In this article, we look at the 10 Cheap Clean Energy Stocks To Buy According to Hedge Funds.
The Clean Energy Market is Booming
According to a report by the International Energy Agency (IEA), clean energy is expanding rapidly and the annual deployment of key technologies is accelerating, driven by policy support and cost reductions. Between 2019 and 2023, investment in clean energy surged by nearly 50%, reaching $1.8 trillion in 2023 and growing at an average annual rate of around 10% during this period. The clean energy sector has become a significant industrial player and a key contributor to the global economy. However, its benefits remain unevenly distributed, with the majority of clean energy deployment occurring in China and other advanced economies.
In 2023 the solar PV and wind capacity grew by 85% and 60% respectively, totaling nearly 540 GW. China led the market in both wind and solar capacity additions. China and advanced economies together made up 90% of wind and solar PV additions. Clean energy helped avoid annual fossil fuel energy demand of approximately 25 EJ, equivalent to 5% of global fossil fuel demand in 2023. This helped avoid around 580 million tonnes of coal demand, 180 billion cubic meters of natural gas, and almost 1 million barrels per day of oil demand. These avoided demands highlight the substantial impact of clean energy on reducing fossil fuel reliance globally.
Investing in a Greener Future
The clean energy market continues to attract significant interest from hedge funds and investment management companies. Norfund, a development finance institution owned by the Norwegian Ministry of Foreign Affairs is highly optimistic about the green energy sector. The organization has a goal to provide electricity to 6.5 million new households and finance 6.5 GW of new capacity by 2026 using a range of clean sources, including solar, wind, hydropower, biomass, and geothermal energy.
Norfund supports medium to large-scale grid-connected power plants, often through industrial partnerships. These projects typically operate under long-term contracts with utilities, benefiting from the significant cost decreases in solar and wind power. Norfund is also investing in enhancing grid capacity and reliability, which is crucial for integrating new renewable energy capacities.
In July, Norfund announced to invest $29.6 million in a rooftop solar project, a combined solar and battery storage project, and a hydropower project which is expected to reduce nearly half a million tons of CO2e annually. Additionally, Tinfos, a Norwegian hydropower company, is partnering with Norfund to develop small-scale hydropower projects in Indonesia, with a goal of 1 TWh of capacity by 2032. Norfund is also investing $25 million in Xurya, a company that provides rooftop solar rentals to businesses in Indonesia, which will help reduce high installation costs and facilitate the shift to renewable energy.
The rapid expansion of clean energy and accelerating deployment of technologies such as solar PV and wind play a pivotal role in shaping the future of global energy. As investment and innovation continue to drive the clean energy sector, a concerted effort to broaden its reach and impact will be essential for achieving a sustainable and resilient global energy future. With that in context, let’s take a look at the 10 cheap clean energy stocks to buy according to hedge funds.
Solar panel workers installing a new farm for clean energy generation.
Our Methodology
For this article, we used clean energy ETFs plus online rankings to compile an initial list of 35 clean energy stocks. From that list, we screened for companies that are trading at a forward P/E ratio of under 22.5, as of September 8. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of hedge fund sentiment, as of the second quarter.
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 Cheap Clean Energy Stocks To Buy According to Hedge Funds
10. Emeren (NYSE:SOL)
Number of Hedge Fund Investors: 6
Forward P/E Ratio as of September 8: 5.7
Emeren (NYSE:SOL) is a clean energy company with a primary focus on developing solar power and solar storage projects. The company operates as an Independent Power Producer (IPP) and has a diversified portfolio that includes 245MW of photovoltaic (PV) systems and 15MWh of storage systems.
Emeren (NYSE:SOL) has strategically shifted its focus to the European market, where competition is less intense compared to the United States, particularly in the construction of storage systems. The European market, particularly in countries like Italy, Poland, Spain, France, Germany, and the UK, offers significant opportunities for growth. The company’s has an extensive pipeline of solar and storage projects in Europe, which constitutes the majority of its order backlog
Emeren (NYSE:SOL) emphasis on Engineering, Procurement, and Construction (EPC) services now account for around 50% of the company’s revenues. The demand for EPC services in the photovoltaic sector has been growing, and the company continues to expand its EPC services, particularly in Europe.
Emeren (NYSE:SOL) has been facing challenges related to project delays. However, its strategic focus on the European market, enhances its growth prospects. The company’s earnings are expected to grow by 100% this year. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $23.59, which represents a 78.98% upside potential from its current level. Emeren’s (NYSE:SOL) stock is trading 5.70 times its earnings, which is an almost 69.64% discount compared to the sector median of 18.77. The stock is held by 6 hedge funds with stakes worth $28.67 million as of the second quarter. Shah Capital Management is the largest shareholder with stocks worth $27.94 million as of June 30.
9. JinkoSolar (NYSE:JKS)
Number of Hedge Fund Investors: 7
Forward P/E Ratio as of September 8: 7.69
JinkoSolar (NYSE:JKS) is one of the largest solar companies in the world by revenue. The company primarily develops and produces photovoltaic solar products. By the end of the second quarter, JinkoSolar (NYSE:JKS) product secured over 80% visibility of the 2024 order book and achieved new records in cell efficiency, with N-type TOPCon-based perovskite tandem solar cell reaching a lab efficiency of 33.24%, surpassing last year’s record of 32.33%. Management believes that the company’s TOPCon technology will offer the best economic performance at a lower cost.
JinkoSolar (NYSE:JKS) is expanding its global footprint and plans to set up a 10 GW solar cell and module factory in Saudi Arabia with PIF and Vision Industries with an investment of $1 billion. JinkoSolar (NYSE:JKS) is trading 7.69 times its earnings, which is a 66.49% discount compared to the sector median of 22.94.
As of the second quarter, the stock was held by 7 hedge funds at the end of the second quarter with stakes worth $15.40 million. As of June 30, Marshall Wace LLP is the largest shareholder in the company with a stake worth $9.27 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $23.59, which represents a 28.91% upside potential from its current level.
8. NextEra Energy Partners (NYSE:NEP)
Number of Hedge Fund Investors: 20
Forward P/E Ratio as of September 8: 10.06
NextEra Energy Partners (NYSE:NEP) is a renewable energy company and a publicly traded subsidiary of NextEra (NYSE:NEE). The company mainly focuses on the acquisition and management of contracted clean energy projects across North America and owns interests in a number of wind and solar projects.
On July 24, NextEra Energy Partners (NYSE:NEP) announced a 1.4% increase in its quarterly dividend, raising it to $0.905 per share. The company has been steadily increasing its dividends every quarter since 2015, making it a top dividend stock. This consistent growth is supported by strong cash generation. In the second quarter of 2024, the company’s cash available for distribution (CAFD) increased to $220 million, up from $200 million in the same quarter last year. Additionally, its operating cash flow for the first half of the year rose to $309 million, compared to $296 million in the same period last year.
NextEra Energy Partners (NYSE:NEP) stock is trading 10.06 times its earnings, which is a 41.41% discount compared to the sector median of 17.16. The company’s earnings are expected to grow by 2.26% this year. The stock was held by 20 hedge funds at the end of the second quarter with stakes worth $71.16 million. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $28.33, which represents a 15.7% upside potential from its current level.
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