Our story starts over two decades ago with early Internet businesses like GEnie (owned by General Electric), Prodigy (a joint venture between CBS, IBM and Sears, Roebuck) and CompuServe (a division of H & R Block for 18 years).

In the early days, the only people investing in these geeky little companies were the stodgy old companies you see above. The Internet as we know it today was absolutely unimaginable.

But as the technology progressed, and computers became cheaper, and more people got online, the utility of the Internet grew. More important—for the purposes of this letter—the value of these companies began to rise. Eventually a dynamic little company named America Online (AOL) came along, growing rapidly thanks to an audacious and unprecedented marketing campaign that involved mailing shiny CDs to millions of American households.

In 1997, AOL bought CompuServe for $175 million.

In 1998, AOL bought Netscape for $4.2 billion.

In 1999, AOL bought Moviefone for $525,000 and MapQuest for $1.1 billion.

Then in 2000, having survived the turn of the millennium unscathed, AOL found itself merging with that titan of old media, Time Warner. The price tag … an astounding $164 billion!

Turns out that was an absolutely horrible investment. AOL’s user base stopped growing in 2001 and is now a shadow of its former self.

Time Warner’s revenues were 43% lower in 2008 than they were in 2000 … and its stock is down a horrible 91% since the heady days when the merger was announced. Finally, just two months ago, Time Warner announced that it would spin off AOL into a separate public company by the end of 2009.

In short, investors who got into the Internet sector early, when the future was still indistinct, reaped great profits as the industry matured in the late-90s.

But investors who waited to buy until the industry was clearly viable and buying was “acceptable” to the masses, saw their fortunes disappear.

So what do we learn from all this?

In the early days, when a sector is still young and the future is uncertain, it provides investors the best investment opportunities.

Now the world is changing once more … and early investors are again getting rich.

Investing in Green Companies: Don’t Think Internet—Think Green

The clean energy industry is still very small and it's future is uncertain. Thus it has the potential to grow exponentially as the world seeks out economically attractive alternatives to high-priced fossil fuels.

And if we've learned any lessons from the days of the Internet boom, it’s that early investors get rich, and those late to the party get nothing.

The time to invest in this sector is now. Stocks are starting to move …

Since March, clean energy stocks have put together a mighty rally, outpacing the U.S. equities market. Three major indexes tracking Green energy companies have risen
sharply …

The U.S.-only WilderHill Clean Energy Index, comprising 51 companies, is up 77% since March. Its global counterpart, the WilderHill New Energy Global Index, which tracks 88 companies in 21 countries, is up 83%.

The CleanTech Index, which tracks a broader group, including industries like sustainable agriculture, is up 77%. By comparison, the S&P 500 is up only 58% since hitting a 12-year low in March.

The Green sector is still in the early days, AND it’s providing investors the best investment opportunities. This is only the beginning …

Investing in Green Companies: The Next Technological Revolution

It’s nothing short of a crisis.

World energy resources are dwindling—yet global demand for energy is predicted to increase 50% in the next 20 years.

Political leaders around the world are worried … and they’re looking to renewable energy to help them out of the mess.

As President Barack Obama told Congress last February, “We know the country that harnesses the power of clean, renewable energy will lead the 21st century.”

Global leaders have begun to take the double threat of global warming and Peak Oil seriously. They’re concerned about national energy security. They’re hoping to stimulate their economies. And they’re pouring money into renewable energy infrastructure like there’s no tomorrow.
 
The U.S. stimulus plan calls for funneling $100-plus billion into renewable energy.
China has targeted renewable energy to make up 10% of its total energy consumption by 2010, and 15% by 2020.

In January, Russia’s Prime Minister Vladimir Putin signed a directive calling for a more than 400% increase in renewable electricity generation by 2020.

Even in the Middle East, solar energy use has grown by 40% to 50% per year for the last 10 years.

But it’s not just governments. Corporations, too, are ramping up their Green investments.

You may be familiar with some of them. Big companies like Intel … PepsiCo … Dell … and Wal-Mart are investing substantial amounts of money in solar, wind, Green building and other renewable technologies.

World leaders and CEOs of multinational corporations aren’t tree-hugging liberals getting into renewables because they want to “make the world a better place.” They’re shrewd economic realists betting big dollars that Green technology is vital to their economic survival.

Twenty years ago, renewable energy may have been the domain of Birkenstock-wearing idealists, but today it’s one of the fastest-growing sectors on Wall Street. Green is here to stay. And it’s shaping up to be the cornerstone of the 21st century economy.

In short …

We are witnessing a technological revolution that will change the course of history—and seasoned investors are taking notice.

Want to make money? Then …

Investing in Green Companies: Follow the Money

You’ll recognize the names of other major league investors who are betting big money on solar power, wind power, electric vehicles, biofuels and other Green technologies.

Like multibillionaires Bill Gates, who plunked down $84 million in biofuels, and Warren Buffet, the largest investor in the geothermal company CalEnergy, and Google.org, which invested $45 million in renewables in 2007.

Just scope out these Green energy gains:

•   - Gushan Environmental (GU)—biodiesel—gained 60%
•   - Capstone Turbine (CPST)—power distribution—increased 120%
•   - SunPower Corp (SPWR)—solar power technologies—up more than 251%
•   - Akeena Solar (AKNS)—residential solar power—zoomed up 316%
•   - Zoltek (ZOLT)—carbon fiber—gained over 100% in 2007 and a jaw-dropping 1,849% over the previous five years
  
  

Alternative energy and other Green areas —from organic foods to waste recycling to energy efficiency—have been growing like supercharged weeds in the heat of summer—and there’s no end in sight.

Early investors—not just the Bill Gateses and Warren Buffetts but ordinary men and women just like you—have already enjoyed substantial returns. And there’s still time to get in on the ground floor … if you act now.

Check out these early gains in solar stocks from 2007:

•  - SunTech Power (STP) gained over 140%
•  - SunPower Corp (SPWR) gained over 251%
•  - JA Solar (JASO) gained over 292%

Investing in Green Companies: Rock Solid Fundamentals

Don’t let the recent events on Wall Street scare you off. As I’ll explain in a minute, renewable energy fundamentals are still rock solid. “Alternative” energy is rapidly becoming mainstream—and its popularity is taking off like a bull on a hornets’ nest.

The rebounding market we’re in represents tremendous opportunity for the discerning investor.

The most lucrative time to get in is now.

So how do you know which stocks are the weeds and which will provide you with a bountiful harvest?

Your Guide Through the Jungle of Alternative Energy

I’m Timothy Lutts, Chief Investment Strategist and Publisher here at Cabot. I’d like to introduce you to an expert in the field of Green investing. Someone who can help you cherry-pick the best of the best Green companies, and avoid the bum stocks and wanna-be’s. His name is Brendan Coffey. He’s the editor of Cabot Global Energy Investor, and we here at Cabot are thrilled with his insight into this blossoming market. More than a decade’s experience in investment journalism has given Brendan a unique, highly unbiased perspective on market trends. A respected financial journalist (he’s a former news reporter for Dow Jones), he has written investment articles for publications like the Wall Street Journal, Barron’s and Forbes.

Brendan’s talent for spotting trends has made his work required reading at Harvard and Marquette business schools. His veteran insight is gleaned from covering everything from the Brazilian ethanol market to the global bottled water craze. And it’s earned him the privilege of talking investing strategy one-on-one with the world’s savviest investors—people like Carl Icahn, Felix Rohatyn and Mark Cuban.

Before joining us at Cabot, Brendan helped pick stocks for Forbes as a member of their Money and Investing Team. It was there that he began to take note of the tremendous potential for profit in the Green sector.

Brendan is especially enthusiastic about the opportunities awaiting early investors in renewable energy.

Beyond solar power, for instance, there’s wind power, another free, non-polluting source of energy that’s about to explode!

In that sector alone you can invest in the stocks of the manufacturers of strong and light carbon fiber blades … in the turbines that generate the electricity … in the batteries that store the power … in the controllers that regulate the entire system … and in the companies that install and maintain the systems.

Then there’s solar water heating, geothermal, biofuels … it’s a whole garden of opportunities!

Our Time-Tested Investment System

I’m happy to report that Cabot Global Energy Investor Editor Brendan Coffey uses Cabot’s proven investment system to identify the most promising stocks in the Energy sector. This is the same system we’ve been using—and refining—here at Cabot for 38 years and counting.

This system steered subscribers of Cabot Market Letter to profits of over 1,200% in Amazon.com.

It recommended that readers of Cabot Top Ten Report buy Intuitive Surgical way back in August 2004—before the stock shot up more than 1,500% to its peak!

And it’s a key factor behind the success of Cabot China & Emerging Markets Report, which performed stronger than any other investment advisory in 2006 (according to Hulbert Financial Digest), with a gain of 78.6%. It topped the list again in 2007 with a gain of 74.1%. And it’s the best-performing newsletter over five years with annualized gains of 22.8% as of June 30, 2009.

Timothy Lutts
Chief Investment Strategist and Publisher