Caprock's Weatherley-White: Plotting for Post-Carbon Era(Audio)

gadgets like the Echo voice activated home assistant. Stocks move lawer today Dow Jones Industrial Average capping the biggest drop in three weeks as Apple laded afternoon sell off in technology shares, overshadowing corporate deals and strong results from Facebook. Facebook today rallying seven point two percent, Apple slumping three

point one percent. S and P five hundred index down nineteen points to two thousand seventy five, a drop of point nine percent down, Industrials down two hundred ten points, the decline of one point two percent. Nes Stack down fifty seven, a drop of one point two percent. Gold up nineteen dollars now at twelve sixty nine ten, a gain of one and a half percent. Crew at eight five barrel crude Oil West Texas Intermediate up one point

two percent. I'm Charlie Palaton. That's a Bloomberg business flash. You're listening to taking Stock with Kathleen Hay and Pimp Box on Bloomberg Radio. This is taking Stock on Bloomberg just to give you a little bit of a recap. Shares of Amazon higher by more than ten percent and after hours trading after the company reports first quarter results earnings per share of a dollar seven that handily beat

the average analyst estimate of fifty seven cents. The company also posting sales that were better than analysts estimated, and also saying that the second quarter net sales will be between twenty eight and thirty and a half billion dollars as for the second quarter, and that is at the

high end of analyst estimate. Stock moving high. Are also moving higher, and after ours trading, the shares a linked In are up by more than fourteen percent or earnings per share and revenue beat analysts estimates and also provided

healthy sales guidance. Shares of LinkedIn higher right now by about fourteen percent, but on the other hand, shares of Gilead Sciences down by nine percent after reporting that profit missed analysts estimates and that sales of its blockbuster hepatitis C treatments were less than expected once again, Shares of Gilead Sciences down by nine percent. Well, how do you put together a portfolio or an investment strategy given the volatility in stock market performance? Let's find out from Matthew

weatherly White. He is the managing director of the cap Rock Group to have over a billion dollars in assets under management. They are based in Boise, Idaho. He can be followed on Twitter at I three impact and he joins us in the studio. Matthew, thanks for being here. Yeah, thanks for inviting me on again. All right, so let's talk about your strategy. How do you approach the selection and allocation process for people that would come to you for advice? And so we start off with a really

detailed lifetime discount of cash flow models. We get a clear sense of what our clients after tax inflation rate of return needs to be, and then we reverse engineer

the asset allocation from that perspective. But what we're really interested right now in terms of portfolio construction and risk management it really the energy markets, because we think that the destabilization in the price of oil is instructive for us when we think about plotting a course to a post carbon or a carbon light global economy, and of

course impact investment investing. It's not just how I can make money, but how can I make money and push the world, help the world move in the direction I want. When you say this disruption oil, just push the price so low creating the postcarbon area. Might say gas is

so cheap, we'll never stop using oil. Yeah, it's counterintuitive, and I think that for the first time, certain me in my professional investing career, that relationship between the price of oil and the adoption of alternative energy strategies is starting to break down a little bit. And I think we might actually be seeing the emerging outline of the inverse of that, where the lower price of alternative renewable energy actually drives the price of conventional fuels. But this

is not because of government subsidies. And I'm not the fossil fuel industry did not enjoy subsidies or does not currently. But I'm wondering, is that something that can stand on its own In places? Yes, in places no, I mean there are some states Arizona, for example, um X, the succession of the of the feeding tariff down there. Um solar power is almost at grid parity without any subsidies, but the five year extension of the investment tax credit

sort of takes that conversation off the table. You might not like the subsidies, but they're going to be there for five mirrors, and that's a great tail wind to the continuing continued development of solar energy. So when you look at companies, who is on your radar screen because you're talking about alternative energy, you're talking about a postcarbon era. You're talking about the role of technology, which what does incrude oil too? But it plays such a big role

in all these alternative sources. It's such a big part of it. I think a lot of times when people look at alternative and renewable energies, they think about it as an energy play. We think about it as a technology play. The reason being that traditional energy is a commodity based business and increased utilization broadly speaking, leads to higher prices. With alternative and renewable energy, it's exact opposite. Increased utilization leads to lower consumer prices per unit of

energy created. And if I'm a consumer, and I get to choose. I'm going for more use equals lower prices. Pals us about emerging markets if you can, because they sometimes have the ability to leap frog developed countries in their technological application and also in the environmental industry. That's exactly right. We've made some really interesting investments in distributed

power in subs in Africa for precisely that reason. If you use the analog of the mobile phone and you look at Sub Saharan Africa in particular, they were able to effectively create a communications network without any hard lines installed.

We think it's the same thing with solar power. If you skip the whole grid installation process and the hundreds of billions of dollars necessary to build power lines across the desert, then all of a sudden you have the capacity to bring power, electricity light to communities that heretofore have simply been off the grid. So can you give

us a couple of names of attractive renewable energy companies? Uh? Yeah, I mean you might know that I'm not permitted to recommend specific stocks are but you're not recommending them, But you who are who are leaders in this field? Yeah, so I'm even looking at ones like Solar City or sun Edison which are cracking sun EDISD in particular, cracking under the weight of debt. We think that the business model still makes sense. It was just the business management

got a little bit out of control. Too much debt growing too fast. Pretty traditional story in the markets, and what kind of returns can I get if I hop into this area? What are you what are you thinking? Yeah, so, if you're doing an alternative renewable project energy finance typically through debt, you can look at an eight handle on a lot of that debt um If you're doing equity, you're really taking a ride on what's going to come from the Paris Accord and Top twenty one. If a

carbon pricing mechanism emerges, we expect very attractive returns. If it doesn't in the near term, then there's gonna be a lot of alatility. Is a transition from a carbon intensive economy to something different. This is great news for people who want to help push the renewal, editwable and renewable energy front forward and makes the money. Matthew weatherly White, thank you for joining us. Managing Director the cap Rock Group,

thank you for joining us. Day on taking Stock. I'm Kathleen he has along with Pim Fox, and this is Bloomberg Radio. Coming up, Bloomberg Law, brought to you by Mercedes Ben's outstanding offers are in full bloom at Your Mercedes Benz tries to dealers take advantage of limited time leasent finance programs on select models this spring season. Visit m b usa dot com for details today