Tom Konrad CFA
Buying opportunities return to clean energy.
Two years ago I had a problem. In the universe of clean energy stocks I watch, I could not find any that I thought were good values. So I wrote an article saying “We’re near the peak.”
If you had been comparing that call to the performance of the broad stock market since then, you would have to conclude that I was ludicrously wrong. The S&P 500 is up 40% since then.
If on the other hand, you’d been watching clean energy stocks, you would have found that the overall trend has been flat to down. The PowerShares Clean Energy (PBW) ETF has basically been flat since then, while solar (TAN) and wind (FAN) ETFs are each down about 20%.
I mention all this because I notice something new, that hasn’t happened for almost two years: I’m again finding clean energy stocks that I think are bargains. I think the sector and the market as a whole still have a lot of room to fall, but I’m encouraged to finally have companies to write about that I think are worth buying again.
Here are ten I’ve been buying, in no particular order.
1. New Flyer Industries (NFI-UN.TO) a bus manufacturer. See article: Questions About Dividend Spook New Flyer Investors. Why I’m Buying.
2. CVTech Group (CVT.TO) a transmission and efficient vehicle company. See article: The Best Peak Oil Investments Meet the Strong Grid.
3-5. Comverge (COMV), EnerNOC (ENOC), which are demand response companies, and Ram Power Corp. (RPG.TO), a geothermal developer. See article: Ten Clean Energy Stocks for 2011: Buying Opportunities.
6. Alterra Power Corp. (MGMXF.PK) is a geothermal and hydropower developer, see: The Magma/Plutonic Merger.
7. Axion Power International (AXPW.OB) is a developer and manufacturer of PbC batteries: An Elephant Hunter Explains Market Dynamics
8. Nevada Geothermal Power (NGLPF.OB), another geothermal pick. See: Blue Mountain Disappoints; Nevada Geothermal Power Looks Like a Takeover Target
9. Ambient Corp. (ABTG.OB) a smart grid stock. See article: A Profitable Smart Grid Penny Stock Aims for a NASDAQ Listing
10. Rockwool International A/S B (RKWBF.PK) an international insulation company. No article yet, but it’s mentioned here: Canadian Insulation Companies Likely to Benefit from Next Budget.
Ten Clean Energy Stocks for 2010
Four of these stocks (Comverge, EnerNOC, Ram Power, and Nevada Geothermal) were part of my annual New Year’s list of ten clean energy stocks I liked. At the time, I only owned the two Geothermal stocks, because I was having trouble finding anything I thought was a good value. That original list has been doing horribly so far this year, in large part because of the dismal performance of these four stocks and that of American Superconductor (AMSC). I’ve been following AMSC’s very real problems closely, discussing the refusal of their main customer Sinovel (601558.SS) to accept shipments, the likely reasons behind that refusal, and attempting to value the AMSC under the assumption that Sinovel will resume accepting shipments, but not at their former pace and without future growth.
Ram Power and Nevada Geothermal also had real problems at their geothermal projects, but I feel that the market has vastly overreacted to both, making the pair bargains by almost any measure, and also potential takeover targets in my estimation. If I were picking my ten stocks today, it would be the list above, with the three Geothermal companies underweighted relative to the rest to avoid putting too much money into one tiny sector.
All in all, it feels good not to be sitting on the sidelines anymore. Blood is on the streets for a lot of decent renewable energy and energy efficiency stocks, and experienced market hands know that it is often the best time to buy.
But keep some cash on the sidelines. Right now, I expect the market will get worse before it gets better. If I’m right, and you’ll want to have cash available to take advantage of other opportunities that arise down the road.
DISCLOSURE: Long NFI-UN, CVT, COMV, ENOC, RPG, MGMXF, AXPW, NGLPF, ABTG, RKWBF.
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 inve
stment 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.
I have followed some of the clean energy stocked you predicted since the start of this year and they are all seriously down. Even Axion crashed.
Was wondering what’s your take on this.
Incidentally, I just quoted the following from a blog in my own blog, The PostWest. WOuld you still recommend investing in green energy or even stocks in general under these circumstances?
NOISYROOM: An American Descent Into Hell (h/t JOSHUAPUNDIT)
It’s hard not to see the signs all around us that America has begun a cataclysmic downward spiral in finances and morality. It’s like watching a slow motion murderous wreck, all the while denying that it is actually occurring. I assure you, what is unfolding in the US now is all too real. It’s a reality that is about to smack Americans full frontal in the face and many will never even see it coming until it is way too late.
It is hard for me to imagine how people cannot see what is happening in finances and in politics in their own country. It is in the news if you look at all… It is on the Internet for all to see… It is whispered by many all around us if you just listen.
The stock market has gone down for the last 6 weeks in a row. And if stock futures are to be believed at all, things will not be good Monday morning this next week. The last time the stock market dropped seven weeks in a row was in 2001 when the dot.com bubble burst. I have said for a long, long time that the stock market is fiction and is being manipulated. But they are running out of ways to fake recovery and growth – they can’t hide forever just how bad things are about to become. We are in free fall economically and stand to not only enter another great depression, but a great, great depression in the next twelve months. Only this time, we don’t have manufacturing or a winnable war to bring us out of it. Obama has ensured that – he has masterfully implemented Cloward and Piven at every turn and we have just sat here allowing him to do it.
China claims that we are already defaulting on our debt and we are virtually owned by them. Between borrowing everything but our soul (and that may be included as well) and letting the Chinese in to build cities along with business, we are the prize fools on the planet. Our Asian overlords will come knocking to collect and considering the regard they hold us in, I don’t think it will be what our elites would consider ‘civilized.’
And as inflation and high gas prices are just clearing their throat, we are in for one hell of a ride.
FP-
I’m still bearish on the stock market as a whole… I would not recommend a net long position at this point, but a long position on selected clean energy stocks balanced by a short position or puts on the general market seems a good bet.
As for the performance of my 10 picks for 2011, they have been horrible, no matter how you slice it. They’ve even drastically underperformed the sector indexes. People seem to be looking for excuses to sell clean energy this year, and, unfortunately, several of my pick peopvided very good excuses to sell. Elsewhere in these pages you’ll find my chronicling of the damage done to American Superconductor and my 3 geothermal picks. The other two big losers are EnerNOC and Comverge, which partly seem to be suffering because of high p/e’s at the start of the year, and partly seem to be suffering from a change in investor mood. In general, there has no been any significant bad news for these two. More at the end of the month when I write my quarterly update.
Thanks for your comment.
What would you do if owned those stocks: would you hold on to it and wait for them coming back, or take your losses? Do you have any thoughts on the time it would take for them to come back?
IT looks like you’re asking about what I’d suggest to holders of my 10 clean energy picks for 2010. It’s time for my Q2 update on that list, so I’ll answer in more detail then.
Do I think these stocks are coming back? For several of them, I see upside but don’t expect them to reach their previous levels anytime soon.
I’d definitely hold on to anything in the list of ones I’m currently buying. I have not looked closely at Waterfurnace, Telvent, or Potlach recently, but I’d probably continue to hold. AMSC is a harder decision.
Your risk tolerance my be different from mine, and you may or may not have a hedge against the market as a whole, so I can’t say what the right thing for you to do would be.
And after my performance this year, it amazes me that anyone is still interested in my advice.