Exited my position in Redfin and Energy Recovery

I had written about Energy Recovery Inc., (NASDAQ: ERII) on my blog on July 25, 2020. I had taken a small position in Energy Recovery on July 24, 2020 at $7.70. Since then the stock has had a nice run and I sold my position today at $8.50 for a 10.3% gain. The technical indicators are still flashing a buy for Energy Recovery. But the stock has had a sharp run-up. The MACD also had a bearish crossover and that was partly the reason for my sell. The Relative Strength Index was at 63 today and I did not wish for it be in the over bought territory before I sold this position. 

Exhibit: Energy Recovery Technical Indicators on August 11, 2020.

 (Source: Tradingview)

I took a position in Redfin on August 10, 2020 at a price of $41.80. I never had full conviction for this trade. I felt Redfin (NASDAQ: RDFN) was too overvalued and there were too many uncertainties in the economy and in the housing market. Given the loss of unemployment benefits for millions of Americans, I wasn't sure how this was going to impact the demand for housing. The Federal Reserve has done an admirable job of lowering the interest rates and stabilizing the financial markets. But even they cannot create jobs or pay unemployment benefits or prevent evictions. So, I felt that the economy is in a very precarious position.  In this current situation, I did not want own a company like Redfin. It may be a speculative bet at these valuations and economic conditions. I sold Redfin at $43.50 for total gain of 4%.   

 

     

     

Climate Change Mitigation Technologies Will be Winners in the Future

    For all the efforts that are underway across the globe to keep the earth's temperature from rising, one thing is becoming clearer with each passing day - climate change mitigation technologies and projects will have to be employed at a large scale to tackle its effects. Companies in the climate mitigation space should be on the radar for investors. 

    I have come to this conclusion after reading various articles on the topic of climate change over a number of years. A couple of recent articles in the New York Times only got be thinking more seriously about the kind of climate change mitigation technologies that will be winners in the future. One article discusses the crisis that could be brought on by the mass migration of people due to excessive heat caused by climate change. When excessive heat causes drought, destroys crops, and makes living conditions very hard, people may have no choice than to start migrating towards cities and seek refuge there.

    Various technologies may have to be employed to prevent farmers from dying of hunger and excessive heat. Providing people with air conditioned spaces could be one of the mitigation project that could be more broadly applied. Air conditioner makers such as Carrier (NYSE: CARR) may be a big beneficiaries of this trend. Use of air conditioners increases the global warming and those effects need to be mitigated too.

    To mitigate the effects of drought, more desalination plants will have to be built to supply growing cities with water.  These plants can also be used to supply water for irrigation. Israel is a leader in the use of desalination technology and it's just a matter of time before many other parts of the world - like India, Africa, the United States, and South America - need massive desalination capabilities. These plants are primarily based on seawater reverse osmosis (SWRO) technology. The reverse osmosis plants consume a lot of energy. To reduce energy use, these plants employ energy recovery devices such as the one manufactured by Energy Recovery Inc (NASDAQ: ERII).

Exhibit: A Energy Recovery Device Built by Energy Recovery Inc.

(Source: Energy Recovery Inc.)

   

    Other technologies and projects that will gain wide spread use in the future are vertical or indoor farming and drip irrigation systems. A lot of venture capital investment is going into vertical farming companies. Softbank has invested in an indoor farming start-up called Plenty. While investors focus on high-tech startups like Plenty, they should not lose focus of "old school" technology such as water pumps, drip irrigation systems and water meters that could also see increasing demand in the years to come. Water conservation technologies beyond drip irrigation will gain ground. For example, low-flush toilets could gain wide-spread use in households. Sophisticated leak detection systems could be employed at a much wider scale to prevent water loss in the water distribution networks and at home. 

    As the world tackles climate change, investors should keep a close eye on mitigation technologies that could improve lives.  

(Disclosure: I own shares in Energy Recovery Inc.)