Ten Clean Energy Companies to Watch
Japan's nuclear crisis has the market looking to solar and wind power, and other sources of renewable energy -- is it time to update your portfolio?
Despite the nuclear power industry’s impressive safety record -- even considering, contrary to popular belief, the Three Mile Island meltdown did likely have a human death toll -- citizens and investors alike are looking to alternative energy solutions. Even President Obama, a nuclear energy cheerleader whose 2011 budget tripled federal loan guarantees for nuclear power plants, has been given some pause to his administration’s aggressive pursuit of the energy source. “I think, no matter what happens, we will try to take the lessons of Fukushima and apply them to our existing fleet and any new reactors we will be building,” said Energy Secretary Steven Chu.
Wall Street’s relationship with alternative energy has proved mercurial over the past decade, influenced by global warming reports, fluctuations in oil prices, BP’s (BP) Deepwater Horizon spill, civil unrest in oil-rich nations, etc. In 2007, Guinness Atkinson’s Alternative Energy Fund (GAAEX) posted a 43% return only to close out 2010 with a negative 21.90% total return.
Now, as daily headlines spur on nuclear fears, the market has responded in typical knee-jerk fashion with rallies for wind, solar and other clean energy stocks. But this time, cleantech’s bullish rebound may not be quite so fleeting. Long term fundamental trends are in the works with Japan likely headed toward natural gas in its rebuilding strategy, electricity costs rising and Germany and China suspending nuclear projects.
President Obama has also run to the other side of the field to cheer for the clean team with promises to make 80% of America’s electricity come from alternative sources by 2035.
One of the biggest and most profitable power players in the alt energy sector is Tempe, Arizona’s First Solar (FSLR). Trading at nearly $140 before the quake struck, First Solar’s stock has since surged more than 8%, having once spiked by 12%. Transcending the technology of pricier and less efficient conventional solar panels, First Solar converts sunlight into energy with photovoltaic (PV) modules. Ninety percent of the company’s business had been attributed to overseas sales from solar project developers and system integrators in France, Germany, Italy, and Spain. Perhaps this most recent success suggests the sun-kissed company’s future will brighten in its home country.
Shares in China’s Trina Solar (TSL), another residential and commercial solar panel producer, have jumped a whopping 13.62% since the March 11 disaster. A vast majority of the company’s sales are also derived from European countries with its largest customer being Belgium’s green project developer Invictus NV. Currently trading at around $27, analyst consensus is that Trina Solar stock is a buy.
In the days following the quake in neighboring Japan, the sun has also shone on Jiangsu-based Suntech Power (STP). One of the world’s largest solar cell producers and the leader in China, the company’s products are built for both off-grid and on-grid electricity generation in residential, commercial, industrial and public utility applications. With gains currently exceeding 10%, analysts are advising investors to hold at its nearly $9 per share price.
It’s always sunny in San Jose these days, the headquarters of SunPower (SPWRA), the former Cypress Semiconductor subsidiary. In 2009, the technologically advanced solar cell and panel producer (using electricity per panel as a gauge) experienced 6.2% sales growth with over $33 in net income. Currently trading at around $16 per share, Sun Power’s 52-week high reached $20.17 in the week following the earthquake. “Technical indicators for the stock are bullish,” according to Market Intelligence Center.
Currently listed by analysts as a strong buy with recorded revenue of 34.8 billion euros in 2010, is the Paris-based self-described “world leader in environmental services,” Veolia Environment ADR (VE). Its energy unit, which operates global co-generation facilities and heating and cooling systems and services in urban and emerging markets, has seen increased revenue to the tune of 8%. Based on a 6% growth rate and a 10% expansion of operating margins, shares are worth $38 apiece on a discounted basis. Veolia’s transport arm is also a leading bus, light rail and rail provider and serves roughly 30 countries.
Although not a traditional alternative energy company, General Electric (GE) is now helping pave the way to a cleaner tomorrow. Compensating for a dodgier energy past, which supplied nuclear reactors to the Fukushima Daiichi plant, GE is offering a more diverse portfolio of power generation products. The company has eschewed its dirty coal technology for a coal-to-power system called the Integrated Gasification Combined Cycle. It's also a world leader in wind turbine production and boasts its Ecomagination venture, which promotes clean technology. Trading at nearly $20 per share and approaching its 52-week high of 21.65, stock is currently listed as a buy.
One of the top holdings in the green energy ETF Market Vectors Global Alternative Energy (GEX) is Durham, North Carolina’s Cree Inc. (CREE). A maker of energy-efficient LED bulbs and fixtures, Cree also provides semiconductor solutions for wireless and power applications. Last year’s shares peaked at 83.38 when sales grew 52.9% and net income exceeded $152 million. Currently, stock is trading at just under $50 and analysts’ consensus is that Cree is a buy.
The little train car company that could, Trinity Industries (TRN) is leading the rail traffic revolution -- manufacturing auto carriers, box cars, gondola cars, hopper cars, intermodal cars and tank cars. Last week, the Dallas-based company entered into a partnership with GATX (GMT) to build 12,500 new railcars over a five-year period.
Its energy subsidiary, Trinity Structural Towers, is one of North America’s largest producers of structural wind turbine towers in the sector. Earlier this month, Trinity Industries declared a quarterly dividend of 8 cents per share on its $1.00 par value common stock. Currently trading at around $33 per share, analyst consensus is that Trinity Industries is a buy.
When considering diversifying into energy exchange-traded funds, rather than individual stocks, PowerShares WilderHill (PBW) has been at the top of the investment heap -- at least for short term holders. Based on the WilderHill Clean Energy Index, this green ETF focuses on small cap firms with a growth investment strategy and is being favored for value and liquidity. The fund has felt aftershocks to the effect of 1% at over $10.00 against a 52-week range of $4.00 to $11.42.
Another renewable energy ETF currently being touted as a “green stock pick for a post-Fukushima World” is Guggenheim Solar (TAN), which tracks the MAC Global Solar Energy Index (SUNIDX). Including holdings like First Solar and Trina Solar, the fund has roughly $168 million in assets. Following the earthquake, it posted gains upwards of 11% while the S&P 500 fell 3%.
Only time will tell if this uptick in renewables is merely a hypersensitivity to current events or if it will usher in lasting change to our energy landscape. Either way, it may be worth your while to start cleaning up your stock portfolio.
Lasting through April 15, 100% of the donations made to The Ruby Peck Foundation for Children's Education will be channeled to the children of Japan as they attempt to find their footing following this natural disaster; and to kick off this drive, we'll pledge $5000 to get it started. Please do what you can, as it will add up, and thanks.
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