In this article, we will take a look at the 10 most undervalued solar stocks to buy according to hedge funds.
The solar energy market is set to make new growth records in 2023 and beyond as the world scrambles to find alternative energy sources to cut its reliance on conventional energy amid rising costs and climate worries. According to a BloombergNEF piece, global solar deployment in 2023 will reach about 316 gigawatts, up from about 268GW in 2022.
The report said that the growth in the space outperformed expectations as BNEF was expecting solar deployments for 2022 to come in at 228GW. The report said that rising demand in Chinese solar markets was one of the reasons for this solid growth. Another reason was rising solar deployment in Europe amid rising electricity prices.
Another report published by Bloomberg in January highlighted that the production of solar panels is set to soar in 2023 as manufacturers seem to have solved one of the key problems that was keeping a lid on production. The problem was the high cost of polysilicon — a key material for most panels. The Bloomberg report said that with several new manufacturing facilities coming online in China, the cost of the material has dropped by more than a third since mid-November.
The energy sector has always been rewarding for investors, especially during difficult economic times. In 2022, energy stocks provided a refuge to investors amid the broader market turmoil. Solar stocks present an attractive opportunity since they are operating in an industry that has long-term growth prospects. Many of the stocks in the industry also pay dividends and are diversified enough across the renewable energy spectrum to offset any losses or uncertainty for a specific business area.
Copyright: lassedesignen / 123RF Stock Photo
Our Methodology
For this article we scanned the iShares Global Clean Energy ETF holdings and listed the top solar stocks owned by the ETF. We then narrowed down to the stocks that have attractive PE ratios when compared to the green and renewable industry average PE of 83, which was calculated by NYU Stern. After applying these checks, we got a long list of solar stocks. We then picked 10 stocks from this list which had the most number of hedge fund shareholders. For that metric we used Insider Monkey’s database of 920 hedge fund holdings.
Most of the stocks mentioned in this article have PE ratios less than the average solar industry PE ratios. However, you will come across some companies that have relatively high PE ratios. Those stocks, however, have lost significant value of the past few months and have long-term growth catalysts and strong hedge fund sentiment. These factors make them undervalued as they have long-term growth upside.
Most Undervalued Solar Stocks to Buy According to Hedge Funds
10. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 15
JinkoSolar Holding Co., Ltd. (NYSE:JKS) has a forward PE ratio of 8.83 as of January 27, according to Yahoo Finance. This Chinese solar stock rallied earlier in January after Roth Capital upgraded the stock to Buy from Neutral. JinkoSolar Holding Co., Ltd. (NYSE:JKS) also increased its price target on the stock to $70 from $50. Roth Capital cited the improving US policy situation and the potential for margin expansion on poly price declines for the upgrade.
As of the end of the third quarter, 15 hedge funds tracked by Insider Monkey reported having stakes in JinkoSolar Holding Co., Ltd. (NYSE:JKS). The total value of these stakes was about $183 million.
9. Avangrid, Inc. (NYSE:AGR)
Number of Hedge Fund Holders: 16
With a PE ratio of under 20, Avangrid, Inc. (NYSE:AGR) is one of the most undervalued solar stocks to buy according to hedge funds. In October, Avangrid, Inc. (NYSE:AGR) stock price target was raised by investment firm Mizuho analyst Paul Fremont to $41 from $39. The analyst kept a Neutral rating on the shares. The analyst said there was a “high probability” that Avangrid, Inc. (NYSE:AGR) will succeed in its negotiations with Connecticut and Massachusetts for higher prices for its Commonwealth and Park City offshore wind projects.
A total of 16 hedge funds out of the 920 funds tracked by Insider Monkey reported having stakes in Avangrid, Inc. (NYSE:AGR) at the end of the third quarter, compared to 17 funds in the previous quarter. The total worth of these stakes was about $96 million. The biggest stakeholder of Avangrid, Inc. (NYSE:AGR) was Paul Marshall and Ian Wace’s Marshall Wace LLP, which has a $22 million stake in Avangrid, Inc. (NYSE:AGR). The second biggest stakeholder in Avangrid, Inc. (NYSE:AGR) was Cliff Asness’ AQR Capital Management with a $20 million stake.
8. NextEra Energy Partners, LP (NYSE:NEP)
Number of Hedge Fund Holders: 21
With an attractive PE ratio of 12.97 and long-term growth catalysts, NextEra Energy Partners, LP (NYSE:NEP) is one of the most undervalued solar stocks to buy according to hedge funds. Of the total hedge funds in Insider Monkey’s database, 21 hedge funds had stakes in NextEra Energy Partners, LP (NYSE:NEP) as of the end of the September quarter of 2022.
Recently, NextEra Energy Partners, LP (NYSE:NEP) stock price target was increased by investment firm Oppenheimer’s analyst Colin Rusch. The analyst raised NextEra Energy Partners, LP (NYSE:NEP)’s price target to $94 from $88 and kept an Outperform rating on the shares. While the analyst noted that NextEra Energy Partners, LP (NYSE:NEP)’s Q4 results were weak, he believes NextEra Energy Partners, LP (NYSE:NEP) is well-positioned for the future.
7. Canadian Solar Inc. (NASDAQ:CSIQ)
Number of Hedge Fund Holders: 22
With a PE ratio under 15 and a strong hedge fund sentiment, Canadian Solar Inc. (NASDAQ:CSIQ) is one of the best undervalued solar stocks to buy now according to hedge funds. Of the 920 hedge funds tracked by Insider Monkey, 22 hedge funds had stakes in Canadian Solar Inc. (NASDAQ:CSIQ). This number shot up significantly when compared to the previous quarter when just 13 funds had stakes in Canadian Solar Inc. (NASDAQ:CSIQ). The biggest stakeholder in Canadian Solar Inc. (NASDAQ:CSIQ) at the end of September was Israel Englander’s Millennium Management with a $31 million stake. The second biggest stakeholder in Canadian Solar Inc. (NASDAQ:CSIQ) was Ken Griffin’s Citadel Investment Group, with a $28 million stake.
Canadian Solar Inc. (NASDAQ:CSIQ) makes solar panels, modules, and solar power systems for residential, commercial, and utility-scale power generation. Canadian Solar Inc. (NASDAQ:CSIQ) is growing rapidly and has diversified its operations to offset uncertainty. One of the biggest advantages Canadian Solar Inc. (NASDAQ:CSIQ) has over its peers is the company’s presence in the entire value chain of the solar industry.
Analysts believe Canadian Solar Inc. (NASDAQ:CSIQ) is undervalued. As of January 24, Canadian Solar Inc. (NASDAQ:CSIQ) had a Price to Earnings ratio of 16.7x, price to sales ratio of 0.4x revenue, and EV to sales ratio of ~0.64x sales.
In November, Canadian Solar Inc. (NASDAQ:CSIQ) posted its third-quarter results. Canadian Solar Inc. (NASDAQ:CSIQ)’s revenue in the quarter jumped 57 % YoY. Canadian Solar Inc. (NASDAQ:CSIQ)’s net income jumped a whopping 123% on a YoY basis.
6. Clearway Energy, Inc. (NYSE:CWEN)
Number of Hedge Fund Holders: 25
With a PE ratio of just 6.6 as of market close of January 27, Clearway Energy, Inc. (NYSE:CWEN) is one of the most undervalued solar stocks to buy according to hedge funds. Insider Monkey’s database shows that 25 hedge funds had stakes in Clearway Energy, Inc. (NYSE:CWEN) at the end of the third quarter of 2022, compared to 21 funds in the previous quarter. This shows that the overall hedge fund sentiment for Clearway Energy, Inc. (NYSE:CWEN) is positive.
Clearway Energy, Inc. (NYSE:CWEN) is also a dividend-paying stock. Clearway Energy, Inc. (NYSE:CWEN) has a dividend yield of over 4%. In November, Clearway Energy, Inc. (NYSE:CWEN) declared a $0.25 per share special dividend. Another important thing to note here is that Clearway Energy, Inc. (NYSE:CWEN) is targeting annual dividend growth in the range of about 5% to 8% through 2026.
Clearway Energy, Inc. (NYSE:CWEN)’s balance sheet is also strong. Most of Clearway Energy, Inc. (NYSE:CWEN)’s debt is project-attached debt. It has no corporate maturities until 2028, and 99% of its consolidated debt is fixed rate.
5. SunPower Corporation (NASDAQ:SPWR)
Number of Hedge Fund Holders: 26
With a PE ratio of 53 (compared to industry PE of 83), SunPower Corporation (NASDAQ:SPWR) is one of the most undervalued solar stocks to buy according to hedge funds. SunPower Corporation (NASDAQ:SPWR) has lost about 16% in value over the past six months. In November, SunPower Corporation (NASDAQ:SPWR) shares gained after investment firm Credit Suisse upgraded SunPower Corporation (NASDAQ:SPWR) to Neutral from Underperform. The ratings upgrade came after SunPower Corporation (NASDAQ:SPWR) posted strong Q3 results that beat estimates. SunPower Corporation (NASDAQ:SPWR) also reaffirmed its 2022 guidance. SunPower Corporation (NASDAQ:SPWR) is expecting its adjusted EBITDA per customer to come in between $2,000 to $2,400.
A total of 26 hedge funds tracked by Insider Monkey reported owning stakes in SunPower Corporation (NASDAQ:SPWR) as of the end of the third quarter, up from 21 funds in the previous quarter. The total value of these stakes was about $190 million.
4. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 27
NRG Energy, Inc. (NYSE:NRG) is also one of the most undervalued solar stocks to buy according to hedge funds. NRG Energy, Inc. (NYSE:NRG) has a PE ratio of 4.28 as of January 27 market close. NRG Energy, Inc. (NYSE:NRG) also pays dividends. It has a dividend yield of over 4%. Earlier in January, NRG Energy, Inc. (NYSE:NRG) increased its dividend by a whopping 8% to $0.3775 per share. The dividend is payable on February 15 to shareholders of record as of February 1.
As of the end of the third quarter, 27 hedge funds tracked by Insider Monkey had stakes in NRG Energy, Inc. (NYSE:NRG). The total value of these stakes was $1.2 billion. The biggest stakeholder of NRG Energy, Inc. (NYSE:NRG) was Richard S. Pzena’s Pzena Investment Management which owns a $635 million stake in the company.
3. Consolidated Edison, Inc. (NYSE:ED)
Number of Hedge Fund Holders: 27
Consolidated Edison, Inc. (NYSE:ED) is getting the attention of smart money. As of the end of the third quarter, 27 hedge funds reported owning stakes in Consolidated Edison, Inc. (NYSE:ED), according to Insider Monkey’s database of 920 hedge funds. This was up from 21 hedge funds that reported having stakes in Consolidated Edison, Inc. (NYSE:ED) at the end of the previous quarter. This shows that the hedge fund sentiment around Consolidated Edison, Inc. (NYSE:ED) is positive.
Consolidated Edison, Inc. (NYSE:ED) is also one of the best and most reliable dividend stocks. Consolidated Edison, Inc. (NYSE:ED) has upped its dividends for over four decades in a row. Consolidated Edison, Inc. (NYSE:ED) has a dividend yield of over 3%.
In November, Consolidated Edison, Inc. (NYSE:ED) shares were upgraded by investment firm Bank of America to Neutral from Underperform. BofA also increased its price target for Consolidated Edison, Inc. (NYSE:ED) to $95 from $78.
2. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 47
While Sunrun Inc. (NASDAQ:RUN) has a relatively high PE ratio, it makes it to our list because it has lost 22% over the past six months and analysts are hopeful the shares of Sunrun Inc. (NASDAQ:RUN) could perform well in the future amid long-term growth catalysts. Sunrun Inc. (NASDAQ:RUN) is also popular among hedge funds and saw a jump in the number of funds having stakes in it in the third quarter. According to Insider Monkey’s database, 47 elite hedge funds have stakes in Sunrun Inc. (NASDAQ:RUN) as of the end of the September quarter, compared to 36 funds in the previous quarter. The biggest stakeholder of Sunrun Inc. (NASDAQ:RUN) is William B. Gray’s Orbis Investment Management which owns a $337 million stake in Sunrun Inc. (NASDAQ:RUN).
Sunrun Inc. (NASDAQ:RUN) is a market leader in the residential solar market. Sunrun Inc. (NASDAQ:RUN) says it has about 18% market share in the US solar market, while it enjoys a whopping 66% market share in solar subscriptions.
1. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 59
Enphase Energy, Inc. (NASDAQ:ENPH) makes it to our list of the most undervalued solar stocks to buy according to hedge funds because Enphase Energy, Inc. (NASDAQ:ENPH) has lost about 26% over the past six months and the shares seem to have long-term growth catalysts, according to several analyst. Hedge funds also piling into this solar stock. Of the 920 hedge funds tracked by Insider Monkey, 59 hedge funds had stakes in Enphase Energy, Inc. (NASDAQ:ENPH) as of the end of the third quarter of 2022, up from 53 funds in the previous quarter. The total worth of these shares was about $2.2 billion. According to Yahoo Finance, Enphase Energy, Inc. (NASDAQ:ENPH) stock has a forward PE ratio of 43, compared to renewable industry’s PE ratio of 83.
In October, Enphase Energy, Inc. (NASDAQ:ENPH) shares rallied after the company posted strong Q3 results and gave bullish guidance. Enphase Energy, Inc. (NASDAQ:ENPH) said it plans to open 4-6 manufacturing lines in the US because of the Inflation Reduction Act.
ClearBridge Investments made the following comment about Enphase Energy, Inc. (NASDAQ:ENPH) in its Q3 2022 investor letter:
“In IT, Enphase Energy, Inc. (NASDAQ:ENPH) delivered a strong quarter driven by secular growth in global rooftop solar, increased penetration into Europe, where demand accelerated, and a continued ramp up in battery storage sales. Also with a strong presence in the U.S., Enphase Energy designs and manufactures microinverters for residential and small commercial solar PV systems and has made strides in evolving from a solar inverter maker into a “home energy management” company that can act as the brains for the home’s energy system, including microinverters for solar, as well as storage and energy management software.”
You can also take a peek at Top 20 Financial Cities in the World and 15 Countries with the Largest Refining Capacity.
Suggested articles:
- 15 Most Famous Hedge Fund Managers
- 15 Cheapest New Cars for 2023
- 25 Least Developed Countries in Europe
Disclosure: None. 10 Most Undervalued Solar Stocks to Buy According to Hedge Funds is originally published on Insider Monkey.
