Environmental Firms Expect Brighter Days Under Bill Clinton

ENVIRONMENTALLY related industries - including anti-pollution companies, oil service firms, and the natural gas industry - are getting a new lease on life these days, thanks to the election of Arkansas Governor Bill Clinton.

Stock prices for many of these firms are heading up, based on the expectation that they will earn heftier profits under a Clinton-Gore administration than they would have earned under a second term for President Bush. The new administration - which made protecting the environment a key campaign theme - is expected to find ways of supporting environmental firms, either by channeling government contracts to such companies, promoting policies that encourage development of new environmentally sound products and services, "or enacting new regulations," according to Vishnu Swarup, an environmental specialist with Prudential Securities Inc.

During the campaign, both Mr. Clinton and Senator Al Gore stressed conservation to hold down oil imports. Clinton has long expressed his support for natural gas over oil or nuclear power. And he has called for a halt to drilling in the Arctic National Wildlife Refuge as well as offshore drilling.

Until recently, environmental stocks had not performed particularly well this year. Pollution- control stocks, for example, have underperformed the broader stock market in terms of earnings. That underperformance reflects the weak economy and the price cutting, which some companies have engaged in to protect their market shares. But in the past month or so, pollution-control stocks have had a rally that is clearly linked to expectations of better gains under the Clinton White House, notes Charles LoCastr o, a pollution-control expert with Donaldson, Lufkin & Jenrette Inc.

During the Carter years, a number of start-up environmental firms prospered, based in part on the granting of special tax incentives for such things as installing solar panels in home heating systems. The Reagan White House, however, was less interested in encouraging special tax breaks, preferring to seek lower energy prices through deregulation of the oil and gas industries. Special energy-related tax breaks for taxpayers were terminated with the enactment of the Tax Reform Act of 1986.

Price cutting is now ending in one important segment of the pollution-control area - collection services, Mr. Swarup says. Browning-Ferris Industries, for example, raised prices on its collection services in October; other companies have followed that lead. Additional industrywide price hikes are expected in January.

The end of price cutting and the rise in prices largely reflect the improving economy. But "there is an element" of linkage to the incoming administration, Swarup says: "Democratic presidents tend to emphasize the environment and regulation. That will help pollution-control firms." Swarup notes that per share stock prices should rise for a number of major pollution-control firms during the next six months, including Browning-Ferris, Chemical Waste Management, Mid-American Waste Systems, and Waste Managem ent Inc.

One energy area that looks especially promising, experts say, is natural gas. Gas stocks have been showing market strength in recent months irrespective of the election. Thus, while Standard & Poor's Natural Gas Index rose 17 percent last year, it has shot up 26 percent since April of this year.

David Fleischer, a gas expert with Prudential, says that Clinton will propose incentives for use of natural gas. But even without such incentives, demand is expected to grow.