A compost heap of hot stocks

‘A piece of sh*t’ was the non-technical term used by Merrill Lynch analyst Henry Blodget to describe a dotcom stock called 24/7 Media, back in October 2000. To him, it was just another ‘new paradigm’ company to foist on an overheating market.

To some observers today, the flotation on the Alternative Investment Market (Aim) of another ‘renewables’ company may look just as suspicious. In June 2006, self-styled ‘hot-dung’ stock Geotrupes Energy proved it is actually possible to go public with what is, technically, a big piece of the afore-mentioned. That’s because Geotrupes develops projects using dung, or ‘biomass’, as a source of energy, as well as more conventional sources such as wind and hydrodynamics. It even takes its name from a species of dung beetle. But the irony of its name has not gone unnoticed. When it came to the Aim market to raise £6.5 million, it was the latest in a spate of renewable energy companies to seek funding this year.

In overseas markets, investors have been even keener to jump on this bandwagon. In May, Norway’s Renewable Energy Corp raised $1.1 billion in an offering that was 15 times oversubscribed. It led the FT’s Lex column to observe wryly, ‘The great strength of renewable energy is its ability to tap inexhaustible sources of fuel — not least, investors’ optimism.’

More than 100 renewable energy stocks are now traded worldwide, with a combined valuation of more than £35 billion, and it seems that alternative energy is generating a speculative frenzy. Even after the recent stock market correction, shares in ethanol group Renova trade on more than 60 times earnings – a multiple not seen since Mr Blodget was testing the language filter on his corporate email account.

But there is a key difference between the renewables of today and the dotcoms of old.