Trish Novicio Mon, July 5, 2021, 8:11 AM·15 min read
In this article, we will take a look at the 12 best environmental stocks to invest in. You can skip our comprehensive analysis of these companies and go directly to the 5 Best Environmental Stocks to Invest In.
Apart from fighting a pandemic, the world is also facing the existential crisis of climate change. Deloitte mentioned in a report that two of the key reasons for the rapid production of greenhouse gases (GHG) in the atmosphere are the burning of fossil fuels and the unending deforestation. Businesses face various hazards due to climate change, ranging from interrupted supply chains and greater insurance costs to labor issues. As a result, many businesses are focusing on sustainability and adopting an eco-friendly business model, which helps the environment and attracts investors.
Companies worldwide are beginning to adapt greener and more sustainable business models from energy generation to semiconductor and vehicle manufacturing to technology innovation. Blue-chip stocks like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), and NIO Inc. (NYSE: NIO) are some of the environmental-friendly market leaders of today.
Since 2012, Microsoft Corporation (NASDAQ: MSFT) has been carbon neutral globally, and the tech giant aims to be carbon negative, water positive, and have zero wastes by 2030. The world's largest tech corporation encourages sustainability through using renewable energy in its factories, integrating environmentally friendly materials in the manufacture of computers and game consoles, and expanding its cloud computing capabilities to help businesses around the world reduce carbon footprints. Microsoft Corporation (NASDAQ: MSFT) released its initial Environmental Sustainability Report in January 2021, announcing a $129 million investment in funds and organizations working on carbon reduction, water management, and circular economy innovations. This investment is part of Microsoft Corporation's $1 billion Climate Innovative Fund, announced in 2020.
One of the sectors helping the betterment of the environment is the electric vehicle (EV) industry. Wall Street analysts remain bullish on major EV players such as Tesla, Inc. (NASDAQ: TSLA) and NIO Inc. (NYSE: NIO). In a CNBC interview, Wedbush analyst Daniel Ives forecasted that electric vehicle stocks could rise by 50% this year. Tesla, Inc. (NASDAQ: TSLA) is the largest electric vehicle manufacturer in the United States, delivering half of the country's EV demand. The electric vehicle giant is not only successful in inventing new technology for greener transportation, but also in generating and storing solar energy for companies and homeowners through its solar panels and Powerwall battery products. TSLA stock has gained 13.3% in the last month.
Sustainable investing options were quite popular in 2020, and they are likely to remain so for several years to come. The groundwork for solar stocks like solar module manufacturer First Solar, Inc. (NASDAQ: FSLR) and solar inverter producer SolarEdge Technologies, Inc. (NASDAQ: SEDG) appears to be in place, with climate change firmly on the Biden administration's agenda. SolarEdge Technologies, Inc. (NASDAQ: SEDG) stock has offered more than 93% returns to investors in the past twelve months. While First Solar, Inc. (NASDAQ: FSLR) shares increased 80% in the last twelve months.
With the current problems the world is facing due to climate change, many companies are re-inventing their ways to help the environment. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn't keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey's research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th, 2021, our monthly newsletter's stock picks returned 197.2%, vs 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017, and they lost 13% through November 16th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
Based on data from over 800 hedge funds tracked by Insider Monkey, the companies included in this article were chosen based on their popularity among hedge funds. We've listed some eco-friendly stocks that are working on renewable energy projects, sustainability plans, and have good ESG scores. We also considered analyst ratings, growth catalysts, and recent financial data of these environmental stocks.
With this context in mind, let's now look at the 12 best environmental stocks to invest in.
Best Environmental Stocks to Invest In 12. FuelCell Energy, Inc. (NASDAQ: FCEL) Number of Hedge Fund Holders: 13
We start our list of the 12 best environmental stocks to invest in with fuel cell power solutions provider FuelCell Energy, Inc. (NASDAQ: FCEL). The Connecticut-based fuel cell company was founded in 1969 and has since grown to become one of the leading manufacturers of innovative molten-carbonate fuel cell technology that is environmentally friendly. The company provides renewable energy products and services in the US, England, Switzerland, Germany, and South Korea. FCEL stock has offered more than 232% returns to investors in the past twelve months
The company has a market cap of $2.7 billion. The company's revenue in the second quarter of 2021 came in at $14 billion. As of July 2, FuelCell Energy, Inc. (NASDAQ: FCEL) shares traded at $8.38. On June 11, Canaccord Genuity maintained a Hold rating on FuelCell Energy, Inc., with a price target of $9 per share.
At the end of the first quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $68 million in FuelCell Energy, Inc. (NASDAQ: FCEL), down from 15 the preceding quarter worth $131 million.
Just like Microsoft Corporation (NASDAQ: MSFT), Tesla, Inc. (NASDAQ: TSLA), and NIO Inc. (NYSE: NIO), FuelCell Energy, Inc. (NASDAQ: FCEL) is one of the best environmental stocks to invest in.
