Dear member,

Mining and exploration companies can be exciting to invest in, and they provide the opportunity to strike it big on the back of a discovery or - further down the line - a takeover. However, it is imperative not to get TUNNEL VISION by focusing solely on mining and exploration when investing within the Venture exchange. As TSX Venture enthusiasts, we've seen it one too many times; investors lose sight of the complete picture of small-cap investing and throw all their eggs into the 'mining basket,' missing out on lucrative opportunities in other sectors while exposing the bulk of their small-cap portfolio to the volatility of a few commodities.

Such a one dimensional investing strategy is as silly as the strategy adopted by millions of investors who pulled their money out of the stock market in 2009 and ran to bonds ($1 trillion has flowed into bonds since March 2009). There's a better, more balanced way of doing things.

Despite the TSX Venture being roughly 65% resource-based, there are some world-class technology companies - which in many cases receive more attention south of the border than within Canada - trading on this exchange. It's rather disappointing that investors within Canada often overlook these opportunities, and quite frankly, it's not proactive - an essential trait for a successful investor.

One of the sectors we have always been strong supporters of - and investors in - is renewable energy. This sector has provided our team and site members with major profit-taking opportunities in recent years. We particularly enjoy investing in this space because, after the R&D stage, renewable energy companies typically aren't as capital-intensive as developing junior mining companies. So in today's economy, when cash is king and the amount of pollutants within our environment is such a concern, renewable energy companies with proven technology are in a very favorable position.

Given the concerns surrounding global climate change, renewable energy has never been more popular amongst governments and environmental movements. Whether you agree with government subsidies or not, renewables continue to benefit greatly from them. The majority of the public support government spending in order to find cleaner, more sustainable energy sources, and politicians know this. In order to appear responsible and favorable in the eyes of voters, global political leaders are spending billions on clean energy initiatives while coal is being attacked and tax benefits to oil and gas companies are being threatened.

Renewable energy is gaining traction on a large scale because it supports a social concern for the environment. Renewables need the congressional and often financial (via subsidies) support of governments - and they are getting it in a big way.

On February 1, 2013, Bloomberg published an article titled Biofuel Stocks Rise After EPA Boosts Mandate.

The report read:

"Shares of biofuels and ethanol companies surged Friday after the government proposed increasing required use of renewable fuels.

"The Environmental Protection Agency standards would require production of 14 million gallons of cellulosic biofuels made from grasses and woody material."

A new and very significant government funding initiative in the renewable energy space is focused on second generation biofuels. Much was learnt from first generation biofuels such as biodiesel (with a focus on ethanol), and major improvements in efficiency have been made by only a handful of companies in North America. From our experience researching the renewable energy space, the lion's share of government funding and regulatory support is more often than not geared toward a select group of companies - often those with direct connections to government and, of course, proven technology.

52 countries - nearly all of the largest economies in the world - have biofuel mandates in place, with the bulk of them coming from the EU, the US, China and Brazil.


Why is this important?

Small-cap renewable energy companies, from our research and investing experience, don't explode in value based on successful completion of R&D. Rather, they explode in value after making major partnership deals, commercializing their technology, receiving a government grant, or gaining respect from major media outlets.

Market Brief:

We believe the flow of funds away from stocks and into bonds is peaking. At current yield levels, bond investors are losing money when adjusted for inflation. It is our belief that money has no choice but to flow back into equities as investors seek a real return which has the potential to far exceed that of bonds. In our view, future equity returns relative to bonds are as good as they have been since our inception.

All the best with your investments,

PINNACLEDIGEST.COM