Some states in America are blowing that percentage away.

In car-crazy California, experts figure that road vehicles are pumping out 40% of the carbon dioxide that’s present in the air. Not only that, but one-quarter of all nitrous oxide emissions in California are believed to originate from passenger vehicles.

What we are talking about here are greenhouse gases. These gases allow sunlight to enter the atmosphere freely, where they trap the heat, ultimately leading to increased global temperatures — as current research suggests.

Ignoring the controversy whether these gases are really a problem or not, it looks like car manufacturers will continually be on the hook to reduce emissions for the foreseeable future.

In this month’s issue of Small-Cap Strategy Report, we look at ways to invest in making cars more emissions-friendly. Of course, controlling car emissions is nothing new, but as this is becoming much more of a political issue these days, new technologies will present us with large profit opportunities…

While large profits will probably lie in technologies just now being exploited, the good news for the environment is that solutions exist to eliminate a significant amount of car emissions almost immediately.

Let’s start with the engine. And a couple of these solutions may already be in your current car:

Turbos — An Old Technology Revisited

Once the domain of sports cars, Mercedes diesels and 18-wheelers, the turbocharger is making a big comeback. We’re seeing them from companies who haven’t offered them in years. BMW’s 335i is a twin-turbo sedan that just hit the market. Audi has also recently employed twin turbos in its A4 and A6 series sedans. Subaru is using turbos in its Impreza WRX.

In all of these cars, the use of the turbo is allowing engineers to use a smaller engine to achieve what a much larger non-turbocharged engine could. A smaller engine is lighter, more fuel-efficient when the turbo is not in use and oftentimes cheaper to produce. And the smaller the engine, the fewer harmful emissions are under normal use.

How to Invest in Turbos: Garrett formed in 1936, became a major force in turbo manufacturing and is now a part of industrial giant Honeywell. Cummins has owned turbo company Holset for over 30 years. Borg Warner bought the famous turbo suppliers Kuhnle, Kopp and Kausch in 1998, and then Schwitzer in 1999. So consolidation has made this a hard area in which to find pure-play investments.

Lower Emissions From Gears and Gearlessness

Even with variable valve timing and cylinder deactivation, there will likely exist optimal engine speeds at which greenhouse gas emissions are at their lowest. New transmissions can keep a car’s engine speed near an emission’s sweet spot.

Until recently, automatics were frequently three or four speeds. Five has now become common, six is seen in more sporty, high-end cars and now at least one manufacturer is boasting of a seven-speed automatic transmission. But why stop at seven? Welcome to the continuously variable transmission, or CVT…

CVT has a virtually infinite number of speeds. It allows an engine always to operate in its sweet spot no matter how fast the car is going. Audi has CVT-equipped models available, and 2007 models, like the Jeep Compass and Dodge Caliber, have them as options.

How to Invest in Transmissions: This also is tricky as most of the greatest values and top names are wrapped up in large industrial behemoths. Most of the niche builders are private.

Some very real gains can come from how a car slices its way through the wind, or how it interfaces with the road. Developing these aspects of automobiles requires precise, specialized systems and highly controlled environments.

Not only do we have a small-cap stock that’s a perfect investment in these specific aspects of automotive development, but the company that we are recommending is arguably the best at what it does. It’s the focus of the current issue of Small-Cap Strategy Report. It should already be hitting subscriber’s e-mail boxes! Learn more here.

Until next time,
Craig
March 15, 2007

P.S.: Everyone knows we need something under the hood that uses little or no petroleum. But the hybrid engine isn’t it. And the hydrogen car isn’t either.

Investing in Green Stocks was originally featured in the Penny Sleuth.