The broad investment theme we call Efficiency 3.0 encompasses much of what is called alternative energy, clean tech, etc., and, as such, has experienced a relatively high degree of influence from the socio-economic mood. This highly charged influence that added undue market euphoria likewise contributed to the subsequent hangover. This is not a new phenomenon. Many took positions similar to ours, seeking to minimize exposure to government influence, and saw those shares painted with the same red brush as those companies deep in the stimulus arbitrage camp.

We are encouraged by the markets returning to the business case; and while the polarized social influence lingers, industries in the space have developed. Investors have a better template on which to weigh their decisions. For instance, we see the plummeting costs of photovoltaics as very similar to that experienced with LCD glass. While there will be losers, there will also be winners.

Our view is that processes by which we make, move and consume power is at a disruptive stage. Contributing to this is the notion that over time, the price of power has more to do with the infrastructure that orders it than the fuel extracted to produce it. For the investor then, the high fixed asset/long time horizon profile isn't really new, except for the traditional technology investor. In the meantime, public and private equity markets have expanded for those seeking long-term cash flows.

We recognize that business seeking greater efficiency is not new, but business seeking power efficiency is new, and it is large. In our knowledge-based economy, power became a significant cost, particularly high quality power. In combination with changing global demographics, these issues frame an investment theme with long legs in our view.

Our objective for this weekly note then is to provide actionable intelligence on trends and events in the Efficiency 3.0 space. By reporting on earnings, regulations, mergers & acquisitions, financings, trade events and private equity, our goal is to be a valuable resource for investment professionals, public and private corporate issuers and private equity professionals.

Efficiency 3.0