Put Your Money Where Your Mouth Is

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I love going three for three!

Last Friday the Russell Indexes released the final results for new additions and deletions, and the three stocks that I recently recommended to Small Cap Investor PRO subscribers all made the final cut. These are three great little companies that are poised to make big share price gains in 2010, and not just because they are in the newest Russell Micro-Cap Index. They are great companies, with solid fundamentals, and good strategies for growth. You can still get my special report on these companies, just click here.

***I hope everybody had a great weekend. When I had some spare time I caught a few minutes of an interesting documentary that HBO just produced, GasLand. The film highlights the dangers posed by the natural gas industry's process of hydrolic fracturing. The process, nicknamed fracking, pumps water into wells in order to expand holes and extract more fossil fuels. Contaminated water can then make it into the water table, and there are reports that it can cause serious negative effects for local communities.

In a particularly disturbing scene, a community resident was able to light his tap water on fire. There was so much gas in the "drinking water" that the sink filled with flames. This is a definite negative externality, and one that we're hearing more and more about when discussing the pros and cons of natural gas exploration.

***Since I talk a lot about natural gas as a transition fuel, it's a bit hard to watch this kind of documentary. In the wake of the BP spill, we all want to see cleaner and safer alternatives to oil. Solar and wind aren't ready yet to bear the brunt of our energy needs. Natural gas fills a huge void, and is important to have in the energy mix for our country's immediate future.

With that in mind, I have one major critique of the film - the documentary failed to put the harmful effects of natural gas drilling into perspective. It's impossible to support ongoing detrimental effects on communities from fracking. But would coal mining be any better? All sources of energy have some negative externalities. I'm not saying I condone them, but we need to recognize what they are in the context of other options. And we need to take steps to minimize the negative effects - more on that in a minute.

The reason I believe in natural gas as the "transition fuel" to a clean energy future is that gas is simply cleaner than coal or oil. High efficiency natural gas-fired power stations can produce up to 70% lower greenhouse gas emissions than existing brown coal-fired generators, and less than half the emissions of new black coal-fired power stations.

***Except for carbon monoxide output, natural gas is the cleanest fuel in terms of the most dangerous pollutants. This doesn't even begin the discussion of negative externalities from other sources including: coal mine collapse, mountain-top removal and massive oil spills.

I said I'd discuss minimizing negative externalities. You may wonder how one person can have that big of an impact, and you would probably be right. But a lot of people can have a pretty big impact.

I spend the lion's share of my time discussing profit opportunities in Small Cap Investor Daily. Remember that at the end of the day investing is all about maximizing the utility of your money. If you're concerned about the practices of a company, or want to forward a clean energy future, then that should play a role in your investment decisions. One way to get the most out of your investment is through activist investing.

***Sometimes it's easy to forget that by buying shares, we become owners of these companies. As investors in small-cap companies, each share gives us a much greater say in decisions. When firms have shareholder meetings, they discuss and vote on the future of the company. Every shareholder gets to vote.

Sure, most proxy voting issues are pretty dry - often just related to management reshuffling, reverse stock splits and the like. But every now and then important issues come up, and shareholders can have an impact.

In 2009, shareholders at McDonalds (NYSE: MCD) managed to pressure the fast food giant to reexamine their harmful potato growing practices. That's a terrific result.

When investing, remember that you become a partial owner in the company. That gives you a voice, even if a small one. Exercise your right to vote, and to speak up for or against company policies. Putting your money where your mouth is not only feels good, it also makes you think twice about the types of investments you're making.

I believe in a cleaner energy future for our country, and I think natural gas will be a big part of it. I also believe these companies have a responsibility to protect the environment. By investing in these companies, and exercising our right to vote on company issues, we can both participate in profit opportunities and try to influence positive change