By Tom Konrad, Ph.D., CFA

Supply and Demand

One uncomfortable fact for green investors is that the clean energy transition is going to require a lot more mines.  Lithium, nickel, cobalt, copper, manganese, graphite, even steel: just name and industrial commodity, and we’re probably going to need a lot more of it.

Total mineral demand for clean energy technologies by scenario, 2010-2040

Even worse, it’s not at all clear where all these materials are going to come from.  While there are plenty of all the elements we need in the Earth’s crust, actually mining them all in the next 20 years is not something that we can accomplish without paradigm-shifting changes to the mining sector.  It’s difficult to imagine a scenario where we construct enough mines to supply all the materials needed to even reach the world’s stated goals for clean energy development, let alone the scale we would need to keep global warming below 1.5℃ or 2℃.  

Economics 101 tells us that when demand for anything increases much faster than supply, price will also rise until the two can be balanced again through demand destruction (reduced purchases because it’s too expensive) or increases in supply (companies increasing production), usually both.

Investing 101 tells us this is an opportunity for companies that already supply the commodity or can supply the coming future demand are likely to do well, and we should buy them.  The obvious suppliers are existing mining companies. This investing theme was particularly popular two years ago when the expected increase in demand for materials was frequently in the news.  This led to a peak in the S&P/TSX Global Mining Index at 133 in April 2022, which has since fallen to 103 as of February 20 (data from spglobal.com).

Little has changed in the long term bullish outlook for commodities in the last two years since the mining index peaked.  Except the stock prices, that is.  Hence, with the mining index down over 22% at the same time that the broad market has been rising, now seems like an excellent time to invest in companies which seem likely to profit from the coming clean energy minerals boom.

Reduce, Reuse

While I expect that investors in mining companies will do well financially over the next decade, as an environmentally minded investor, mining is one sector I’m simply not willing to invest in.  While I believe that there are likely some mining companies that behave as environmentally responsible as possible, I do not have the skills or the inclination to determine which are which.

Environmentalism 101 (Is that a class?  If not, it should be.) tells us to reduce, reuse, or recycle before we buy something new.  When it comes to these materials, mining is making new.  I expect there are good investing opportunities in all three principles. We can reduce the use of the most expensive and rare materials by substituting more common ones.  Origami Solar (not a public company) is working on replacing expensive aluminum with cheaper and stronger steel in the frames for solar modules, while Form Energy (also not public) is making batteries with cheap and abundant iron instead of the commonly used (and much more expensive) lithium.

We can also reuse existing infrastructure, such as repurposing the sites and grid connections of old coal plants for energy storage. We can also extend and expand the usefulness of power lines with grid-enhancing technologies like better monitoring and software.

Recycle

As astute readers have noted, most of the examples of reduction and reuse of clean energy materials listed above involve new businesses trying to create new markets.  Such opportunities can lead to incredible investment returns, but they also come with a level of risk that I, as a relatively conservative investor, try to avoid.  Recycling, however, is an established business that already produces profits.  This is the type of investment opportunity I look for: Currently profitable businesses that can profit from the transition to a clean energy economy.

Historically, lithium-ion batteries have not been recycled at all due to the lack of facilities to recycle them. That situation is changing rapidly.

The Inflation Reduction Act’s requirement that electric vehicle batteries is leading to a boom in the construction of battery recycling plants in North America.  With all the announcements of new recycling plants, I’ve become concerned that there may not be enough used batteries to go around.  

If I’m right that we are likely to soon have more battery recycling plant capacity than we have used batteries that are easy to recycle, then the companies most likely to make a good profit are the companies that already have systems for gathering used batteries in place.  In the case of used electric vehicle batteries, that means companies that already have vehicle part recycling and reuse facilities, commonly known as junkyards.  Two such companies are Radius Recycling (RDUS – until recently known as Schnitzer Steel) and LKQ Corp (LKQ).  

Radius is vertically integrated, using its junkyards as one source of scrap metal for its recycled steel mills.  It’s also widely recognized as an environmental leader.  Corporate Knights named it the world’s most sustainable company for 2022.  

In contrast, LKQ Corporation is a manufacturer of non-OEM replacement car and RV parts as well as running junkyards.  I don’t think I’ve ever seen LKQ on a list of sustainable companies, although much of its business is inherently sustainable.  Repairing a vehicle is usually a more sustainable option when compared to replacing it.  It’s also what I usually call a “boring” business… I like these because I think they are less prone to selling at inflated earnings multiples.  That’s certainly the case for LKQ today.

My final recycling holding is Umicore SA (UMI.BR, UMICY).  Umicore is a European processor of  recycled battery materials and other precious metals. They are a little farther up the value chain, making them relatively more vulnerable to future spikes in the price of used batteries, but I expect that their established relationships, proprietary recycling expertise, and participation in the more mature European battery recycling industry should help them weather increased competition for a limited supply of used batteries.

Conclusion

It’s widely accepted that the clean energy transition will lead to the demand for many industrial commodities growing faster than supply, although many investors have moved on to other themes since the interest in commodities peaked in 2022.  That makes it a great time to get in.

Investing in mining companies is an obvious, but environmentally problematic way to profit from coming price increases.  Investing in the recycling supply chain may be a less obvious method, but it is much more environmentally sound.  Three stocks to consider are Radius Recycling (RDUS), LKQ Corp. (LKQ), and Umicore (UMI.BR, UMICY). 

DISCLOSURE: As of 2/21/24, Tom Konrad and accounts he manages own the following securities mentioned in this article: RDUC, LKQ, and UMI.BR.  He does not plan to sell any of them in the next two weeks, and may buy more.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.  All investments contain risk and may lose value. Past performance is not an indication of future performance. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

ABOUT THE AUTHOR: Tom Konrad, Ph.D., CFA is the Editor of AltEnergyStocks.com (where this article first appeared) and a portfolio manager at Investment Research Partners.

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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

You don’t have to own mining companies to benefit from rising metals prices.

This is a roundup of first quarter earnings notes shared with my Patreon supporters over the last week. Waste to energy operator Covanta and specialty metals recycler Umicore are both benefiting from skyrocketing metals prices.

Just as renewable energy and energy efficiency stocks have long shown that investors don’t have to own fossil fuel companies to benefit from rising prices of fossil fuels, recyclers like Covanta and Umicore are showing that you don’t have to own environmentally damaging mining companies to benefit from rising metals prices.

Covanta Earnings

Everyone could find something to like in last week’s first quarter earnings at Covanta (CVA).  

Revenue and income all showed strong growth over the prior year.  This was driven by strong pricing trends in metals, waste disposal (“tip”) fees, and energy prices.  These gains were achieved despite higher planned outages for maintenance in 2021 compared to the prior year.  This will reduce the need for additional maintenance outages later in the year.

In addition, the company increased its guidance for the full year, and expects further improvements to come from the strategic review as it renegotiates contracts or closes unprofitable operations.  It seems likely that many of these renegotiations will come at the 19 municipally owned plants in the US that it operates under contract.  The company also anticipates significant savings from overhead.

In short, everything is coming up roses.

• The company is performing well
• The macroeconomic environment is favorable
• New plants will be coming online over the next 3 years in the profitable UK market
• Additional savings are expected from the strategic review.

Covanta is definitely a stock to hold even in this relatively overvalued market.

Umicore and Hydrogen

Umicore (UMICF, UMICY, UMI.BR) released its first quarter update as well as a presentation on its positioning in the hydrogen economy in late April.  

In the business update, they’re driving with fully charged batteries:

• Metals, and especially the precious metals, prices are soaring, boosting their recycling business (which also increased its volumes)
• Automotive production is recovering, helping their catalysis business.  The shift away from light duty diesel vehicles is also helping them increase market share.

Umicore currently expects its 2021 earnings to slightly exceed the guidance released just in February.

Hydrogen

With much talk of the hydrogen economy, especially in Europe, Umicore released a timely presentation on how they have and expect to participate.  The company already has a strong position as a supplier of catalysts for the PEM fuel cells used in Fuel Cell Vehicles (FCVs), and have won a number of supply contracts for future fuel cell vehicle platforms.  As of 2020, Hyundai Motor has produced 6,781 Fuel Cell Vehicles using Umicore as a supplier.

They also announced a new partnership with Anglo American Platinum (AAL.L, ANGPF, ANGPY) to develop a liquid carrier which would be used in hydrogen transportation.  They see significant long term growth potential in both this and as a supplier of catalysts to the electrolyzer market.

Conclusion

It was hard to describe Umicore as a value stock when I added it to the 10 Clean Energy Stocks list at the start of the year, and it’s even harder today, given the 30% appreciation since then, I continue to value it for the exposure it gives to the materials used in clean transportation technologies.  Other ways to get this type of exposure include mining stocks and electric vehicle companies like Tesla (TSLA).  I do not invest in mining companies because of environmental concerns, and I do not invest in “story” stocks like EV manufacturers because I like to focus on “boring” stocks that benefit from the same trends, but not everyone is talking about.

It’s much easier to get an edge in your investment analysis when you are one of the few investors paying attention.  

DISCLOSURE: Long CVA, UMICF.

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 Earnings Roundup: Metals Prices Boost Covanta and Umicore appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

The last three months of 2020 brought an explosion in clean energy stock prices.

Solar stocks (as measured by the Invesco Solar ETF (TAN), nearly tripled.  So did the Invesco Wilderhill Clean Energy ETF (PBW), which includes a broader spectrum of companies.  Wind stock rose 61%, and even the relatively sedate Yieldcos were up 32%.  The stars of the last half of 2020 was undoubtedly Tesla (TSLA, up 246%) and other electric vehicle stocks.

Money Flows Out of Fossil Fuels and Into Clean Energy

I believe that the cause of the current rise in stock prices is largely the fossil fuel divestment movement, which gained significant momentum in 2020.  Not only have I been hearing greater interest in divestment from individuals, but major money managers like Blackrock and the New York State Pension Fund have stated their plans to divest from fossil fuels over time.  If you have not already taken your money out of fossil fuel stocks, you are late to the game.  As I wrote in 2014, when it comes to divestment, the last one out loses.

The same goes for investing in clean energy stocks.  While not all the money taken out of fossil fuel stocks flows into clean energy stocks, some of it does.  The market capitalization of clean energy stocks is quite small compared to the amount of money flowing into the sector: Demand for shares in clean energy companies is rising faster than companies are going public or issuing new shares.

Issuing New Shares

Economics 101 tells us that when demand increases faster than supply, the price rises.  This is exactly what we have seen in clean energy stocks in the second half of 2020.  We also learned that when price rises, it induces increased supply: More clean energy companies will go public and/or issue new shares.

Rising stock prices bring more than just stock market profits, they are also significant for the companies.  Companies will refrain from raising money in secondary offerings unless they are confident that the offering will be “non-dilutive.”  A non-dilutive share offering is one in which the money will be invested in a way that increases earnings more as a percentage than the number of shares is increased.  This allows the offering to have the effect of increasing future earnings per share, despite the increase in the number of shares.

As a company’s stock price rises, more potential investments become non-dilutive, and investments that are already non-dilutive become even more attractive. The company’s private competitors will also benefit.  They will find it easier to raise money from investors who use the valuations of publicly listed firms to determine what the firm is worth.  

If clean energy stock prices stay at their current level for a few months, we will see increasing numbers of companies going public through IPOs and Special Purpose Acquisition Companies (SPACs).  We will also see more established companies raising money through secondary offerings.

The Gold Rush

As I learned when I took California History in elementary school, the most reliable way to make money in the state’s 1849 gold rush was to sell picks and shovels to aspiring gold miners.  Three of the stocks in my Ten Clean Energy Stocks for 2021 model portfolio are metaphorical picks and shovel suppliers to clean energy industries.

If Tesla’s stock price rise is any guide, there will be significant new investment flowing into manufacturing electric vehicles.  Autoparts manufacturer Valeo, SA (FR.PA, VLEEF, VLEEY) specializes in vehicle electrification, autonomous driving, and comfort systems, so it’s clearly well positioned to help automakers focus more on Tesla’s specialties: Electric and autonomous driving.

Global water, energy, and waste management giant Veolia (VIE.PA, VEOEF, VEOEY) is also firmly in the picks and shovels business, although their clients are more often large multinational companies and municipalities rather than clean energy firms.  Yet Veolia is a potential beneficiary from the boom in clean energy stocks.  They own and develop clean energy and recycling projects which could potentially be sold when acquisitive clean energy companies start bidding up the prices of clean energy projects.  They also have access to valuable urban real estate at their municipal utilities where they could develop solar and wind projects for sale to clean energy firms with money to spend.

Umicore, SA (UMI.BR, UMICF, UMICY) is also well positioned for the boom in electric vehicles.  It produces cathode materials for lithium-ion batteries, and is a battery recycler.  The electric vehicle boom is currently constrained by the supply of lithium-ion batteries and the supply of specialty metals (lithium, manganese, cobalt and nickel) that go into their manufacture.  The mining of many of these materials often takes place under exploitative and environmentally harmful conditions in poor countries.  Although still a small portion of the battery materials market, Umicore’s recycled materials can claim a price premium based on battery manufacturer commitments to ethically sourced raw materials.  Although still in their infancy, recycled content mandates like the one Europe recently passed will also play a role.

Finally, dry bulk shipping firm Scorpio Bulkers, Inc. (SALT) is repositioning itself to sell picks and shovels to the burgeoning offshore wind industry.  Dry bulk shippers carry bulk unpackaged cargoes like ore, grains, coal, and metals.  Scorpio is selling its dry bulk shipping fleet and using the proceeds to buy offshore wind turbine installation vessels.  In addition, it is applying to change its name to better reflect its future business.  

While SALT’s first wind turbine installation vessel is unlikely to be delivered until 2023, I believe that the rebranding will allow the company to attract part of the flood of cash pouring into the clean energy space.  

It is also value priced. The company had 11.5 million shares outstanding, $1,429 million in assets, and $675 million in liabilities at the end of September 2020.  It expects to write down the market value of its vessels by between $475 million and $500 million to reflect their true market value.  That market value is also the price at which they are currently being sold.  It has made nine announcements of ship sales since mid-November.  Since the sales are ongoing, we can expect its write-down estimates to be reasonably accurate.  After the sale of its vessels, its main assets will be easy-to-value cash and contracts to buy wind turbine installation vessels.  After subtracting liabilities, Scorpio will be worth approximately $254 million to $279 million, or $22 to $24 per share.  The stock is currently trading in the $17 to $18 range.

Conclusion

Unless it suddenly reverses, the recent run-up in clean energy stock prices is likely to lead to a real-world investment boom in clean energy.  While undoubtedly necessary to accelerate the world’s transition away from fossil fuels, not all such investments will be profitable, especially when they amount to buying other clean energy companies at also inflated prices.

During an investment boom, the companies selling tools and supplies to the investors are often more profitable than the investments themselves.  That’s what I hope for Valeo, Umicore, and Scorpio Bulkers (under a new name that highlights its new business) in 2021.

DISCLOSURE: Long VLEEF, UMICF, SALT, VEOEF

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 Four Picks and Shovels Stocks appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

An annual tradition, here is my Ten Clean Energy Stocks for 2021, which is also the new model portfolio for the year, with equal dollar values of each stock using closing prices on 12/29/2020.   

Returning Stocks

• Mix Telematics (MIXT)
• Green Plains Partners (GPP)
• Covanta Holding (CVA)
• Red Electrica (REE.MC, RDEIF, RDEIY)
• Valeo, SA (FR.PA, VLEEF, VLEEY)
• Veolia (VIE.PA, VEOEF, VEOEY)

New Stocks

• Scorpio Bulkers, Inc. (SALT) – Dry bulk shipper converting to offshore wind construction.  Thanks to Thad Curtz for bringing my attention to this one.
• Brookfield Renewable Energy Partners (BEP) – A leading clean energy Yieldco with significant hydropower assets.
• Umicore, SA (UMI.BR, UMICF, UMICY) – Leading recycler of batteries and specialty metals.
• Avangrid (AGR) – Owner of renewable generation and utilities.

As I track this model portfolio over the year, I will continue using the Global X YieldCo & Renewable Energy Income ETF (YLCO) as a clean energy benchmark and the SPDR S&P Dividend ETF (SDY) as a broad market benchmark, while throwing in the performance of my real money managed portfolio, the Green Global Equity Income Portfolio (GGEIP) for good measure.  The chart below shows preliminary numbers for 2020.

As I discussed last week, this was another difficult year to find clean energy stocks that I think are good values.  It’s a great thing for the planet that the fossil fuel divestment movement seems to be driving up the prices of clean energy stocks, but it makes life harder for value investors like me.

Given the high valuations, I think it’s important to keep some cash on the sidelines, but my track record on calling market tops is abysmal, so I never get totally out of the market.  

I’ll be following up this list with a series of articles looking at the individual holdings in depth over the next week.  My Patreon supporters can read drafts of the first two here and here.

Update

You can now read all the articles looking at these stocks in more depth through the links below:

• Valeo, Veolia, Umicore, and Scorpio
• Covanta, Green Plains Partners, Avangrid, and Brookfield Renewable Energy Partners
• MiX Telematics and Red Eléctrica

DISCLOSURE: Long all 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 Ten Clean Energy Stocks for 2021: The List appeared first on Alternative Energy Stocks.

by Tom Konrad, Ph.D., CFA

Of the few survivors of the dot com bust, Ebay (EBAY) is a perennial also-ran.  It owned the market for consumer-to-consumer (C2C) transactions in 2000, but has since repeatedly lost market share.  Nevertheless, the company remains a profitable business that enables the sustainable reuse of easy to ship items while returning cash to investors.

Note: My supporters on Patreon got an early look at this article.  Want to support my work and get previews of my writing?  Join them here.

The Competition for Sellers

In the early 2000s, Ebay lost sellers to Amazon’s (AMZN) marketplace, which had the advantage of getting listings in front of a larger group of buyers, and has since added more services for sellers, such as delivery services through Amazon’s impressive logistics arm.  More recently, specialist competitors like Etsy (ETSY) for crafts , and PoshMark for fashion have attracted younger users who prefer an app-based interface.

Many sellers prefer Ebay for its lower fees compared Amazon and other competitors, and its pure customer to customer model means that it has no inventory or warehouses, and its operations are not disrupted by trying to maintain social distancing.   Other sellers list on multiple platforms, but offer better prices on Ebay because of the lower transaction fees.

This is why I believe that social distancing is an opportunity for Ebay to claw back some market share from Amazon.  The stories of third party sellers being second class citizens on Amazon’s platform have been prevalent for years, most notably Amazon using its data to directly compete with third party sellers in any category that it starts to see as particularly profitable.  Sellers can succeed quickly through access to Amazon’s legion of buyers on its Marketplace, but if they become too successful, they will likely find themselves competing with Amazon itself.

Sellers discovered another problem with their reliance on Amazon when the company decided to prioritize the delivery of “essential” items in March.  While prioritizing life saving items over toys and knick-knacks is likely a good use of Amazon’s overtaxed warehouse workers, this is small consolation to a small online seller who needs the income to buy their own essential items.  These frustrations will likely lead sellers to be less likely to trust all their eggs to Amazon’s basket.

Looking Forward

Ebay’s revenues, and number of sellers and buyers have been basically flat in recent years, and the company did not expect that to change when it issued its guidance for 2020 at the end of January.  The company did expect single digit earnings per share growth, driven mostly by share repurchases.

Those share repurchases and the new dividend were motivated by activist investors who have forced the company to start returning value to shareholders in the absence of growth.  The company now has a new CEO and two new board members nominated by the activists.  They have also led Ebay to consider the sale of some of its properties, including the very fortuitously timed sale of StubHub for $4.05 billion (approx $5/share) in February.  Further shoring up the balance sheet, Ebay followed this sale by refinancing and extending the term $1 billion of its senior unsecured debt with lower interest notes due in 2030.

Before the crisis, the expectation had been that Ebay would use its strong cash position to invest in its platform, and accelerate its stock buybacks.  The new reality means that Ebay is in a good position to be a consolidator by buying up less well prepared rivals.

Sustainability

For me, “Reduce, Reuse, Recycle” is not just an alliterative list of sustainable actions which I incorporate in my personal life, it’s also a list of investing themes I try to incorporate in my portfolio.  For reduce, I have stocks that incorporate energy efficiency like Hannon Armstrong (HASI) and Ameresco (AMRC).  For recycle, I have Umicore (UMICF, UMICY, UMI.BR), Schnitzer Steel (SCHN), and Greystone Logistics (GLGI).  The essentially anti-consumerist nature of reuse makes it a particularly difficult investing theme to participate in.

I’ve wanted to include Ebay or another C2C marketplace as the first “Reuse” stock in my portfolio for a long time, but until recently, Ebay’s valuation and lack of dividend have kept me away.  The recently initiated dividend and stock decline have changed that.  Combine that now with potential opportunities to claw back market share from Amazon and potentially purchase distressed rivals, and I’m buying.

Or at least I’m selling cash-covered puts on Ebay.  I like to think of buying a stock as a bet that it will go up, or, if it doesn’t, that the dividend will exceed any decline.  Selling a cash-covered put, or buying the stock and selling a covered call are similar strategies that I think of as bets that the stock will not fall permanently.  If the stock falls below the option strike price, the investor will own the stock at a cost below what it was trading at when the bet was made.  If the stock rises, the investor keeps the option premium and cash.

In terms of Ebay’s prospects, the company is cash rich, and its operations are unlikely to be disrupted by the pandemic.  It may even see some upside.  The loss of income for too many people in this crisis will lead some to explore new ways to earn cash.  Selling off unneeded stuff on online platforms is an easy and quick option, especially people who want to avoid in person transactions.

Trading

Good valuation, a strong balance sheet, opportunities arising from people staying at home, and overall sustainability all led me to use a cash covered Ebay put as a new position in my 10 Clean Energy Stocks model portfolio at the start of the month.

The market and Ebay stock fell the following day, and have since recovered, so readers who follow the model portfolio would have had an opportunity to make the trade.  If you missed that window, I expect the market to remain volatile in both directions for months to come as investors sort out what this pandemic and the response to it mean for the economy.

It is that expected volatility that leads me to prefer cash covered puts to the direct purchase of stocks in current market conditions.  If your account does not have sufficient options permission to sell cash covered puts, purchasing the stock and selling a covered call has the exact same risk/reward profile.

If you do not have options permission at all, watching several stocks you think are good prospects and starting with a small position which you increase if the stock falls is probably the best option.  Unfortunately, that strategy is difficult for anyone who does not pay daily attention to the market.

Disclosure: Long HASI, EBAY, UMICF, SCHN.  Small long positions in AMRC and GLGI.

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 Ebay: A Sustainable Social Distancing Stock appeared first on Alternative Energy Stocks.

Pollution control stocks are publicly traded companies whose business involves technologies for removing or reducing the emissions of harmful pollutants, contaminants, and/or waste from human activity, or removing these pollutants from the environment or water.

This article was last updated on 6/25/2020.

If you know of any pollution control stock that is not listed here, or think one of the stocks above should not be in the list, please let us know by leaving a comment.

The post List of Pollution Control Stocks appeared first on Alternative Energy Stocks.

Battery stocks are publicly traded companies whose business involves the manufacture of batteries, battery components, or battery management systems used to store electricity through electrochemical means.

This list was last updated on 3/21/2022.

If you know of any battery stock that is not listed here and should be, please let us know by leaving a comment. Also for stocks in the list that you think should be removed.

The post List of Battery Stocks appeared first on Alternative Energy Stocks.