You say you want a resource revolution? These stocks are ready

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The current issue of the McKinsey Quarterly has an intriguing excerpt from the book, Resource Revolution: How to Capture the Biggest Business Opportunity in a Century, by Stefan Heck and Matt Rogers. The investing takeaway is equally intriguing – but only for extreme optimists.

The way Mr. Heck and Mr. Rogers see things, rising global affluence is pushing us to become far more efficient and imaginative in the way we use resources. This is a good thing: Rather than being defined by resource scarcity, they write, "the world economy will be revitalized by an array of business opportunities that will create trillions of dollars in profits."

They continue: "Rather than settling for historic resource-productivity improvement rates of one to two percentage points a year, leaders must deliver productivity gains of 50 per cent or so every few years."

To do so, companies have to employ five approaches, either individually or in combinations: substitution (replacing costly materials with something cheaper and more readily available); optimization (using software to improve how companies use resources); virtualization ("moving processes out of the physical world"); circularity (finding additional value in products after their initial use) and waste elimination.

If that sounds a little less than concrete, the authors helpfully provide a short list of companies, from four different sectors, that have already harnessed these approaches. In transportation: Tesla Motors Inc., Uber, and Zipcar. In power: C3 Energy, Opower Inc., and SolarCity Corp. In agriculture: Hampton Creek Foods Inc. and Kaiima. In buildings: Cree Inc., DIRTT Environmental Solutions Ltd., and Nest Labs.

Is there an investing angle here? For sure. As the authors write, "The resource revolution represents the biggest business opportunity in a century. Companies that try to stick to the old '2 per cent solution' (just improve performance by 2 per cent annually and you will be fine) are going to become obsolete quickly. Businesses that can deliver dramatic resource-productivity improvements at scale will become the great companies of the 21st century."

The implication is that their short-list of companies is a great place to start looking for these winners – but it's also a list of potentially ultra-volatile stocks, for those that are publicly traded, with an upbeat future already factored in.

This isn't necessarily a bad thing. Google Inc. snapped up privately held Nest Labs in January, paying $3.2-billion (U.S.) for the "smart thermostat" maker and moving deeper into the area of connected gadgets. As well, Avis Budget Group Inc. bought Zipcar at the end of 2012, paying a 49 per cent premium and recognizing the advantages of a car-sharing network (though the takeout price was lower than Zipcar's initial public offering).

But Tesla and SolarCity, both headed by Elon Musk, require solid confidence in the near future. SolarCity's share price surged more than tenfold from the end of 2012 to its record high in February. And Tesla, which has risen 480 per cent over the past year, trades at 131-times estimated earnings.

Others are worth a closer look. Cree is a lighting company, whose shares trade at a steep 35-times estimated earnings. DIRTT, a Canadian manufacturer of office interiors, is a small company (market cap: $200-million) that is not yet profitable. And Opower, which works with utilities to drive energy efficiency, is working on an IPO.

Mr. Heck and Mr. Rogers believe the resource revolution will bring great things. Let's hope they're right. But as previous revolutions demonstrated, there's a lot of money to be made – and lost.