies increases.

The questions for most investors though is; where to invest? Should one consider investing in a case or two of vintage plonk? or better perhaps to own some trees or a bit of land or gold. Well, the answer is different for everyone. Alternative investment assets all behave very differently, and their values or income potential affect ted by variable unique to the sector or specific property or asset. Most alternatives however share a common characteristic, and that is illiquidity. As mostly tangible and property-based assets, alternatives to traded financial instruments might be difficult to sell quickly or at all in some markets, and investors must make themselves aware of the asset specific risks associated with whatever it is they choose to invest in.

Investors seeking income will find some investment alternatives to be more suitable than others, and the same could be said for those investors seeking stable, long-term capital growth. All however should seek the advice of an experienced consultant able to properly advise on the risks and opportunities associated with the specific asset class that is of most interest. Do your own research, and choose to work with a professional with experience and a track record in identifying successful investment opportunities that have achieved their objective.

David Garner is Partner at DGC Asset Management, an alternative investment boutique specialising in property transactions in the agriculture and renewable energy sectors.

The offset can be purchased or generated, and investment in carbon offset generation projects requires careful assessment. The carbon action plan of any company depends on many factors.

Purchasing carbon credits (Retailers and Wholesaler)

Carbon credits can be bought from a third-party retailer, or institutions can buy it either for profit or non-profit purposes. Price, projects, transparency and quality standards are some key aspects of carbon credits, which the buyer should be aware of. The current carbon market is a buyer beware market and investors should conduct thorough research to make a final decision.

Carbon offset credits can be purchased from third-party bulk supplier, specializing in providing a number of credits and the benefit of wholesale is the price is lower as compared to retail price, although, the price varies depending on the project type, transparency and standards.

Earning high quality offsets

The criteria to earn high-quality offsets are -

1. Transparency- Transparency is the main criteria to attain high quality offset. Transparency refers to the condition where all project details are provided to the investors. The need of the project should be clear and the details should include -

o The type of project

o Duration

o Standards used

o Tests done

o Measures

o Price

o Location

2. Get net reduction of emissions- The project should be able to provide real net reduction of emissions and an absolute net reduction of GHG emissions should be attained.

Some offset projects are based on the baseline emission concept, which has many risks. A baseline emission refers to the emission reduction calculated from the difference of emission in the baseline scenario and the emission generated from the project. The main issue with the baseline project is the hypothetical scenario, where there is no fail safe way. To get high quality in baseline project, the baseline should be explicit and should ensure benefits from offset projects.

How to invest in carbon offset projects?

If you wish to invest in carbon offset projects, instead of going to third-party, you can opt to invest in projects, which provide carbon credit generation opportunities. In exchange of money invested in buying the offsets, you can negotiate a project developer to get the ownership. This approach may initially involve a high transaction cost but as per the value of the projects, emission reduction capabilities and need of the institution, the buyer can opt to invest in offset projects.

There are many categories in offset projects, which vary depending on location of projects and method of carbon sequestration. The offset project can be located in any part of the world – Brazilian rainforests, sub-Saharan rainforests or Australia and the purchaser can either invest in forestry or agro-forestry for offset generation.

Some institutions offer investment opportunities in carbon sequestration projects and it allows these institutions to generate carbon offset for self use and sell the surplus offset. These institutions offer agro-forestry opportunities in different categories and the investors get land ownership for a specified term. Investors can earn carbon credits and sell the surplus generated in voluntary markets.

This article has been written after brief study and research on Capital Alternatives Investments.

The value investor adheres to the principle of buying only undervalued stocks – undervalued in the sense that the stock’s current price fails to reflect (as far as the investor is concerned) its ‘fair’ market price or its true ‘intrinsic worth’. Famous advocates of the value investing philosophy include the legendary and very much alive investor Warren Buffet, and the late Benjamin Graham – one of the first proponents of value investing, a subject he taught as a professor at the Columbia Business School in 1928.

The overriding reason why value investors seek out undervalued stocks is because value stocks tend to offer a higher degree of capital preservation than growth stocks. Value investors are not so much concerned with how much they might make out of an investment, but how much of their capital they could lose – i.e. having bought a stock, what are the chances of the price falling never mind rising?

What’s a stock worth?

Depending on when and where you look – and even if the business appears to be totally sound and is making money – it’s not particularly difficult to find stocks where, for one reason or another, the stock price fails to reflect the intrinsic worth of the business. But how can a value investor establish a company’s true intrinsic worth? In other words, how does the value investor pinpoint an undervalued company?

It’s all in the numbers

Essentially, value investors use cold, hard, quantifiable historical data to determine whether a stock is undervalued or not. The experienced value investor will analyze a range of the businesses’ financial fundamentals such as the price-earnings ratio (P/E), earnings yield, discounted cash flow analysis (DCF) and price-to-book ratios – to name but four of the nine+ key fundamental ratios. The numbers that emerge from that quantitative analysis provide a reasonably accurate indication of the company’s real worth and whether its shares are fairly valued or not. If a stock’s fair value is higher than its current market price, then that stock might be a value stock – assuming of course that there are no obvious reasons why the price is lower than it ought to be.

Why stocks are undervalued

Assuming the stock doesn’t warrant the cold shoulder from investors, stocks can be undervalued because they’re not particularly popular with the investors at that moment of time, or simply because the stock is off the market’s radar. Even if the fundamentals add up, a stock can deserve to be undervalued because of disappointing results, a poor credit rating, management changes, a scandal of some kind, the business is unfashionable, or there are problems relating to the company’s products or services. Where those circumstances exist, and the stock price is lower than the fundamentals suggest it ought to be, that stock is sometimes deemed to be a ‘Value Trap’.

Comparing apples with apples

It is also possible for two investors to analyze the same fundamentals and each come to a different conclusion regarding the intrinsic value. If however each investor calculated the values applying Benjamin Graham’s principles – where the focus is totally on documented historical numbers – both individuals would reach the same number.

About the Margin of Safety

By purchasing a stock which is priced at less than its real worth, the chances of the price falling much further are relatively low and as such the investor’s capital is less exposed to risk. For that reason, value stocks are considered to offer a ‘Margin of Safety’ – the higher the MoS, the better protected the investors capital is judged to be. As mentioned previously, it can be extremely difficult to calculate accurately a stock’s intrinsic worth, so a reasonable Margin of Safety (MoS) can shield the investor from the adverse effects of incorrect calculations, a market downturn, or both. For large cap, blue chip and highly liquid stocks, and having established the stock’s intrinsic value, the value investor would hope to purchase that stock at a 90% discount to its intrinsic value – i.e. a 10% MoS: more speculative, smaller or illiquid stocks should ideally be bought at a discount of 50%+ to their intrinsic value, thus providing a 50% MoS.

The attractions of value investing

· The MoS can provide an element of capital preservation
· Value investing is a single minded and highly disciplined approach: Value investors make their investment decisions based on cold, hard facts, rather than hype, fashion, trends or human emotions
· The returns: In 1984, having examined the performance of investors who worked at Graham-Newman Corporation and were thus most influenced by Benjamin Graham, Warren Buffett concluded that as a doctrine, value investing is, on average, successful in the long run

The disadvantages of value investing

· Value investors must be prepared to miss out on short term investment opportunities
· Value investing requires willpower. Value investors buy when other people are selling and sell when other people are buying, which can pose psychologically difficulties for some investors
· Value investing demands patience – essentially it’s a ‘buy and hold’ strategy
· The ‘value trap’: a stock may be undervalued not just because it’s out of favour with the market but because it deserves to be
· The importance or relevance of more qualitative analytical factors such as the abilities of a company’s management or the value of its brands or goodwill are not taken into account

http://value-stocks-investing.com

Eco Business has reported the recent announcement of Japanese government plans to introduce certain legislative changes making it easier for abandoned farmland to be consolidated for use in renewable energy projects. The approach of the Japanese government toward abandoned agricultural land will create new opportunities for ethical investments in the country and it will be interesting to observe whether the initiative will be adopted elsewhere.

The problem of abandoned farmland exists in many countries for a range of different reasons. For example, agricultural land could have been abandoned on the basis of soil erosion or productivity loss, often the result of over-exploitation and unsustainable agricultural management. Another reason is human migration from rural to urban areas, a relatively modern-day phenomenon. Whatever the reasons, land abandonment is a serious problem in our world of finite resources and needs to be approached in a sustainable manner. Considering the growing global energy need and the problem of climate change, ethical investments in renewable energy projects present as one of the most efficient and environmentally-friendly ways to address the issue of abandoned agricultural land.

The Eco Business website on 12 February 2012 disclosed that the Japanese Ministry of Agriculture, Forestry and Fisheries proposed law changes to simplify the approval and notification procedures prescribed under several statutes in order to provide opportunities for renewable energy projects such as solar and wind farms on abandoned agricultural land. According to the ministry’s estimates, approximately 170,000 hectares of farmland could thus be used for the generation of electricity from renewable energy sources. And whilst current legislation has certain provisions enabling the construction of power generation facilities in abandoned farmland, there is a shortage of land suitable for large-scale renewable energy facilities, such as panels for photovoltaic power generation.

Making use of abandoned farmland for renewable energy projects is in line with the energy policy of the Japanese government. In May 2011, BusinessGreen reported that Japan was aiming to generate at least 20 percent of its electricity from renewable energy sources by 2020, doubtless prompted by the Fukushima nuclear power plant incident earlier in 2011. The planned legislative changes are likely to facilitate achievement of Japan’s renewable energy targets, at the same time making the country less reliant on nuclear energy.

If the Japanese parliament adopts the new legislation as planned, interesting ethical investment opportunities will emerge in the Land of the Rising Sun. The simpler procedures will create an additional incentive for private companies to invest in solar and wind energy projects and the establishment of power generation facilities will in turn create job opportunities. It would surely follow that other governments should consider emulating the Japanese example and enable investments in renewable energy projects on abandoned farmland. This could help revitalise local economies in targeted areas with the added benefit of helping the country in question to meet its renewable energy targets.

The Japanese approach toward abandoned agricultural land can be seen as an alternative to another ethical investment option, namely the use of abandoned agricultural land for bioenergy crops. This is yet another way to make use of agricultural land with ethical investments since growing energy crops on abandoned lands provides environmental benefits without leading to food-fuel competition for land, one of the major concerns of environmentalists when it comes to biofuels. Of course, with energy crops there are a range of factors to be taken into consideration, such as climate, soil type and so on. In consequence, in places where the appropriate conditions are not present, wind and solar farm projects could become a viable alternative to crop-based biofuels. In any case, governments should create the appropriate legal prerequisites in order to enable investors to make use of abandoned agricultural land, as is expected to happen in Japan.

Looked at from the perspective of this global issue of abandoned farmland, ethical investments in the renewable energy sector can help boost local economies, create job opportunities and contribute to climate change mitigation. In a nutshell, and regardless of whether it comes to wind or solar farms or to growing energy crops, governments as well as eco-minded investors should not let any land go to waste.