The alternative fuel and renewable energy industry is currently one of the fastest-growing sectors globally. Examples of alternatives include wind, solar, nuclear, hydropower, and biofuel energy. According to the Business Research Company, the global alternative fuel or renewable energy market was valued at $1.10 trillion in 2024 and is projected to reach $1.55 trillion by 2028, growing at a CAGR of 8.8%. Growing environmental concerns and stringent environmental regulations in many developed countries have significantly boosted the renewable energy sector, leading to an increase in installed capacity for renewable sources. The increasing power demand and energy consumption are also key drivers of the growing demand in the alternative or renewable fuels industry.

According to the International Energy Agency (IEA), global energy demand is expected to increase by 3.4% annually by 2026, with 85% of this additional demand coming from China and India. India’s electricity demand alone is predicted to grow by over 6% annually until 2026, driven by economic growth and rising air conditioning use. Southeast Asia is also expected to see a 5% annual increase in electricity demand through 2026. In the United States, a moderate rise in electricity demand is anticipated in the coming years, primarily driven by data centers. The electricity consumption by data centers, artificial intelligence, and cryptocurrency could potentially double to 1,000 TWh by 2026. The IEA forecasts that the surge in electricity generation from low-emission sources will meet global demand growth over the next three years, with renewable energy expected to surpass coal as the leading energy source by early 2025.

Read Also: 10 Oil Stocks with Biggest Upside Potential According to Analysts and 7 Best Emerging Markets Stocks To Buy Now.

Uncertainty in U.S. Alternative Energy Market

On November 11, Reuters reported that hedge funds rapidly increased their investments in bank stocks, marking the fastest pace in three years, while simultaneously reducing their holdings in renewable energy companies, according to a note from Goldman Sachs. This shift in investment strategy came in response to Donald Trump’s win in the U.S. presidential election. Financial stocks, including banks, have become the most favored and most net-purchased sector on Goldman’s prime brokerage trading desk.

Additionally, hedge funds placed long bets on consumer finance, capital markets, and financial services companies, with a focus on US stocks and equities in developing Asia and Europe, where they exited short positions and added long ones. In contrast, utility companies, especially independent power, and renewable electricity producers faced heavy selling, with hedge funds taking two short positions for every long position in U.S. utility companies.

Despite short-term challenges, the rapid growth and increasing investment in alternative fuel and renewable energy reflects a global shift towards sustainable and environmentally friendly energy solutions. As renewable technologies continue to advance and become more cost-effective, they are increasingly becoming the preferred choice for new energy projects worldwide. With that in context, let’s take a look at the 10 best alternative fuel stocks to buy according to hedge funds.

Our Methodology

To compile our list of the 10 best alternative fuel stocks to buy according to hedge funds, we used Clean Energy ETFs plus online rankings to compile an initial list of 25 alternative fuel stocks. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

10 Best Alternative Fuel Stocks To Buy According to Hedge Funds

10. Fluence Energy, Inc. (NASDAQ:FLNC)

Number of Hedge Fund Holders: 27

Fluence Energy (NASDAQ:FLNC) is a global leader in energy storage technology and specializes in battery-based energy storage solutions. The company designs, manufactures, and delivers energy storage solutions and software that improve the efficiency, reliability, and sustainability of energy systems. Moreover, the company’s products improve grid reliability, integrate renewable energy, and manage energy costs.

Fluence Energy (NASDAQ:FLNC) is taking a proactive approach to building a resilient and localized supply chain in the United States. The company has established six US production facilities, including a dedicated battery module production line in Utah and two battery cell production lines in Tennessee. These facilities are equipped with advanced robotics and automation technology, which enhance production efficiency and product quality. By localizing its supply chain, Fluence Energy (NASDAQ:FLNC) aims to reduce reliance on Chinese imports, mitigate the risks associated with potential tariff increases, and capitalize on the incentives provided by the Inflation Reduction Act (IRA).

Fluence Energy (NASDAQ:FLNC) is also expanding its market presence by diversifying its geographic footprint and increasing its pipeline of projects. The company is looking for opportunities in the US, Germany, Australia, Canada, and Chile. Additionally, the company is focusing on recurring services and digital businesses.

9. Shoals Technologies Group, Inc. (NASDAQ:SHLS)

Number of Hedge Fund Holders: 27

Shoals Technologies Group, Inc. (NASDAQ:SHLS) is known for its electrical balance of systems (EBOS) solutions tailored for utility-scale solar and wind energy projects. The company’s innovative products are designed to simplify solar installations and enhance system performance. In addition to improving efficiency, Shoals Technologies Group, Inc.’s (NASDAQ:SHLS) EBOS components play a key role in reducing costs in the deployment of solar power projects.

Shoals Technologies Group, Inc. (NASDAQ:SHLS) is actively pursuing several strategic initiatives to drive growth and expand its market presence. One of the key areas of focus is the company’s transition to 2kV electrical systems, which enhances the efficiency and cost-effectiveness of solar installations. This technology increases the voltage in solar projects to 2,000 volts and is expected to significantly reduce the cost per watt of energy production. Shoals Technologies Group, Inc. (NASDAQ:SHLS) is collaborating with industry leaders such as GE Vernova on pilot projects to demonstrate the benefits of 2kV systems and developing strong relationships with key players in the solar industry to drive adoption and secure a competitive edge in the market.

Shoals Technologies Group, Inc. (NASDAQ:SHLS) is also focusing on the commercial, community, and industrial (CC&I) market. This segment represents approximately 10% of the size of the utility-scale solar market in the US but is growing at an attractive pace and aligns well with the company’s existing strengths and product offerings. The company has made investments in building a dedicated commercial and product development team to address this market.