Tom Konrad CFA
July was a hard month for the stock market and clean energy stocks in particular. My broad market benchmark of small cap stocks, IWM, fell 7% and is down 2.7% for the year, while my clean energy benchmark PBW fell 9% and has slid into the red for the first time. It is down 0.1% for the year to date. The mostly defensive stocks in my 10 Clean Energy Stocks for 2014 model portfolio fared relatively well, but they were still down 2% for the month. For the year to date, the model portfolio has held up well, with a total return of 4.8%.
(Note that the monthly numbers are for July 3rd to August 5th, and the YTD numbers are from December 26th to August 5th. I use numbers as of when I have time to write, rather than strict month-end in order to make these updates as timely as possible.)
Individual Stock Notes
(Current prices as of August 5th, 2014. The “High Target” and “Low Target” represent my December predictions of the ranges within which these stocks would end the year, barring extraordinary events.)
1. Hannon Armstrong Sustainable Infrastructure (NYSE:HASI).
12/26/2013 Price: $13.85. Low Target: $13. High Target: $16. Annualized Dividend: $0.88.
Current Price: $13.57. YTD Total US$ Return: 1.2%
Sustainable Infrastructure REIT Hannon Armstrong has fallen fairly sharply in recent weeks, on minimal news. The company announced a deal to finance home solar projects for Sunpower (NASD:SPWR) which I would expect to have a small positive effect on the stock price. I find the decline puzzling, but consider it a buying opportunity. Although Hannon Armstrong is already my largest holding, I recently sold some $12.50 March 2015 puts.
If there is trouble that the market knows about but I don’t, you can find out when HASI reports second quarter earnings on August 11th. I’ll find out when I come back from a week long backpacking trip on the 16th, but I’m not worried.
For readers wanting a detailed overview of HASI all in one place, an excellent one just came out on Seeking Alpha.
2. PFB Corporation (TSX:PFB, OTC:PFBOF).
12/26/2013 Price: C$4.85. Low Target: C$4. High Target: C$6.
Annualized Dividend: C$0.24.
Current Price: C$4.36. YTD Total C$ Return: -7.6%. YTD Total US$ Return: -9.7%
Green building company PFB has been declining as well, also for unknown reasons. Second quarter results were better than the previous year, with higher earnings and profit margin.
3. Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF).
12/26/2013 Price: C$4.44. Low Target: C$3. High Target: C$5.
Annualized Dividend: C$0.30.
Current Price: C$4.46. YTD Total C$ Return: 33.5% . YTD Total US$ Return: 30.5%
Independent power producer Capstone Infrastructure held steady throughout the month, without significant news. The gain for the month arose from the payment of its regular C$0.075 quarterly dividend.
4. Primary Energy Recycling Corp (TSX:PRI, OTC:PENGF).
12/26/2013 Price: C$4.93. Low Target: C$4. High Target: C$7.
Annualized Dividend: US$0.28.
Current Price: C$6.00. YTD Total C$ Return: 24.4% . YTD Total US$ Return: 22.3%
Waste heat recovery firm Primary Energy announced a regular quarterly dividend of 7¢ US to holders of record on August 15th. but there was no other significant news. The gain shown here was mostly a big jump at the close today (Aug 5th.) It might just be a blip (the stock is thinly traded), or there may be trading based on rumors of some real news about to be announced.
Update: The jump seems to be due to the immanent acquisition of Primary Energy by Fortistar. The Wall Street Journal reported that a deal was “near” shortly after the close.
5. Accell Group (Amsterdam:ACC [formerly ACCEL], OTC:ACGPF).
12/26/2013 Price: €13.59. Annual Dividend €0.55 Low Target: €11.5. High Target: €18.
Current Price: €13.90. YTD Total € Return: 6.3% . YTD Total US$ Return: 3.5%
Bicycle manufacturer and distributor Accell Group reported strong results for the first half of the year, and said it expects the strength to continue in the second half. Since the company resets its dividend annually based on profits, we can expect next year’s dividend to be significantly higher than this year’s €0.55. The company has been streamlining its operations discontinuing its relatively unprofitable mass market bicycles, and focusing on its higher end models. The company also sold its small fitness unit. Both of these moves mean that Accell will be better able to capitalize on its leadership in e-bikes as the market for assisted pedaling continues to grow rapidly.
6. New Flyer Industries (TSX:NFI, OTC:NFYEF).
12/26/2013 Price: C$10.57. Low Target: C$8. High Target: C$16.
Annualized Dividend: C$0.585.
Current Price: C$12.89. YTD Total C$ Return: 25.2% . YTD Total US$ Return: 22.3%.
Leading transit bus manufacturer New Flyer will announce second quarter results about the same time this will be published on August 5th. The market expects good news, if price action is any indication.
7. Ameresco, Inc. (NASD:AMRC).
12/26/2013 Price: $9.64. Low Target: $8. High Target: $16. No Dividend.
Current Price: $7.58 YTD Total US$ Return: -21.4%.
The stock of energy performance contracting firm Ameresco jumped in response to its second quarter results on July 31st. Although the company did not raise its guidance for the year, management’s tone regarding the market for its services was very positive. This was a big change after two years of mostly negative surprises caused by customers delaying and scaling back projects.
Management also noted that they may be able to upgrade some of their existing landfill gas plants to take advantage of new rules allowing higher quality landfill gas to qualify for the incentives designed to encourage cellulosic biofuels.
8. Power REIT (NYSE:PW).
12/26/2013 Price: $8.42. Low Target: $7. High Target: $20. Dividend currently suspended.
Current Price: $8.95 YTD Total US$ Return: 6.3%
There was no significant news for solar and rail real estate investment trust Power REIT.
9. MiX Telematics Limited (NASD:MIXT).
12/26/2013 Price: $12.17. Low Target: $8. High Target: $25.
No Dividend.
Current Price: $9.86. YTD Total ZAR Return: -12.3%. YTD Total US$ Return: -15.8%
Global provider of software as a service fleet and mobile asset management, MiX Telematics did not report any significant news.
10. Alterra Power Corp. (TSX:AXY, OTC:MGMXF).
12/26/2013 Price: C$0.28. Low Target: C$0.20. High Target: C$0.60. No Dividend.
Current Price: C$0.315 YTD Total C$ Return: 12.5% . YTD Total US$ Return: 9.9%.
Renewable energy developer and operator Alterra Power gave updates on its uninterrupted progress on its Jimmie Creek run-of-river hydro and Shannon Wind projects, as well as a loan it is negotiating to finances those investments. It expects to close on the loan in the third quarter.
Two Speculative Clean Energy Penny Stocks for 2014
Ram Power Corp (TSX:RPG, OTC:RAMPF)
12/26/2013 Price: C$0.08. Low Target: C$0.00. High Target: C$0.22. No Dividend.
Current Price: C$0.02 YTD Total C$ Return: -75% . YTD Total US$ Return: -75.5%
Terminal US$ Return -57% (when I said to sell on June 3rd.)
Geothermal power developer Ram Power’s stock continued to slide since the company has not announced any progress in negotiation with its creditors.
Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF).
12/26/2013 Price: C$0.075. Low Target: C$0.00. High Target: C$0.22. No Dividend.
Current Price: C$0.11 YTD Total C$ Return: 46.7% . YTD Total US$ Return: 43.3%.
Wind project developer Finavera received the final payment from Pattern Energy Group (NASD:PEGI) for its Miekle Wind project. This follows the announcement of the sale of its 10% stake in Cloosh Wind project in Ireland. Comparing the announced payments to my March estimates, the Cloosh payment was at the low end of my expected range, but the Miekle payment was towards the high end. All together, I estimate Finavera’s net cash per share is at least twice the current stock price of C$0.11.
The company now has cash to more than settle all its outstanding liabilities, and will provide details of its long-awaited strategic plan in advance of the Company’s annual general meeting on September 12th. The company’s CEO, Jason Bak, says that the reason it has taken so long to present this plan to shareholders was courtesy to its potential partners, who did not want to publicly commit to the plan until the money was available to implement it.
If shareholders do not like the plan when they find out what it is, Bak has previously said that we will have the option of voting for the strategic plan or for returning the cash to shareholders.
Conclusion
Although the market pulled back in July, earnings announcements for these picks have generally been positive. This is especially for Ameresco, where two years of disappointments seem to be ending, and Accell Group which is showing the benefits of a couple years of reorganization into a leaner, more focused operation.
In addition to the good news in the main portfolio, speculative pick Finavera seems to be on the cusp of paying off more than enough to compensate for the losses realized in June on the other speculative pick, Ram Power.
Disclosure: Long HASI, PFB, CSE, ACC, NFI, PRI, AMRC, MIXT, PW, AXY, FVR, PEGI.
DISCLAIMER: Past performance is not a guarantee or a reliable indicator of future results. This article contains the current opinions of the author and such opinions are subject to change without notice. This article has been distributed for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
