October 25, 2006
Winslow Conservation Index Outperforms the S&P 500 and Russell 2000
by Bill Baue
Winslow Management Company back-tested five-year performance of 15 companies focused on
conservation, an oft-overlooked component of the alternative energy equation.
"Conservation is the quickest, cheapest, most practical source of energy." So said President Jimmy
Carter on April 18, 1977, during the first wave of interest in alternative energies after the early
'70s energy crisis. Now, in the midst of the second wave of interest in alternative energy fueled
by high energy prices and climate change, conservation (otherwise known as reducing energy
consumption) is again a hot topic.
Winslow Management Company, a pioneer of green investing, has taken
steps to identify the investment return on conservation. In March of this year, Winslow analysts
collaborated with the Canaccord
Adams research staff to create an equal-weighted index of 15 domestic companies focused on
"This group of stocks has been nothing short of a stellar performer over
the last one, three and five years, handily outperforming both the S&P 500 and the Russell 2000,"
said Jack Robinson, founding president of Winslow.
For the five-year period ending October
1, 2006, the conservation index would have generated annualized returns of 21.90 percent, compared
to 5.22 percent for the S&P 500 and 12.23 percent for the Russell 2000 (an index of small
"Companies and consumers have been interested in conserving
water and energy not so much for environmental value as for economic value, driving the growth of
these conservation companies," Mr. Robinson explained.
Source: Winslow Management Company
A number of the companies in the index are current holdings in the Winslow Green
Growth Fund (ticker: WGGFX), a small-cap growth
fund focusing on environmental sustainability. These include American Superconductor (AMSC), which makes
high temperature superconductor wires and power electronic converters; Fuel-Tech (FTEK), which
develops technologies for air pollution control and process optimization services for combustion
facilities; and Maxwell (MXWL), which makes power delivery
and energy storage solutions. Recent holdings include Itron (ITRI), which helps electric, gas,
and water utilities measure and forecast output; Environmental Power (EPG), which runs agriculture-waste
energy facilities; and Headwaters (HW), which helps the energy and
construction materials industries conserve.
As is apparent from the above chart, the index
generally rose over the past three years before declining earlier this year, but more recently the
index has been on the rise again.
"The conservation index had a great month in
September--up 10.75 percent, led by Caraustar, Fuel-Tech, and Lindsay Manufacturing," said Liz
Levy, Winslow's senior environmental analyst.
Caraustar (CSAR) makes recycled paperboard, and
makes water- and energy-conserving irrigation systems. Several companies contributed particularly
to the strong performance of the Conservation Index over the past five years, Ms. Levy told
SocialFunds.com. These include Aleris International (ARS--$7.60 to $50.54), which makes
recycled aluminum products; Fuel-Tech ($2.26 to $14.89), Headwaters ($11.26 to $23.35), and Itron
($23.37 to $55.80).
The index was not necessarily constructed as a vehicle for investing,
and Winslow does not have plans to create a product around the index, according to Ethan Berkwits,
Winslow's marketing director.
"This is not a top-down index--meaning it did not pull all
stocks meeting certain criteria from a full universe--but simply a selection of companies by our
analysts and Canaccord Adams' research staff that represent a range of conservation technologies
and solutions," Mr. Berkwits told SocialFunds.com. "On a number of occasions over the past few
years, we've generated similar indices to this one for our newsletter--they have primarily been for
educational purposes, and illustrative of a particular opportunity that's emerged in the world of
"None of these indices should be considered components of our
portfolio--in most cases no more than a few companies are current or potential holdings for the
Fund, and the newsletter itself is a general advisory newsletter and is not pegged to our mutual
fund," Mr. Berkwits continued. "These tracking indices all illustrate a particular theme that we
think green investors would find interesting; in some but not all cases, Winslow invests in these
themes, but usually by selecting one or two companies that are particularly compelling to us."
Of course Winslow will likely keep a close eye on the index going forward, paying particular
attention to the companies fueling most growth.
"As global economic growth continues and
energy prices remain high, we think these conservation companies will continue to reap the
benefits," concluded Mr. Robinson.