- Despite warnings of an ongoing bubble in the stock market, Jeremy Grantham remains invested in one of the most speculative areas in the market.
- Grantham has invested much of its wealth in green investments and made big money in for-profit companies like QuantumScape.
- “There may be a bubble that will affect this in a year or two, but it will come back bigger and better than other groups,” Grantham told Bloomberg.
Billionaire investor Jeremy Grantham has been warning of a bubble in equities for years, but that has not stopped him from investing in one of the most speculative areas of the market known to be years away from profitability.
For years, he has put much of his wealth into green investments that tackle the big problem of climate change – and in the process, he has made a lot of money.
It is an unexpected path for a long-term value investor, who is often more focused on cash flows, profits and valuations rather than the long-term potential of a technology. Now Grantham is investing in risky green-focused SPACs and early venture capital, which have no doubt benefited from the ongoing rise in stock market valuations.
In other words, he’s benefiting from the same thing he’s been worried about for years: a potential stock market bubble.
But given the threat of climate change – represented by ongoing wildfires, floods and extreme weather events – along with the likely reaction of policy makers in the form of carbon taxes and other climate-friendly legislation, investment makes sense for Grantham.
“This is going on as far as the eye can see. It’s an unfair advantage for green investment. There may be a bubble that will affect this in a year or two, but it will come back bigger and better than other groups because of this tailwind. “This will be the most important investment theme for the rest of your life,” he told Bloomberg.
About half of the $ 1.4 billion in assets that Grantham manages across a fund, charity, and his personal holdings are destined for green venture investments, according to Bloomberg. In particular, he said he was looking for “neglected climate opportunities” that “have the potential to change the world.”
The investments Grantham has made are paying off. Over the past decade, he said his venture capital portfolio has returned 19% annually, helped in part by a 102% increase in 2020. The gain was driven by an early investment of $ 12.5 million in QuantumScape, which was published via SPAC last year and delivered a surprise to Grantham.
His second largest direct investment is Greenlight Biosciences, which is working to make RNA molecules an environmentally friendly alternative to pesticides. Greenlight said in August that it will go public via a SPAC merger.
But many of Grantham’s early green investments did not turn out well, and he expects a few big gains to compensate for many small losses, a common strategy in the early stages of investment.
“We expect to have many failures, but when we win, we expect it to be a very big win,” Grantham said.
And while he’s optimistic about green investment, a green stock he avoids is Tesla, which he thinks is, you guessed it, in a bubble.