Category Archives: 10CleanEnergyStocks

10 Clean Energy Stocks: Returns Through February/ Poll

by Tom Konrad Ph.D., CFA

I’m experimenting with how to display the returns of the 10 Clean Energy Stocks model portfolio.  My Patreon supporters seem fairly evenly split between the two options show below, so I’m opening the poll up to my broader readership.

You can see the two most popular options below (with real return data through the end of February) and take the poll here.

Comments are welcome as well.

Returns through February, 2021 style.
Returns through February in the 2019 style

DISCLOSURE: Long all stocks in the model portfolio.

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Covanta and Hannon Armstrong Earnings

by Tom Konrad, Ph.D. CFA

Two more earnings notes I shared with my Patreon followers on February 18th.

Covanta Holdings (CVA)Covant 4Q 20 earnings

Leading waste-to-energy firm Covanta Holdings (CVA) announced 2020 earnings today.  There will be a conference call tomorrow morning, but here is my high-level impression:

The company managed well through Covid and ended the year within it’s original pre-covid guidance.  Metals and energy prices, as well as increased maintenance capital expenditures were a drag on results, but  prices are improving and capital expenditures will fall in 2021.

The company is conducting a strategic review which will likely result in the sale of some underperforming assets.  I expect any money raised this way will go to pay down debt, as will retained cash flow from its dividend reduction last year.  

As I wrote in April 2020, while covid was the excuse for the dividend reduction, the underlying reason was that the company’s debt and dividend were too high. That opinion has not changed, so readers should not expect to see a dividend increase as a result of the ongoing strategic review, which management expects to conclude by the middle of the year.  

Rather, I expect the dividend to be maintained at its current level while the company strengthens its balance sheet and invests in growth projects.  This should be  good for the company’s long term prospects, but I don’t expect anything spectacular to happen to the share price in the short to medium term.

Hannon Armstrong (HASI)

Sustainable infrastructure financier Hannon Armstrong (HASI) was down on earnings today.    I did not see anything bad in the earnings report, so I think the cause is just that the stock is overvalued, and the new guidance of 7-10% annual earnings growth does not justify its current lofty valuation.

Maybe the stock will decline far enough that I want to buy it again… not likely without a major market decline, which is probably not something I should “hope” for, but it would definitely be a silver lining.

Love the company, hate the price.

DISCLOSURE: Long CVA, HASI

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.

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Eneti and Brookfield Renewable Earnings

By Tom Konrad, Ph.D. CFA

Here are a couple earnings notes I shared last week with my Patreon followers.

Eneti, Inc. (NETI) – formerly Scorpio Bulkers (SALT)

Eneti completed its name and ticker change on February 8th. New ticker is NETI (formerly Scorpio Bulkers (SALT), which I recently wrote about here.

Highlights from February 2nd earnings report:

  • 37 of the 47 vessels owned at the 3rd quarter have been sold or have completed sale agreements.
  • Net asset value is $23.94/share. Since most assets are cash or vessels held for sale, this number is basically accurate.
Rendering of future wind turbine installation vessel ordered by Eneti

The stock is still a good buy at the current $20-ish per share, since it’s trading below asset value. As the market starts to value this stock based on its new offshore wind turbine installation model, I expect it to start trading at a significant multiple of book value. I will be surprised if it ends 2021 under $30.

Brookfield Renewable Secondary Offering & Earnings

Brookfield Renewable Partners (BEP) and Brookfield Renewable Corp. (BEPC) announced a secondary offering of BEPC shares, as I predicted last month. What I did not predict was that the sale was by the company’s parent, Brookfield Asset Management (BAM) so this sale will lower BAM’s stake in the company rather than raising cash for Brookfield Renewable.

It has already had the predicted effect of lowering the BEPC/BEP price premium. When I added BEP to the 10 Clean Energy Stocks list on December 31st, BEPC shares were trading at a 35% premium to BEP. Since then BEP is up 9.8% while BEPC is down 9.1%. The premium has fallen to 12%.

In the short term, I expect the premium to start increasing again in a week or two, although I doubt it will ever get back above 30%. After it recovers, we can expect more secondary stock offerings, which will drive it back down. In the longer term (after a year or so) I would expect the premium to stabilize in the 10-15% range.

If the premium falls to 5% or less because of the secondary offering, it will probably be worth selling BEP to buy BEPC, at least for shareholders with relatively small unrealized capital gains.

Brookfield Renewable also announced fourth quarter earnings last week. I’d sum it up as “Steady as she goes.” The company increased its quarterly dividend by 5% to $0.30375, at the low end of its 5% to 9% target annual increase.

Disclosure: Long NETI, BEP, BEPC, short BEPC calls

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.

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SALT: Buying the Balitc Dry Dips

by Tom Konrad, Ph.D. CFA

The Baltic Dry Index (BDI) is a shipping and trade index created by the London-based Baltic Exchange. It measures changes in the cost of transporting various raw materials, such as coal and steel.

Since the BDI is a measure of the income which firms that own dry bulk cargo ships can earn, changes in the BDI tend to drive changes in the stock prices of such companies.

Stock Price Correlation

Until recently, one such company was Scorpio Bulkers (SALT), one of my Ten Clean Energy Stocks for 2021 picks. The chart below shows the last 5 years, with changes in the BDI leading to changes in SALT’s stock price.

5 year BDI/SALT chart

There is also one notable exception to these correlated moves in June 2020, when the company recapitalized in a secondary offering.

On August 3rd, SALT announced its new strategy of investing in the next generation of offshore wind turbine investment vessels and selling its fleet of dry bulk carriers.

As SALT’s dry bulk fleet is sold, the company’s future earnings become increasingly independent of BDI. If the market were acting rationally, the correlation of the stock with BDI should also fall over time.

We’re not seeing that.

6 month BDI/SALT chart

In October, 50-ish percent moves in the BDI led to 25-ish percent moves in SALT. In January, we saw two 30-ish percent moves in the BDI, and the corresponding moves in SALT were around 10 percent to 20 percent.

Vessel Sales

In both cases, the stock moves were approximately half the size of changes in the BDI. Between the start of October and the end of January, SALT announced the sale of 22 Vessels: 7 in October, 3 in November, 6 in December, and 6 in January. The company has sold approximately two-thirds of its fleet since the new strategy was announced on August 3rd, but the stock is still following the index..

Why is BDI Still Driving the Stock?

The continued correlation between SALT and BDI is likely due to quantitative hedge funds using programmatic trading to take advantage of correlations between BDI and all dry bulk shippers. Some of these programs (which may rely entirely on machine learning) have not yet been updated (or updated themselves) to reflect SALT’s declining dependence on dry bulk shipping for its future earnings.

Timing

When a stock falls for reasons that do not have to do with its fundamentals, I call it a buying opportunity.

BDI and SALT have both fell in late January. Enough said.

DISCLOSURE: Long SALT.

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.

The post SALT: Buying the Balitc Dry Dips appeared first on Alternative Energy Stocks.

January Performance: 10 Clean Energy Stocks for 2021

10 Clean Energy Stocks for 2021 January
US$ total returns. YLCO – Clean energy dividend stock benchmark; SDY – broad market income stock benchmark; GGEIP – my real money managed strategy; 10CES21 – the 10 Clean Energy Stocks for 2021 model portfolio.

You can find the original list here.  I’ll be doing commentary on individual stocks as there is news.  The first of these is on MiX Telematics (MIXT) earnings, first published for my Patreon subscribers on January 28th and copied below.  A note on Scorpio Bulkers (SALT) from February first will be published here tomorrow.

MiX Earnings

MiX Telematics (MIXT) reported earnings this morning [January 28th].  The numbers showed improvement over the previous quarter, but a decline over the previous year due to the covid crisis which was exacerbated by the strengthening dollar.

The results were pretty much what I expected when I added MiX to the 10 Clean Energy Stocks for 2021 list.

In that article, I wrote:  “[C]ovid has led many businesses to take a new look at what parts of their operations can be handled online and remotely.  This should provide a lasting boost to the vehicle telematics industry in general.”

Stefan Joselowitz, Chief Executive Officer of MiX Telematics was quoted in the press release saying, “As we look ahead, we are very encouraged by the strategic conversations we are having with large fleet operators on the greater role telematics will play in their future operations. This gives us confidence MiX is well positioned to return to attractive subscription revenue growth rates once the economy normalizes.”

I take that as confirmation of my thesis.

DISCLOSURE: Long MIXT and all other stocks in the list.

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.

The post January Performance: 10 Clean Energy Stocks for 2021 appeared first on Alternative Energy Stocks.

Year in Review: 10 Clean Energy Stocks for 2020

by Tom Konrad, Ph.D., CFA

Looking Back

At the end of 2019, I was worried about overvaluation.  

I wrote that my main goal for the 10 Clean Energy Stocks for 2020 list was “to find stocks which will be resilient in the event of a US bear market.”  We certainly had a bear market in 2020, although it was nothing like the kind of bear market I had been anticipating.  The bear market was precipitated by the coronavirus pandemic, rather than overvaluation.

While I can claim to have anticipated the 2020 bear market, if not its nature, I was surprised by two other market events driving stock prices.  One was the sudden reversal of the bear market, which led to gains in most indices for the year.  The second was the rapid growth of the fossil fuel divestment movement, leading to rising interest in clean energy stocks.  

Both of these surprises helped pull the 10 Clean Energy Stocks model portfolio to a 7.8 percent total return for the year, but my defensive posture at the start of the year, my failure to anticipate the nature of the bear market, and my policy of trying to minimize trading meant that the model portfolio did not see as much upside as my clean energy income stock benchmark, the Yieldco ETF (YLCO), or the real money strategy I manage, the Green Global Equity Income Portfolio (GGEIP).  These were up 29.7 percent and 28.1 percent, respectively.

Model portfolio v benchmarks

My broad market income stock benchmark did not see any benefit from the new interest in clean energy stocks, so ended the year up only 4.1 percent.

Looking Forward

With valuations even higher than they were at the start of 2020, and the economy in a continued pandemic tailspin, I would not be surprised if another bear market were to start in 2021.  I don’t think the stock market has ever seen back-to-back bear markets like this, but one vocabulary lesson of 2020 was that “unprecedented” and “unlikely” can mean radically different things.

And despite current stratospheric valuations of most clean energy stocks, I would not be surprised if the boom has a lot further to run.  Even if the rest of the stock market collapses, the rush of money out of fossil fuels and into clean energy could continue to send the sector skyward. 

It’s a market truism that, “In the short-run, the market Is a voting machine, but in the long-run, it is a weighing machine.”  Right now, the market is voting for clean energy.  The pandemic has caused many to take stock of how their actions affect the world around them.  

Just as masks help stop the spread of covid-19, people are realizing that clean energy stocks can help stop the spread of climate change.  That has started a clean energy stock boom, and stock market booms often gather a momentum of their own, with past gains leading to expectations of future gains, and new investors rushing in because of the fear of missing out.

This clean energy boom is starting to look like a bubble, but stock market bubbles can expand for years before they pop.

2021

individual stock performance
Portfolio breakdown- click for full size

My new 10 Clean Energy Stocks for 2021 list tries to take advantage of the boom in clean energy stocks, while also keeping a defensive posture.  Since the pandemic response has been so much worse in the United States than most of Europe, I included many European names, and tried to focus on clean energy companies that could benefit from increased spending by other clean energy companies.  I looked at stocks that could leverage their high stock prices to increase their future growth rates, while trying to diversify beyond the obvious solar, wind, and electric vehicle sectors.

Will this new list return to its historical outperformance compared to its benchmark? I have no idea.  I have trouble believing just how good my own track record is, given how often it feels like I am wrong about where the stock market is going.  

Annual returns

Although I find myself without any confidence in my stock market predictions for 2021, I console myself with two facts:

  1. Overconfidence is a danger for investors, not a boon.
  2. Some things are more important than making money in the stock market.  

We’re going to have a new President in 2021.  As long as I’m not wrong about that, I can handle being wrong about the market.

DISCLOSURE: Long positions all the stocks in the model portfolio.  

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.

The post Year in Review: 10 Clean Energy Stocks for 2020 appeared first on Alternative Energy Stocks.