Tech Fund Manager Landis Bets on Solar to Get Hot Again

(MoneyWatch)  Kevin Landis, manager of the Firsthand Alternative Energy Fund, made his pitch on Tuesday for investing in the sector, particularly companies involved in harnessing solar energy. He likes their growth prospects, especially as technology comes along to make their operations more efficient and cost-effective, and many of the stocks are trading at small fractions of their peaks reached a couple of years ago.

To try to profit from his prediction that new technologies "are going to turn the economics upside-down in solar," he has taken large positions in industry leaders like SunPower and Suntech Power. Other holdings include smaller businesses such as G.T. Solar International and Canadian Solar.

Some of the burgeoning technologies that are changing the industry endeavor to make silicon wafers - the key component of solar cells - more efficiently and cheaply. Others use more exotic materials like gallium and tellurium or adjust the gaps between the orbits of electrons in silicon atoms to make them more compatible with the photons of sunlight hitting them.

Landis is very enthusiastic about several of the nano-sized companies developing these technologies, but they are still fledgling enterprises not ready for prime time or a stock exchange listing. While he waits, he keeps his assets in more established solar companies and in providers of alternative forms of alternative energy, including Vestas and Gamesa, two leading wind turbine manufacturers.

The portfolio also features some larger, more mature companies like 3M, Echelon and Corning that dabble in energy - actually the saving of it.

Echelon designs automation systems that "turn a dumb building into a smart building," helping it to use energy more efficiently, Landis said. 3M accomplishes the same end in a lower-tech way through its insulation and other construction materials.

Corning, the glassmaker, is developing the window of the future. Instead of tinting to keep out heat, glass will have receptors that harvest sunlight that can be used to provide electricity.

Alternative energy is a fascinating industry that is bound to become an important segment of the economy and stock market - one day. Until that day comes, the sector will trade with extreme volatility, making it prudent for most individual investors to own it only through mature, diversified companies or through a fund like Landis's.

A fund seems like a better choice. Companies like Corning and 3M can only have limited activity in the sector (that's what makes them safer), while a fund provides unalloyed exposure.

Fund managers also may be able to gain access to promising smaller companies before they are available to ordinary investors. That counts for a lot in a nascent industry like this.

Picking a fund shouldn't take long. There are very few focusing on alternative energy, and Landis's seems like the best of them; it has handily outperformed such rivals as Calvert Alternative Energy and Guinness Atkinson Alternative Energy.

The Firsthand information technology funds that Landis manages have done extremely well over the years. He seems to be carrying his expertise at finding potential next big things from that sector to this.

But because many of his alternative energy holdings aren't big things yet, expect wild price swings and only commit a sliver of your risk capital to the fund. Then be prepared to leave it alone for many years until the future arrives.