This “Dirty” Industry’s Secret “Green” Penny Play

There are no two ways about it…investing in environmentally friendly companies is a powerful trend that will sustain itself for quite some time.

Green stocks ― like solar panel manufacturers, wind farm builders, and clean fuel developers ― have seen share prices race ahead of the rest of the market in recent months. Since the beginning of the year, the Wilderhill Clean Energy Index has rallied 9.08% versus a 1.68% loss for the market at large.

Individual companies have fared even better. Just look at Suntech Power Holdings (NYSE: STP) and Helix Wind (OTCBB: HLXW), two green companies that have netted investors 32% and 46% respectively since January.

The allure of green companies isn't relegated to Wall Street, however. Main Street is going green, too.

With the demise of our country's traditional manufacturing base, growing numbers of now unemployed Americans are looking for manufacturing jobs at green companies. The growth rate of these green jobs has been quite robust. The Associated Press reports the renewable energy sector has added jobs at more than twice the national rate for nearly a decade. Now, we can look forward to even more money flowing into renewable energy projects, thanks to government interest.

That influx of jobs and money has even made its way to Motor City.

Where line workers in Ford, GM, and Chrysler automotive plants once had few options during past recession-induced layoffs, manufacturing jobs with green companies have become a welcome alternative to the unemployment line. Between 1998 and 2007 Michigan saw a 10.7% increase in clean energy jobs ― a trend that's continued into 2009.

Green companies may be part of the only industry that isn't awash in a sea of red. That's because today green manufacturing has become a $228 billion dollar industry that's even attracting the eye of behemoths like GE and Wal-Mart.

However, while green companies have investors' attention right now, most of them aren't as compelling as they could be...

The best green investment right now isn't in windmills or solar. In fact, it's a business most people wouldn't categorize as green at all. That's because while traditional green technologies have enormous potential, they're untested in the business world and ― for the most part ― currently unprofitable.

That's fine if you're willing to wait years for gains to materialize in your portfolio, but that's not an attractive option for investors who were burned by 2008's tumultuous market.

That's why I'm not looking at some experimental new technology. Actually, the industry that interests me the most right now has been around in some form for more than 2,000 years. It's also extremely profitable…

I'm talking about paper.

And while paper manufacturing may elicit mental images of huge smoke-billowing tractors clear cutting endangered rainforests, that's not necessarily the case. Paper can actually be one of the greener products in your home. In fact, the Sustainable Forestry Initiative calls paper "one of the few truly sustainable products" on the planet.

Surprisingly, manufacturing by-products provide a renewable source for more than 60% of the energy used to make paper. Couple that with the fact that paper is biodegradable, recyclable, and reusable, and that paper makers are responsible for planting 4 million new trees every day, and paper really emerges as one of the most interesting green products out there.

It also emerges as a compelling investment right now…

As a basic material used in practically every household and office in the world, paper is remarkably recession resistant. And that omnipresence also makes for a hugely diversified client base. To be sure, not all paper companies are equally attractive in this economy, but it's essential to remember that paper doesn't just include the white sheets in your printer ― paper companies manufacture products that are used as retail packaging, industrial components, and even building materials. Forget notebooks, these are the paper products you want represented in your investment portfolio right now.