By Tom Konrad, Ph.D., CFA

With the launch of my (green dividend income focused) hedge fund early this year, I had to take a hiatus from publishing my annual list of 10 Clean Energy Stocks that I feel will do well in the coming year.  Since my duty to clients takes precedence over readers, I could not tell people about stocks I liked before buying them for the fund.

As we complete the first half of the year, the fund is now largely invested, although I am still keeping some buying power back in anticipation that the overall market could easily fall further, leading to even better opportunities than we see today.  

Since I’m not actively buying in the fund, I am now free to share my top picks with the public.  Like everything in my hedge fund, these are all companies that, in my judgment, reduce the fossil fuel use, carbon emissions, or other pollution in the overall economy by operating and expanding their businesses.

I probably won’t be able to publish monthly updates to this list as I have in the past.  If I am actively buying any one of these stocks, I will not be writing about it, and I will not want to tip my hand by writing about the others while just omitting one or two.  But I plan to publish intermittent updates on the whole list when I can, and will do a recap in July 2023 to look at how the list did in the past year and why.

Valuation and Timing

The recent declines of the stock market are finally giving us decent valuations, better than anything we’ve seen since the short-lived market bottom in early 2020.  That’s not to say that the market will not fall further, but it’s likely that many individual stocks are currently seeing their lows. 

Whenever I see a stock I like trading at a good valuation, I buy some.  If it falls further because of a continued general market decline (as opposed to bad news at the company itself), I buy more. These ten stocks have all reached the “buy more” stage.  If the market keeps falling, I’ll soon be ready to invest everything I can, and even start using uncovered short puts to take on a bit of leverage.

10 Clean Energy Stocks for 2022-2023: The List

By Tom Konrad, Ph.D., CFA

Ten Green Stocks I expect to do well over the next year (7/1/2022 to 6/30/2023)

Prices are as of the close on 6/30/2022.  1€ = $1.0482, $1 = 7.0972 DKK = C$1.2876 

Clean Transportation Stocks

• MiX Telematics (NASD:MIXT – $8.14) – A provider of vehicle tracking and telematics to large international vehicle fleets.  The company is green because it both reduces accidents and fuel usage for its customers.
• Valeo, SA (FR.PA – €18.42 or US ADR: VLEEY or US foreign stock ticker: VLEEF) – a provider of electrified drive trains, sensors, and comfort systems for the automotive industry.
• NFI Industries (NFI.TO C$13.39 or US foreign stock ticker: NFYEF) – A leading international bus and motorcoach manufacturer selling a large and growing number of electrified vehicles.  N

Green Building Stocks

Rockwool A/S (ROCK-B.CO 1597.50 DKK and ROCK-A.CO or US foreign stock ticker: RKWBF) – a manufacturer of fire and mold resistant building insulation.

Hannon Armstrong Sustainable Infrastructure (NASD:HASI) – A financier of solar, wind, biogas, and energy efficiency installations.

Green Municipal Infrastructure Stock

Veolia (VIE.PA €23.29 or US ADR: VEOEY or US foreign stock ticker: VEOEF) – A large international developer and operator of municipal infrastructure such as water, wastewater, recycling, and environmental remediation.

Biofuel Stock

Enviva, Inc (EVA $57.22) – A vertically integrated wood pellet supplier to European and Japanese markets, where they mostly displace coal in electricity generation.

Recycling Stock

Umicore, SA (UMI.BR €33.32 or US ADR: UMICY or US foreign stock ticker: UMICF) – A vertically integrated recycler of hard-to-recycle and specialty metals used in clean energy industries such as batteries, solar, wind, and catalytic converters.

Green Electricity (Yieldcos)

Avangrid (NYSE: AGR $46.12) – one of the top producers and developers of renewable electricity in the United States.  

Atlantica Sustainable Infrastructure (NASD: AY $32.26) – an international owner and developer of renewable energy, efficient natural gas, electric transmission line and water assets.

DISCLOSURE: Long all stocks in the 10 Clean Energy Stocks for 2022/23 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 10 Clean Energy Stocks for 2022-2023: The List appeared first on Alternative Energy Stocks.

By Tom Konrad, Ph.D., CFA

Monthly Performance

Returns for the Ten Clean Energy Stocks for 2021 model portfolio are shown below.  It was a good month for clean energy stocks as well as the broader stock market, with the portfolio up 4% for a 20% total return through the end of October.  Its clean energy benchmark (RNRG) was up more (8%) but is still down 6% for the year.  Its broad market benchmark (SDY) rose 5% and has caught up with the model portfolio at a 20% return year to date.

Earnings

Third quarter earnings season has started.  Below are some notes I’ve shared with my Patreon supporters over the past couple weeks:

MiX Telematics Earnings

MiX Telematics (MIXT) was down on earnings today.  I’d call it a case of decent earnings… the company continues to grow revenue and subscriptions quarter over quarter and year over year, but they are still a long way from 2019 levels.

Oil and gas customers still account for most of the shortfall, with most of the customer wins highlighted in the earnings call being transit, mostly bus fleets.  They did say that one big oil and gas customer is starting to bring some of its vehicles back into service.

Overall, the quarterly performance was decent, but investors were probably hoping for more of a bounce given the subscribers lost in 2020.  If anything, the long term outlook is improving, so the recent declines make MiX one of the few stocks in which I see value in the current market.

Green Plains Partners Earnings

The big news in Green Plains Partners’ (GPP) third quarter earnings wasn’t news at all.  The distribution increase for $0.435 quarterly which had been announced in mid-October, and the company had told us to expect the increase in August when I wrote: “I expect the board of directors to raise the dividend to between $0.40 and $0.45 next quarter.”

The stock jumped anyway, and now trades around $15.  Given its current 11.2% yield, I think a modest ($1 to $2) further increase over the coming months is likely. 

Enviva Earnings

Note: Enviva is not in the current 10 Clean Energy Stocks list, but made an appearance in 2019 and I thought the news was notable enough to make it worth writing about.

I had two major take-aways from wood pellet MLP  Enviva’s (EVA) 3rd quarter earnings.  

First, the previously announced simplification transaction where the partnership has bought out and absorbed its general partner and is converting to a corporate structure should be great for the stock price.

The company is guiding for $3.62 of total dividend payments in 2022.  After the shift to a corporate structure, EVA should start trading with a yield more in line with its Yieldco peers, around 3 to 5 percent.  So we can expect a share price a year from now to be in the $72 to $120 range.  With the current share price at $68, I’m fairly bullish.

The other take-away is that the company is moving into new markets with the announcement of a long term wood pellet supply contract to a European producer of aviation biofuel.  This is important because its largest current market, which is selling to power producers who burn the pellets in converted coal power plants has long term limitations.   

First, using wood pellets to generate electricity is not the highest use for a a renewable fuel source which is easy to transport and store.  These are two advantages notably lacking in the leading renewable energy sources, electricity from solar and wind.  Given the size and weight of batteries needed, it is very difficult to electrify long distance aviation.  As we transition the world away from fossil fuels, we need to find renewable energy sources for every application.  Sustainable aviation fuel is one where solar and wind will find it difficult to compete, so this is a good long term market for Enviva’s biomass.

Other applications which will be difficult to serve with electricity from solar and wind are industrial processes such as steel and cement production, and the 10 to 20 percent of electricity which needs to be served by long term seasonal storage to meet demand that cannot be easily served with wind and solar.  Enviva is also exploring contracts with industrial customers looking to decarbonize.  

This new contract demonstrates that Enviva has scalable prospects for participating the sustainable energy economy for the long term, even when its current role as a bridge fuel to make use of the existing infrastructure in converted coal plants comes to an end.

DISCLOSURE: Long all stocks in the 10 Clean Energy Stocks for 2021 portfolio and EVA.

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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by Tom Konrad, Ph.D., CFA

Market Decline

Last week I warned “The risks in today’s stock market outweigh the possibility of future potential gains.”  Looks like we’re seeing those risks manifest in short order.  The last couple days’ decline have me looking at a few stocks to start adding to my positions again, especially MiX Telematics (MIXT) discussed on June 2nd and Green Plain Partners (GPP), discussed below.

Note that this pullback could easily be very early days of a much larger market decline.  We might even see the market fall far enough to test the March lows… any of my buying now is just small amounts, with most of my buying power held in reserve.  As I wrote last month, I balance the level of my buying or selling against my confidence in the valuations of the stocks in question and my predictions of market trends.  Right now I think we’re starting to see some good values in a few stocks again, but I think it’s likely that we will see much better valuations in the weeks or months to come, so I am mostly holding on to my cash and waiting for better values to be created by continued declines.

On the other hand, there’s also a chance that we’ll see an immediate rebound in the next week, which is why I’m doing a little buying now.

The three updates on the individual stocks in the model portfolio which I wrote for my Patreon supporters earlier this week:

Green Plains Partners (GPP) Secures Financing

Disclosure: Long positions all the stocks mentioned.

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 10 Clean Energy Stocks for 2020: Updates on GPP, HASI, CVA appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Sometimes it’s good to be wrong.

When I published the Ten Clean Energy Stocks For 2019 model portfolio on New Year’s Day 2019, I thought we were likely in the beginning of a bear market.  With 20/20 hindsight, that was obviously wrong.

I made the following predictions and observations:

1. “[T]he clean energy income stocks which are my focus should outperform riskier growth stocks.”  [True]
2. “[D]eep value investors will put a floor under the stock prices of these ten stocks.” [Irrelevant, and a little amusing.]
3. “I could also be wrong about the future course of this market.”  [So true!]
4. “I have a history of underestimating the optimism of investors.” [True, and even more true today]
5. “[If] the Dow [is] hitting new highs by the end of 2019 …  I expect that this model portfolio will produce gains as well, although it will likely lag the gains seen by the broad market of less conservative picks.” [Wrong again]
6. “As long as you are in the market, every now and then the stars will align, and you will make some great gains.” [True, but I did not think that alignment would come again in 2019 so soon after 2016 and 2017.]

In the end, my conservative model portfolio ended the year with a total return of 46%.  The real-money green income strategy I manage, GGEIP returned 41% despite a large cash allocation in the second half of the year.  Both compare favorably to my clean energy income benchmark, YLCO, which was up 37%, and the broad market income benchmark SDY, which gained 24%.

In short, the stars aligned in 2019.

Because almost every stock in the model portfolio went up far more than its actual business improved, I dropped most of them from the 2020 clean energy stocks model portfolio.  I still like all the companies, just not their prices.

I did not sell any of them completely in GGEIP, but I have been taking profits in and lowering my allocation to the ones with the greatest gains.

The new list is heavily international, and partly hedged.  Despite being wrong in 2019, in 2020, I’m doubling down on the thesis that there is a good chance of a bear market in the United States this year.

When it comes to predicting bear markets, I sometimes feel like I’m a broken clock.

Eventually this broken clock will be right.  Until then, I’ll console myself with the unexpected fruits of being wrong.

Disclosure: Long PEGI, CWEN/A, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, VLEEF.

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 2020 Hindsight: Ten Clean Energy Stocks For 2019 appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

2019 has become another blockbuster year for the Ten Clean Energy Stocks model portfolio and, to a lesser extent clean energy stocks and the broad stock market as well.  I’m frankly surprised to see the party continuing.  The continued spiking of the metaphorical punch bowl by the Federal Reserve with interest rate cuts certainly has a lot to do with it. I had expected those cuts to be both fewer and less effective.

Which all goes to show that it’s always a good idea to hedge one’s bets in the stock market.  At least in part because of this hedging, my real money Global Green Equity Income Portfolio GGEIP has somewhat underperformed the 10 Clean Energy Stocks model portfolio, up 38.5% and 44.5% for the year, respectively.  Both remain well ahead of their benchmarks, however, with the clean energy income stock benchmark YLCO up 29.3% and the broad income stock benchmark SDY up a still respectable 21.9%.

Will the party continue with a blowout Santa Claus rally?  Only Santa knows, but I’m going to continue with caution in case he decides to show up with a lump of coal (have you seen coal stocks recently?) instead of nicer gifts.

Individual Stocks

Last month I warned,

Hannon Armstrong HASI, Terraform Power (TERP), and Brookfield Renewable Energy Partners (BEP) are all stocks in which readers should be considering taking some profits, if they have not already.  I continue to think these three stocks are all ripe for price corrections.

Terraform saw that price correction, down 10% on a secondary offering of 14.9 million shares of stock at approximately $16.84 a share.  This is business as usual for Yieldcos, which sell shares when prices are high to finance the purchase of income producing clean energy investments.  As long as such investments can be had at prices which expand per share cash available for distribution, such secondary offerings are good for long term shareholders.  I generally consider the one or two months following a secondary offering as the best time to invest in Yieldco stocks, although Terraform’s valuation even after the recent dip is not making me rush in with any buy orders.  But it’s certainly less overvalued than last month.

Brookfield Renewable Energy Partners announced a stock distribution and the creation of a new corporation, Brookfield Renewable Corporation (BEPC).  This will allow investors who are not able to invest in limited partnerships like BEP to also invest in the stock, which is designed to have identical distributions to BEP and will be exchangeable for BEP units.  The stock price of BEP has been climbing since the announcement in anticipation of the new demand for shares from this new potential class of buyers.  After the split, investors should not be surprised if BEP takes advantage of its new, lofty stock price to raise cash in its own secondary offering, bringing the stock price back down from its temporarily lofty level.

Although I think the formation of BEPC will be good for existing investors, I continue to trim my holdings of BEP in anticipation for such a decline.

French autoparts maker Valeo SA (FR.PA, VLEEF) reported strong 3rd quarter sales at the end of October, and the stock has been rising since.  Sales were up 8% despite an ongoing contraction in auto sales overall.  The company’s  excellent performance is largely due to the start of production on projects including vehicle electrification, cameras, and lighting.  All-in-all, the company’s plan to leverage its R&D efforts to get its products into more new vehicle models seems to be paying off.  Barring a broad market sell-off, I would expect the stock to continue to advance.  Given the large increases in most of the stocks in this year’s list, I am going to be searching for a large number of new stocks to add to the 2020 list as I drop the ones that have climbed the most since they are no longer offer compelling valuations.  Unless it advances significantly more in December, Valeo seems likely to stay.

Another big winner was Atlantica Yield (AY).  Investors generally liked the 3rd quarter earnings report and 1 cent increase in its quarterly dividend to $0.41 at the start of November.  Revenue and Cash Available For Distribution (CAFD) continue to advance at a 6-7% rate through the company’s investment in new projects, such as the ATN Expansion 2 transmission project which it closed on during the quarter.

One thing I like about Atlantica compared to other Yieldcos is its diversification into electricity transmission and water.  Owning both of these asset classes is rare in the industry, but transmission in particular is essential to the clean energy transition, and having expertise in different asset classes means that Atlantica can look at different types of investment opportunities when traditional Yieldco assets like solar and wind are relatively expensive.  Because of its Spanish roots, Atlantica also has a more diverse geographic profile than other Yieldcos.

Conclusion

The year isn’t over, but I can confidently say that, at least as far as my stock picks go, it far exceeded my expectations.  With all the price rises, I’m going to have trouble finding ten clean energy stocks that I think are good investments at the end of December.  I’m seriously considering including one or two short positions in the portfolio, something I have done only once before, in 2008 when I include a short of First Solar (FSLR).  It was a timely choice, since First Solar fell 50% that year, helped along by the financial crisis.  Alternatively, given the new accessibility of option strategies for the small investor, perhaps I should include option hedging or positions in the portfolio.

What do readers think? Would a short, option hedging, or just sticking to long-only (with the continued caveat that readers should have a large allocation to cash or a hedging strategy) be the most useful to you in the Ten Clean Energy Stocks for 2020 model portfolio?  Let me know in the comments.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, FR.PA/VLEEF, CWEN-A. 

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 Ten Clean Energy Stocks For 2019: Still Party Time appeared first on Alternative Energy Stocks.

Why Free Commissions are a Game-Changer For Small Investors

by Tom Konrad, Ph.D. CFA

Last month, Charles Schwab (SCHW), E-Trade (ETFC), and Ameritrade (AMTD) all dropped their commissions for online stock trades to $0. They also dropped commissions on options contract to $0.65 per contract.

The change opens up cost-effective individual stock investing to even the smallest investor, and also allows many more investors to use option strategies.  For those wondering if there is a catch, and how these brokers will make money with $0 commissions, see here.  The short version is that they make money on your cash deposits, and from options trades, mutual funds, and ETFs.

The Ten Clean Energy Stocks Example

Each year, I publish my model portfolio of Ten Clean Energy Stocks. A small investor who had purchased an equal-weighted portfolio of those ten stocks at the start of each of the last five years starting in 2015 would currently be up 143% over that period… assuming they had paid no commissions.

An investor who had started with $1000 in 2015, and paid no commissions on trades would have $2,430 today. But that was not an option for most investors until now. If the same investor had started 2015, and bought equal amounts of each of the 10 stocks each year, selling them at the end of the year to buy the new list and paying a $5 commission on each trade, they would have only $1,606. An investor starting with $10,000 in 2015 would have had $23,472 today.

As the above examples show, a $5 commission on stock trades is manageable for an investor with $10,000 who wants to follow the Ten Clean Energy Stocks strategy, but a $5 commission is prohibitively expensive for an investor with only $1,000. $0 commissions change this completely.

Why is this important?

The ability to make small stock trades means that even a small investor can now build a diversified portfolio of stocks. Previously, cost effective diversification was only available to small investors through mutual funds and ETFs. While the 0.5% to 2% annual fees on such investments are not large (in absolute terms) for an investor with only $1000, they add up over time.

More importantly, a small investor who starts with an ETF or mutual fund strategy will not gain the skills needed to manage an individual stock strategy while the stakes are small. Once that mutual fund investor is managing $10,000 instead of $1000, a 1% annual mutual fund fee has risen to $100 a year and is starting to amount to real money.

Free stock trades also open up educational opportunities.  A 20 person stock investing class could put together a $2000 account with a $100 “materials” fee to each student, allowing the class to trade with real money during the semester, with the investment and profits or losses returned to the students at the end of the semester.  Using real money is a remarkably different emotional experience than theoretical trading, and free trades open that experience to anyone able to afford college textbooks.  In this case, the “used” textbook might be worth more at the end of the semester than it cost when new.

Finally, readers of AltEnergyStocks are likely to be motivated by a wish to invest in companies that are helping to reduce greenhouse gas emissions and other environmental impacts. While there are a number of clean energy mutual funds and ETFs, many of these funds will contain investments in stocks that will not be aligned with a particular investor’s beliefs. This is also true with the Ten Clean Energy Stocks annual lists. This year’s list includes both an ethanol company (Green Plains Partners GPP), a waste-to-energy company (Covanta, CVA), and a wood pellet company (Enviva, EVA). I and others have explained why we think each of these stocks has a net positive impact on the environment. for instance, see here for ethanol, and here for Covanta and Enviva.

Readers who remain unconvinced are able to simply leave these stocks out of their own “Seven” or “Nine Clean Energy Stocks” portfolios. Investors in mutual funds and ETFs do not have this flexibility.

Option Strategies

While an investor with $10,000 can invest in my Ten Clean Energy Stocks model portfolio at reasonable cost without free commissions, certain useful options strategies were not affordable until now. A couple months ago, I wrote that I sell covered calls to reduce my market exposure in times like these, when I believe downside risks outweigh potential gains. Selling cash covered puts is another option strategy I use when I’m feeling more bullish.

I mostly use Schwab, and until the recent price drop, the commission on an options trade was $4.95 plus $0.65 per contract. Each options contract is an option on 100 shares of the underlying stock. The $4.95 fixed part of the commission meant that I did not feel it was usually cost effective to trade options unless I was trading at least 10 contracts, or 1000 shares. For a stock priced at $15, that meant that the underlying stock position was worth at least $15,000.

As a general rule of thumb, I am unwilling to allow any position to reach more than 10% of a total portfolio, meaning that, before the recent reduction, I was only willing to trade options in a portfolio of $150,000 or more. This puts options strategies out of reach for the vast majority of investors.

Now, without the $4.95 fixed charge, it is cost effective to trade a single options contract. This opens up the cost effective use of options strategies to investors with portfolios of $20,000 or more, and likely now including the majority of readers of this blog.

For investors with more money who have yet to use options, the ability to trade single contracts has the advantage of limiting risk while an investor learns the ins and outs.

Conclusion

Zero cost stock trades, and options trades without a fixed charge are a great equalizer. While they will not teach you to be a good investor, they do give you the opportunity to learn by doing without having to put large sums of money on the line.

If you do not yet have an account with a brokerage that offers $0 commissions, it’s time to stop paying them. Charles Schwab is currently offering $100 to $500 for new accounts with this referral link. I do not get any compensation when people use this offer.

DSCLOSURE: Long GPP, EVA, CVA.

The post How Free Commissions Change The Game For Small Investors appeared first on Alternative Energy Stocks.

by Tom Konrad Ph.D., CFA

Although valuations and political uncertainty have me spooked, October was another strong month for the stock market in general and clean energy income stocks in particular.

While my broad income stock benchmark SDY added 1.6% for a year to date total gain of 19.6%.  My clean energy income stock benchmark YLCO did even better, 2.7% for October and 29.7% year to date.  The 10 Clean Energy Stocks model portfolio fell somewhere in between for the month (up 1.8%) but remains unchallenged for the year to date (40.7%).   My real-money managed strategy, GGEIP, lagged as I reduce market exposure in what I consider an increasingly risky market (as discussed last month).  GGEIP was up 1.0% for the month, and 35.0% year to date.

Individual Stocks

Analyst Downgrades, Sudden Stock Moves

The most notable stock move of the month was Covanta Holding Corp’s (NYSE:CVA) 16% decline.  This started on October 22nd, when Raymond James warned that the company’s earnings would be impacted by the weak commodity market.  The analysts like the company’s long term prospects, but reduced their rating from “Strong Buy” to “Market Perform” based on expected near term weakness.  Sure enough, the company reported weakness in commodity prices in its third quarter earnings.  After earnings, BMO cut its price target from $19 to $18, and UBS cut its from $17 to $15.50.

With the stock trading below $15, I see this as one of the few buying opportunities in the stock market today, and added to my exposure by selling cash covered puts with strike prices of $12.50 and $15.  I think the large sell-off is symptomatic of increasing investor nervousness.  We also saw a similar sell-off in Yieldco Clearway (CWEN, CWEN-A) based on analyst downgrades.

It feels to me that investors are looking for an excuse to sell, causing the market to overreact to analyst downgrades.  Regular followers of this blog, in contrast, will likely have already trimmed their holdings as the stocks rose, and so should remain unphazed by these sudden swings in sentiment.  If you have not been trimming your holdings in your biggest winners, you probably should be. Hannon Armstrong HASI, Terraform Power (TERP), and Brookfield Renewable Energy Partners (BEP) are all stocks in which readers should be considering taking some profits, if they have not already.  I continue to think these three stocks are all ripe for price corrections.

Buyout

One stock with significant gains where I am not currently taking profits is Pattern Energy Group (PEGI) because a cash buyout announced on November 4th for $26.75 removes most of the market risk from this stock.  Two  months ago, I dismissed the rumors that Terraform Power would be the buyer, but the rumors that the company was in talks for a buyout were well-founded.  The buyers ended up being the Canada Pension Plan Investment Board (CPPIB), which is also negotiating to purchase Pattern Development.

The price of the buyout was below the stock market price at the time of the announcement, but approximately 15% above the price PEGI had been trading at prior to the buyout rumors, which began to circulate in early August.  Because the buyout price was below the market price at the time of announcement, a number of shareholder class action lawsuits were immediately filed.  Investors should not be alarmed at the number of suits; class action lawyers are simply jockeying to be first, because typically most such class actions will be consolidated into one and the lawyers who were first to file generally get to take the lead and collect the lion’s share of the fees.

PEGI and CPPIB need to convince both the judge and shareholders that the buyout price was justified.  They need shareholders in order to win shareholder approval for the merger.  In order to make this case, it is not out of the question CPPIB may increase the buyout price slightly in order to bolster their argument.  But I don’t think that readers should expect this.  As I wrote in August, “At $27, I’d call PEGI fairly valued, so investors should be cautious about banking on a merger going forward.”

Even without a price increase, the merger dramatically lowers the market risk of PEGI stock.  With two expected dividends of $0.4222 before the expected close of the deal, shareholders can expect to receive a total of $27.59 over the next six to eight months.  As I write, the share price is $27.33, which would amount to a 1% gain over that time.  This is not a great interest rate, but it is better than cash, and holders do get the chance of an upward revision to the buyout price.

Conclusion

I continue to remain cautious.  Readers should take some gains in their biggest winners and be prepared for more of their stocks to fall suddenly and dramatically in response to even mild analyst downgrades and short term bad news.  A sharp market correction or bear market could start at any time… or the bull may continue to limp along.  I continue to believe the downside risks outweigh the possible gains of betting that the bull still has much life left in him.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, FR.PA/VLEEF, CWEN-A. 

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 Ten Clean Energy Stocks For 2019: Pattern Buyout, Analyst Downgrades appeared first on Alternative Energy Stocks.

I missed my regular monthly update in early June because of vacation.

In hindsight, early June looks like it was a good buying opportunity. The broad market of dividend stocks (represented by my benchmark SDY) falling six percent in May, only to rebound a similar amount in June. At the time, I would have continued to advise caution: “Sell the peaks” rather than “Buy the dips.”

Particularly volatile stocks like European autoparts supplier Valeo (FR.PA) from this list would have generated even greater short term gains. But it would take more than a six percent market decline to transform this bear into a bull. As I have been writing for the last few months, I feel the risks in this market are high, and if or when they manifest, the decline will be a lot more serious than we saw in May.

Readers should take May as a warning, or a preview of what is possibly to come, and use the June bounce back to take some gains and increase their cash positions. This is precisely what I have been doing in my real-money managed strategy, GGEIP, and is (at least in part) why GGEIP fell less in May than the 10 Clean Energy Stocks model portfolio.

For May, GGEIP fell 2.2% compared to 4.5% for the model portfolio. It also gained less in June: 5.5% compared to 7.2% for the model portfolio. Although their clean energy income benchmark YLCO had a larger net gain over the two months, both the real and model portfolios remain well ahead of their benchmarks for the first half of the year.

More importantly, you can see that GGEIP is less volatile than either the Ten Clean Energy Stocks model portfolio or the benchmarks. Low volatility will be at a premium in any potential stock market decline.

Regarding individual stocks, May started with first quarter earnings from most of the stocks in the list, but these earnings did not contain many surprises. For the most part, the companies continue to invest and progress as planned.

Given my concerns about the stock market in general, I am not actively buying anything right now. Instead I am increasing portfolio allocations to cash and bonds. In terms of valuation, I feel Green Plains Partners (GPP) is the most attractive security in the list because rising oil prices caused by our stand-off with Iran and falling grain prices caused by President Trump’s trade war with China. These should help the ethanol market recover from the damage done to it by the administrations systematic undermining of the Renewable Fuel Standard. The current depressed price of GPP stock also provides some protection from a general market decline.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, VLEEF. 

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 Ten Clean Energy Stocks For 2019: Sell The Peaks appeared first on Alternative Energy Stocks.

In April, my 10 clean energy stocks model portfolio continued to power ahead, despite the concerns about market valuation I expressed last month.  As I said at the time “me being nervous about the market is not much of an indicator that stocks are going to fall” at least in the short term.  So I continue to trim winning positions and increase my allocation to cash as stocks advance.

Both the model portfolio and the Green Global Equity Income Portfolio (GGEIP) were up 4.5% and 3.6% respectively in April.  This was solidly ahead of their clean energy income benchmark YLCO and broad market income benchmark SDY, which were up 0.3% and 2.1% respectively.  For the year to date, both real and model portfolios remain well ahead of their benchmarks as well.

The one stock I said I was not trimming last month was Atlantica Yield, PLC (NASD:AY), which turned in a healthy 5% gain in April.  I continue to hold.  The big winner was Valeo SA (FR.PA, VLEEF), which shot up 25%. I also mentioned Valeo as one which still had an attractive valuation, but I was more cautious because Valeo is also much more volatile than the other stocks in the list.  While this parts supplier for efficient, electric and autonomous vehicles can accelerate like an EV when market is good, it can also fall off a cliff if the market turns too rapidly.

Covanta Holding (CVA) was the first stock in the model portfolio to announce first quarter earnings, covered that in more detail here.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, VLEEF.

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 Ten Clean Energy Stocks For 2019: April Ascent appeared first on Alternative Energy Stocks.

The first quarter of 2019 saw the market’s largest quarterly gain in a decade, and my 10 clean energy stocks model portfolio outperformed both the broad market and the clean energy income ETF I use as a benchmark (see chart above.)

Performance that strong makes me nervous, especially since the last time we saw gains like these it was the stock market rebound from the financial crisis.  In this case, while the market was down in the last quarter of 2018, it had only been enough of a decline to blow a little of the foam off the top of a market that was looking very bubbly.  The first quarter’s gains have shaken up the market’s champagne bottle all over again.

While this particular investor is happy to pop the cork in celebration, you can bet I’m taking pains to make sure the spray is not going to drench me or my portfolio.  I’ve been selling some positions for cash, selling covered calls on others, and letting cash covered short puts expire without selling new ones.  In short, I’ve been taking steps to lower my portfolio’s sensitivity to market movements in preparation for a possibly severe market decline.  I’ve returned to my more customary bearish stance after my relatively aggressive (for me) buying towards the end of 2018.

Yes, I was also bearish at the end of February, and, in fact, I’m bearish most of the time, so me being nervous about the market is not much of an indicator that stocks are going to fall.  That said, the few times I’ve been bullish (the start of 2019, early 2009, and late 2015 (for Yieldcos after the 2015 Yieldco bust), for example, have all seen strong gains.  So maybe we’re not going to see the crash I’m worrying about this year, but I’m pretty confident the risks going forward outweigh the upside of a few more percentage points gain that might come from staying fully invested.

Of the ten stocks in the model portfolio, the one large position I’m holding all of is Atlantica Yield, PLC (NASD:AY). It has failed to join its Yieldco brethren in the recent rally, and so its relatively attractive valuation provides some downside protection.  While Valeo SA (FR.PA, VLEEF) has also been flat for the year to date, that auto parts supplier is much more sensitive to economic conditions than the other stocks in the portfolio, most of which are quite defensive in nature.  I’m holding Valeo, too, but that is not a particularly large position.

Disclosure: Long PEGI, CVA, AY, TERP, BEP, EVA, GPP. INGXF, HASI, VLEEF.

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 Too Good To Last? Ten Clean Energy Stocks For 2019 appeared first on Alternative Energy Stocks.