Alternate Energy Sector Ideas

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>>> 11 Best Clean Energy Stocks to Buy Now

Ma’k Almario

January 23, 2021


https://finance.yahoo.com/news/11-best-clean-energy-stocks-181804490.html


In this article, we discuss the 11 best clean energy stocks to buy now. If you are in a hurry, you can skip and click to read the 5 best clean energy stocks to buy now.

The Environmental Impact Assessment (EIA) defined clean energy as energy derived from sources that are naturally replenishing but flow-limited; renewable resources are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. An example of sources could be sunlight and wind depending on their time and availability. According to Bloomberg New Energy Finance, by 2030, renewable energy sources will account for over 60% of the 5,579 gigawatts of new generation capacity and 65% of the $7.7 trillion in power investment.

The clean energy industry has provided jobs for many Americans over the last couple of decades. According to the Environmental Defense Fund, from 2015-2019, the sector was adding jobs 70% faster than the overall US economy. However the COVID-19 pandemic has took a toll in many industries and the clean energy sector was not immune to this. According to Wood Mackenzie estimates, 2020 global solar and energy storage installations are expected to drop nearly 20% compared to pre-COVID-19 projections. Which resulted in 106,000 lost jobs in March alone in the United States.

Despite the negative economic effects reflected on the sector due to the pandemic, a recent Harvard analysis showed that people living in contaminated cities were more likely to die of COVID-19. According to the World Health Organization, an estimated 7 million people worldwide every year die because of air pollution. Relatively, it should be viewed as a viable sector in the economy.

The Biden Administration has expressed his intent to progress into a better environment. The president mentioned plans to sign an executive order to undo many of Trump's environmental rollbacks. Biden pledged to rejoin the international Paris climate accord and he did so a couple of days ago. Biden said during his inaugural address,

"A cry for survival comes from the planet itself, a cry that can't be any more desperate or any more clear,"

Elon Musk, the richest man in the world and the founder of Tesla (TSLA) has also done his share in working towards a world with clean energy. In a blog published at Tesla, Musk mentioned his master plan in the creation of Tesla,

“Create a low volume car, which would necessarily be expensive, use that money to develop a medium volume car at a lower price, use that money to create an affordable, high volume car, and…provide solar power.”

Wind machines have the ability to power cities when installed in arrays, replacing the emission-spewing coal-fired or natural gas-fired plants that today form the backbone of many electrical systems. The New York Times recently wrote an article on General Electric (GE)’s test model for their plans of new series of giant offshore wind turbines. GE’s machine has set the standards for the industry, one single machine will be able to light up a town of roughly 12,000 homes. The turbine will be deployed at sea.

Although offshore turbines now account for just 5% of the overall wind industry’s generating capacity, the part of the market has taken its own identity and is expected to grow faster in the coming years. According to International Energy Agency, the GE turbine is selling better than its competitors may have expected. On Dec. 1, GE reached an agreement to provide turbines for Vineyard Wind and has deals to supply 276 turbines to what is likely to be the world’s largest wind farm at Dogger Bank off Britain. These deals, with accompanying maintenance contracts, could add up to $13 billion, estimates Shashi Barla, principal wind analyst at Wood Mackenzie, a market research firm.

In order to identify the 11 best clean energy stocks to buy now, we started with the holdings from iShares' Global Clean Energy ETF (ICLN) and we were able to narrow down our list to 11 stocks by using our hedge fund sentiment scores. General Electric didn't make our list because ICLN did not include the stock among its holdings. You will also notice that Vestas and Siemens Gamesa are well-known clean energy stocks that the ETF invested in but we did not include them in our list because we do not have hedge fund sentiment data on these companies.

Our in-house analysis shows that we can use the sentiment information gathered from the hedge fund filings to classify in advance a select group of stocks that can beat the S&P 500 index by double digits annually on average. For instance, the portfolio of our monthly newsletter’s stock picks has beaten the market by over 88 percentage points since March 2017 (see details here) Some of the portfolio holdings of our monthly newsletter have been shared publicly too. In October, we shared this real estate stock and since then, it’s been up nearly 50 percent.

When you go through our list you will notice that most of the stocks highlighted in this article are solar energy stocks. This signals us that most investors are relying heavily on solar energy stocks and they may actually be overpriced. It may make sense to look into wind energy companies for cheaper investment opportunities.

In any case, based on our hedge fund sentiment data, we now present to you the 11 best clean energy stocks to buy now based on the stock picks of 800+ hedge funds tracked by Insider Monkey:


11. Atlantica Sustainable Infrastructure (NASDAQ:AY)

No of HFs: 11

Total Value of HF Holdings: $63.1 Million

We start the list of the 11 best clean energy stocks to buy now with AY. The company is known for its renewable energy, efficient natural gas, electric transmission and water assets in North and South America. In 2020, the company announced an agreement with Algonquin to acquire a 20 MW solar plant with a 15 year PPA in place in Columbia. The investment is expected to be approximately $20 million. The closing is expected to be in mid-2021. Santiago Seage, Atlantica’s CEO said,

“We are happy to co-invest with Algonquin in these projects, in a measured step to enter into a new market like Colombia, with attractive growth prospects for renewables and with similar characteristics to other Atlantica’s markets in South America.”


10. DAQO New Energy Corporation (NYSE:DQ)

No of HFs: 18

Total Value of HF Holdings: $109 Million

DQ was also mentioned as one of the 10 Best Solar Energy Stocks to Buy Now. The company is known for its high-purity polysilicon. Recently, the company announced a long-term high-purity polysilicon supply agreement with a subsidiary of JA Solar and with another leading solar company. Under the agreement, DQ will provide JA Solar with high-purity mono-grade polysilicon in a total of 32,400 MT-43,200 MT between January 2021 and December 2023. Chief Executive Offer of DQ, Mr. Longgen Zhang said,

"We are very pleased to further strengthen our cooperation with JA Solar and another leading solar company, both of whom have been our long-term customers for years. Including the volume of these two agreements, approximate 79,800 MT of our polysilicon has already been booked under long-term supply agreements for 2021. We believe solar PV will play an increasingly important role in the global energy market as we are entering into the era of grid-parity and as the levelized cost of solar PV is being continuously reduced. As always, we will focus on our core business by accelerating our capacity expansion and providing high quality products to contribute our effort to the fast-growing solar PV market."


9. Ormat Technologies, Inc. (NYSE:ORA)

No of HFs: 19

Total Value of HF Holdings: $198 Million

ORA was mentioned in the 50 Best Utility Dividend Stocks to Invest In. The top hedge fund holder of this stock is Ian Simm’s Impax Asset Management which had $142 million invested in the stock at the end of September. An insider purchased 3,000 shares at around $55 in September 2020. The stock is up 89% since then.

In 2020, the US Department of Energy announced more than $15 million in grant funding for Ormat Technologies, Inc, Reno, and the University of Nevada in support of geothermal energy efforts. U.S. Sen. Jacky Rosen, D-Nev said in a July 29 statement,

“This grant funding, which will be used to support investment in geothermal research and development, will help to create a cleaner future for the Silver State. I will continue working in Congress to secure support for Nevada’s clean energy initiatives.”


8. Plug Power, Inc. (NASDAQ:PLUG)

No of HFs: 21

Total Value of HF Holdings: $389 Million

PLUG ranks as the 8th best clean energy stock to buy now. They are also mentioned in the 10 Best Hydrogen Fuel Cell Stocks to Buy Now. The top hedge fund holder of this stock is D.E. Shaw’s DE Shaw which had $245 million invested in the stock at the end of September. An insider recently purchased 100,000 shares at around $2 in March 2019. The stock is up $60 since then. In Massif Capital’s Q2 2020 Investor letter, they made a few comments on the stock,

“Our long book drove 100% of the results this quarter. This is a hard pivot from our first-quarter results, which were driven by our short book and tail risk strategy. Mining firms led the performance with Equinox Gold (EQX), Lucara Diamonds, Turquoise Hill (TRQ), Barrick Gold (GOLD), Lithium Americas (LAC), and Ivanhoe Mining, each contributing more than 2.5% to the portfolio’s return. On the short side, our trio of new energy/alternative fuel companies, at least two of which are little better than companies formed to take advantage of the public’s appetite for stocks with green credentials, dragged down results by a combined 6.7%.

From a sectoral perspective, our Basic Materials allocations contributed 24.9% to the portfolio while Energy and Industrials were both a drag on the portfolio. The tail risk hedge contributed -0.5%, which is to be expected, given the market’s swift move to the upside since the end of March.”


7. Sunnova Energy International, Inc. (NYSE:NOVA)

No of HFs: 23

Total Value of HF Holdings: $422 Million

The top hedge fund holder of this stock is Daniel Patrick Gibson’s Sylebra Capital Management which had $93 million invested in the stock at the end of September. An insider purchased 500 shares at around $28 in October 2020. The stock is up 78% since then.

On December 23, 2020, NOVA announced the appointment of Akbar Mohamed, as an Independent Class III director of the Company’s Board. William J. (John) Berger, Chief Executive Officer of Sunnova said,

"Akbar is a highly accomplished entrepreneur and leader in his field who brings to Sunnova operational and strategic horsepower. With his in-depth understanding of the dealer model through his experience building the largest AT&T dealer business in the United States, Akbar will be an incredible addition to our Board as we continue to focus on our goal of being a customer-centric, dealer driven, and tech-enabled wireless power service provider.”


6. Canadian Solar, Inc. (NASDAQ:CSIQ)

No of HFs: 25

Total Value of HF Holdings: $245 Million

The sixth best clean energy stock to buy now is CSIQ. During the third quarter of 2020, the company announced net revenues of $914 million. The company recently announced that they have sold ownership interest in its Hays and Jenner solar projects to BluEarth Renewables. Projects are expected to start commercial operations in 2021. Dr. Shawn Qu, Chairman, and CEO of CSIQ said,

"This is our third transaction with BluEarth and given their strong Alberta presence and deep experience in operating and maintaining large-scale clean energy projects, we believe they are the right owners for the Hays and Jenner solar projects. These projects together will generate clean electricity for tens of thousands of Alberta homes each year. We thank BluEarth for their continued trust and for seeing the value that these best-in-class solar projects will provide to their customers and to the citizens of Alberta, furthering a leadership role in the clean energy transition."

Given the advantages of large solar installations vs distributed residential, I believe that generation is likely to increasingly tilt towards those use cases. First Solar is extremely well positioned, and I look forward to continued gains.”


5. Sunrun, Inc. (NASDAQ:RUN)

No of HFs: 29

Total Value of HF Holdings: $3.27 Billion

The top hedge fund holder of this stock is Chase Coleman’s Tiger Global Management which had $2.29 billion invested in the stock at the end of September. An insider recently purchased 59,057 shares at around $16 in October 2019. The stock is up 440% since then. Massif Capital talked about the stock in its Q2 2020 investor letter,

We laid out our thesis on Sunrun (NASDAQ:RUN) in our first-quarter letter to investors and concluded that while the company had dropped 50% in March, we still felt comfortable holding the short position, this was an error. We re-evaluated that posture in May, following a rapid rise in the stock price, and decided to exit the position as the title wave of liquidity entering the markets seemed more than enough to continue to support a firm dependent on capital markets for cash. Given the level of support we see in credit markets right now, our misgivings about their business model do not add up to sufficient catalysts to allow us to hold the position. We encourage readers to revisit our thesis on the company. We would highlight that our decision to re-enter at any point in the future will likely be a function of regulatory rulings on utility net metering practices or compelling evidence to suggest a decline in tax equity investing.

We also closed our short position in Plug Power (NASDAQ:PLUG) this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory. Like SunRun, we have several signposts in front of us for Plug Power that would prompt a re-enter.

The alternative energy landscape is a tricky environment right now. We are enthusiastic about many of the technology and market-driven solutions that are moving society closer to carbon neutrality. A component of our core strategy is deeply rooted in the belief that assets are increasingly mispriced in a rapidly changing energy landscape. We are believers in some young technology companies, wary of stranded asset risks, and understand that many currently out of favor industries will require investment in decarbonization efforts, not divestment.3 Yet, the nascent stage of the energy transition we find ourselves in also invites the creation of businesses that will ultimately prove unsuccessful. Positive sentiment in the collective is necessary to drive complex and challenging societal issues like decarbonization. Still, it can be dangerous at the individual (company) level if it results in the misallocation of resources – purposefully or otherwise.

We are likely to remain patient right now with many of these firms. The attractive trade in alternative energy right now certainly appears to be on the long side. We will continue building into many of our wind investments and are intrigued by developments in the European utility space, and international power developers.


4. Renewable Energy Group, Inc. (NASDAQ:REGI)

No of HFs: 30

Total Value of HF Holdings: $139 Million

The top hedge fund holder of this stock is Ken Griffin’s Citadel Investment Group which had $134 million invested in the stock at the end of September. An insider purchased 3,000 shares at around $16 in March 2020. The stock is up 506% since then. During the third quarter of 2020, the company reported a revenue of $576 million on 176 million gallons of fuel sold. The company recently announced a change in the organizational construct of its senior leadership team. Chad Stone will move from CFO to Senior Vice President, Commercial Performance. REG President & CEO, Cynthia “Cj” Warner said,

“I am delighted to announce these exciting changes to our leadership team. We believe these changes will strengthen our senior leadership team and create a more streamlined reporting structure to accelerate growth in our areas of focus. We believe these organizational changes will allow us to better recruit, promote and develop strong talent within REG.”


3. Solaredge Technologies, Inc. (NASDAQ:SEDG)

No of HFs: 31

Total Value of HF Holdings: $553 Million

SEDG ranks as the third-best clean energy stock to buy now. The company is known for the design, development, and marketing of direct current optimized inverter systems for solar photovoltaic installations worldwide. During the third quarter of 2020, the company reported revenue of $338.1 million. Zivi Lando, CEO of SolarEdge said,

“Our third quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the global pandemic. Our solar business outside the U.S. reached an all-time high and the U.S. market is showing signs of return to pre-pandemic installation levels. In our non-solar business, our e-Mobility team is gearing up to deliver to our customer the first significant batch of full powertrain solutions for assembly in electric vehicles in the fourth quarter. In addition to continuing to generate significant cash from operations this quarter, we raised $618 million, net of expenses, in convertible debt providing additional support for our continued organic and non-organic growth.”


2. First Solar, Inc. (NASDAQ:FSLR)

No of HFs: 40

Total Value of HF Holdings: $283 Million

In an article, White Brook Capital mentioned some commented about FSLR in their Q2 2019 investor letter

“First Solar is a provider of solar modules to the industrial and commercial segment. Despite lackluster earnings reported during the second quarter, the stock appreciated due to the growth in the backlog as their offering continues to be attractive to industrial customers globally.

Solar is having its second moment, and I believe that First Solar is the best positioned to take advantage. First Solar is an industrial and commercial solar module producer. While often thought of as a homogenous solution, solar generation assets should be considered on a spectrum with retail and industrial applications on opposite ends.

Industrial solar installations are built for utilities, usually with production capacity confirmed before installation, or less frequently on spec, with multiple potential proximate commercial customers.

Commercial installations are also large, but significantly smaller than industrial installations, and are built to offset a company’s carbon footprint or to provide electricity for manufacturing or data center operations at a specific site.

Retail commercial is becoming more commonplace, with retailers like Walmart commissioning builds at their stores or distribution centers. Community solar projects also fit within this category, where a group of residential customers will agree to use a specific solar project for their electricity alleviating the negative impact of rooftop solar.

Finally, residential which is often installed on homes.

The physics of generating electricity using solar technology are the same across the spectrum. A solar module produces electricity at the rate that the solar panel is exposed to sunlight, limited by the efficiency of the panel and the inverter used to make the electric current generated, usable. Sun exposure to the panel is different from sun exposure through the panel. A well-tuned solar module needs foliage cleared (obvious) and dust washed away (less-obvious) to achieve its potential. Once the electricity is in the panel, the electricity needs to make its way to the grid. Solar module makers use solar inverters that condition the electricity for use at the individual panel, the multi-panel, or the node level – all which impact the efficiency of the entire installation, its cost, and its resiliency to failure. Efficiency, therefore, shouldn’t just be considered on as a point in time, but over time, accounting for the lifespan of the installation, and the probability and cost of part failure.

Residential customers have a proclivity to install the most theoretically efficient panels and inverters possible, but due to the limited space on a roof and the need to get costs down, to have a very limited number of inverters. This means that while they’re potentially incredibly capable, they’re not very resilient. Additionally, a residential customer’s tolerance to pay the necessary operating costs to maintain and clean the panels is low. In real life, consumers treat their panels like consumer electronics, their value is higher than the cash flows generated at the initial installation, and the perceived value declines below cash flow relatively quickly as the technology ages. Finally, the average house is owned for 7 years, while an installation is capable for 20 years. If the new buyer does not agree on the aesthetics of the installation, solar devalues the home. Residential solar, in my view, is not a great area for investment for the consumer or for an investor.

The shortfalls present in the residential market, decline the “more industrial” the installation. In that segment, the costs to install and upkeep the modules near peak efficiency are critical to achieve the priority of the investment – a solid IRR. First Solar’s modules are exceptionally cheap to install and maintain – producing consistent predictable current even if the peak efficiency is slightly lower than peers. Given the advantages of large solar installations vs distributed residential, I believe that generation is likely to increasingly tilt towards those use cases. First Solar is extremely well positioned, and I look forward to continued gains.”


1. Enphase Energy, Inc. (NASDAQ:ENPH)

No of HFs: 42

Total Value of HF Holdings: $1.04 Billion

ENPH is the best clean energy stock to buy now. The stock was mentioned as one of the Top 11 Lithium and Battery Stocks to Buy Now. An insider purchased 52,400 shares at around $19 in November 2019. The stock is up 1015% since then. The company is known for its software-driven home energy solutions that span solar generation, home energy storage, and web-based monitoring and control. During the third quarter of 2020, the company reported a revenue of $178.5 million along with a record 41.0% for non-GAAP gross margin.

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