Pollution-control stocks ride environmentalist wave

Climate Ark, via Reuters: Investors are betting that pollution control stocks will clean up on stricter environmental regulations and dwindling natural resources. Sporting valuations reminiscent of the heady days of the Internet boom, the group is up nearly 40 percent this year as equity buyers speculate on increased demands for purified water, cleaner-burning fuels, and alternative energy sources.

Stock prices have doubled for Pittsburgh-based water-treatment provider Calgon Carbon Corp.,and tripled for Springfield, Virginia, environmental and defense contractor Versar Inc. Even the group's poorest performer, Lancaster, New York environmental consultant Ecology and Environment Inc., is up 17 percent, about double the benchmark Standard & Poor's 500 index.

Still, profits have been inconsistent and revenue growth spotty. The few companies that are widely tracked by brokerage analysts show highly speculative valuations, with Batavia, Illinois, fuel-treatment company Fuel Tech Inc, trading at 84 times prospective earnings.

…A number of factors are driving the group's popularity, from new global warming legislation to expected water shortages.

…But investors are looking at the big picture. With more than 1 billion people lacking access to potable water, filtration companies are also riding the wave of environmental concern.

…Faith in future prospects despite unproven profit records have paid off for green-minded investors.

…"You can't necessarily justify their current prices on earnings," said Boniface Zaino, portfolio manager for New York based Royce Opportunity Fund. "But in the long term the earnings will keep pace."