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Hot Planet, Hot Stocks


Climate change is an unwelcome fact of life. As the world adapts, there will unavoidably be industries that benefit from a warmer planet.


It's hot out there today, folks.

With few local forecasts below 90 degrees, the monster heat wave currently gripping the Northeast is not abnormal for this time of year. However, it is a reminder of those foreboding academic forecasts on global climate change. Stanford University projects that the current decade will see extreme seasonal temperatures, with temperature highs equivalent to the hottest season on record (from 1951 to 1999) four times more likely to occur. Within the next 30 years, exceptionally long heat waves could become commonplace in the United States.

While the situation is tragic, it's unlikely to change soon. As the world adapts to global warming, there will unavoidably be industries that benefit from a hotter planet. Minyanville takes a look at a few.

Pumping Up the AC

When the concrete starts to simmer, it's time to turn that AC up to full blast. Global sales of air conditioners are projected to reach 78.8 million units by 2015. Hampered by the economic recession until recently, demand for individual units is expected to rebound, sparked by increasing replacement needs, higher demand in developing markets, and brands pushing energy-efficient technology.

Carrier, a division of United Technology Corp. (UTX), is a world leader in air conditioning and refrigeration systems. They recently took home the 2012 Energy Conservation China Top Ten Application New Technology Award for their 23XRV high efficiency VFD tri-rotor screw chiller.

Watsco, Inc. (WSO), headquartered in Coconut Grove, Florida, is the United States' leading air conditioning manufacturer, and recently delivered strong first quarter results while its competitor AAON Inc. (AAON) is bolstered by high returns in the unit replacement market.

Banking on the Grid

With air conditioners around the country on full blast, energy providers are undoubtedly reaping profits from high meter readings.

Pressure on the grid comes from average demand, which is more likely to spike in the summer. More people requiring energy for their air conditioners, and an increased need to cool industrial infrastructure, cause overloads and blackouts, like the infamous 2003 blackout that left roughly 55 million Northeasterners in the dark.

The largest utilities and energy generators in the Northeast include units of Exelon Corp. (EXC), an Illinois-based utility holding company; FirstEnergy Corp. (FE), which just relaunched a nuclear facility in Ohio; Duke Energy Corp. (DUK), which is currently engaged in a $26 billion merger with Progress Energy Inc. (PGN); and Consolidated Edison (ED), the New York City electricity provider currently exploring green roof technology.

In times of high demand, these utilities are forced to buy excess electricity on the spot market, or power-on additional plants at enormous costs. Demand response companies like EnerNOC, Inc. (ENOC), Comverge, Inc. (COMV), and Honeywell International, Inc. (HON) help keep stress off the grid by managing their networks of heavy energy users, and allowing utilities to divert unused energy to parts of the grid that are in severe need. To optimize how consumers manage their energy once it's arrived, companies like American based Echelon Corporation (ELON) design software to control climate within buildings to minimize energy consumption.

Looking at the Less Obvious

Keeping cool goes beyond machines, and now encompasses the materials used to build homes and offices. 3M Co. (MMM) sells Cool Roofing Granules, an energy efficient roofing material that promises to "keep a home cool with less energy consumption and lower energy costs" and claims to be four times more reflective when compared to competing products.

Global climate change has also created opportunity in one unexpected industry: oceanic shipping. The break-up of ice in the Arctic Circle has allowed the Danish private shipping company Nordic Bulk Carriers A/S (which operates as a subsidiary of US-based private shipper Phoenix Bulk Carriers) access to a northern sea route. That access reportedly cuts 4,000 nautical miles off the original "Suez route" between Norway and China, saving an average of 580 tons of bunker fuel and shortening the trip from 40 to 18 days. This should equate to great savings for global dry-goods transporters like Eagle Bulk Shipping Inc. (EGLE), NewLead Holdings, Ltd. (NEWL), and Top Ships, Inc. (TOPS), whose stocks are currently leading intraday prices in the industry.

It's estimated that this route stays open for four months out of the year before freezing over. The Russians – who have been enthusiastic about the new route, which closely hugs their northern coast – argue that if the cargo ships were to be accompanied by a Russian atomic ice breaker, they could make the trip for up to seven months without get stuck in the ice.

Twitter: @brokawbrokaw
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