In this article, we discuss 12 best alternative energy stocks to buy now.
Mark Carney, the former Bank of England governor, told Bloomberg on November 8 that renewable energy assets are set for explosive growth, since they are the solution to both energy security risks and climate change. Carney is also a vice chair at Brookfield Asset Management, and he noted that smart investors are following “an absolute wall of opportunity in just rolling out clean energy at scale.”
Europe is facing a harsh winter, and the global leaders are on the fence about how to distribute the capital in energy markets. Some advocate that investors need to pour more money into oil, gas, and coal to increase energy supplies swiftly. Others argue that it is high time to boost spending on renewables as the world is already battling with global climate change.
At the beginning of November, the United States and the United Arab Emirates announced a renewable energy pact which could result in $100 billion of investments globally. The partnership is developed to create 100 gigawatts of renewable power by 2035, which is about twice the capacity that was generated in Europe and North America combined in 2020. To benefit from the boom in the alternative energy sector, some of the best stocks to buy include NextEra Energy, Inc. (NYSE:NEE), Enphase Energy, Inc. (NASDAQ:ENPH), and First Solar, Inc. (NASDAQ:FSLR).
Our Methodology
We selected the following clean energy stocks based on growth fundamentals, positive analyst coverage, and strong market visibility. We have arranged the list according to the number of hedge fund holders in each firm, tracked by Insider Monkey as of the second quarter of 2022.
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Best Alternative Energy Stocks To Buy Now
12. FuelCell Energy, Inc. (NASDAQ:FCEL)
Number of Hedge Fund Holders: 10
FuelCell Energy, Inc. (NASDAQ:FCEL) is a Connecticut-based company specializing in fuel cell technology, which is an alternative to conventional combustion-based power generation. FuelCell Energy, Inc. operates in the renewable energy, fuel cells, carbon capture, and energy storage industries.
Canaccord analyst George Gianarikas on October 21 initiated coverage of FuelCell Energy, Inc. with a Hold rating and a $3.25 price target. FuelCell Energy, Inc.’s management embarked on “a rather aggressive and transformational turnaround in 2019” and appears to be well positioned to benefit from the increased global interest in hydrogen, said the analyst. While he is bullish on fuel cell technology, the analyst needs to see more orders before becoming incrementally positive.
According to Insider Monkey’s second quarter database, 10 hedge funds were long FuelCell Energy, Inc., compared to 16 funds in the prior quarter. D E Shaw held the leading stake in the company, comprising 8.3 million shares worth $31 million.
Like NextEra Energy, Inc., Enphase Energy, Inc., and First Solar, Inc., FuelCell Energy, Inc. is one of the best clean energy stocks to invest in.
11. JinkoSolar Holding Co., Ltd. (NYSE:JKS)
Number of Hedge Fund Holders: 16
JinkoSolar Holding Co., Ltd. (NYSE:JKS) is a solar panel manufacturer headquartered in Shanghai, China. It is one of the most popular clean energy stocks on Wall Street. On October 28, JinkoSolar Holding Co., Ltd. posted a Q3 GAAP of $0.90 and a revenue of $2.74 billion, topping market estimates by $0.38 and $140 million, respectively. Revenue over the period climbed 106% on a year-over-year basis. The company sees strong demand growth in the global market.
On October 31, Roth Capital analyst Philip Shen reiterated a Neutral rating on JinkoSolar Holding Co., Ltd. and lowered the price target on the shares to $50 from $58 after the company posted a robust Q3 and guided to a better-than-expected Q4. Despite the U.S. challenges, JinkoSolar Holding Co., Ltd. is executing comparatively well in Europe and India, the analyst noted.
According to Insider Monkey’s Q2 data, 16 hedge funds were long JinkoSolar Holding Co., Ltd., compared to 10 funds in the prior quarter. Lei Zhang’s Hillhouse Capital Management is the largest stakeholder of the company, with 1.14 million shares worth about $79 million.
10. Ormat Technologies, Inc. (NYSE:ORA)
Number of Hedge Fund Holders: 17
Ormat Technologies, Inc. (NYSE:ORA) is a Nevada-based company that specializes in alternative and renewable geothermal energy technology. It is one of the premier clean energy stocks to monitor in the shift to alternative sources of energy. On November 2, Ormat Technologies, Inc. reported a Q3 non-GAAP EPS of $0.33 and a revenue of $175.9 million, outperforming Wall Street consensus by $0.07 and $6.68 million, respectively. For full-year 2022, Ormat Technologies, Inc. expects total revenues of between $720 million and $735 million, up from the prior outlook of $710 million to $735 million. The consensus revenue estimate is $719.25 million.
On October 20, Citi analyst Ryan Levine initiated coverage of Ormat Technologies, Inc. with a Neutral rating and a $91 price target. While he calls Ormat Technologies, Inc. “a premium global geothermal story” developing new geothermal, battery, and solar projects, the analyst remains concerned about longer-term threats.
According to Insider Monkey’s data, 17 hedge funds were bullish on Ormat Technologies, Inc. at the end of the second quarter of 2022, compared to 16 funds in the preceding quarter. Ian Simm’s Impax Asset Management is the biggest stakeholder of the company, with more than 3 million shares worth $238 million.
9. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 19
Brookfield Renewable Partners L.P. (NYSE:BEP) owns and operates renewable power assets including hydroelectric plants, wind farms, solar facilities, and energy storage facilities. On November 4, Brookfield Renewable Partners L.P. declared a $0.32 per share quarterly dividend, in line with previous. The dividend is payable on December 30, to shareholders of record on November 30. Brookfield Renewable Partners L.P. also posted market-beating Q3 results.
On October 18, TD Securities analyst Sean Steuart assumed coverage of Brookfield Renewable Partners L.P. with a Buy rating and a $41 price target. The partnership with Cameco to acquire Westinghouse Electric, one of the world’s leading nuclear service providers, expands Brookfield Renewable Partners L.P. more rapidly into broader energy transition segments, the analyst told investors in a research note.
According to Insider Monkey’s data, 19 hedge funds were long Brookfield Renewable Partners L.P. at the end of Q2 2022, compared to 18 funds in the last quarter. Select Equity Group held the biggest stake in the company, comprising 2.5 million shares worth $90 million.
Here is what ClearBridge Investments Global Infrastructure Income Strategy has to say about Brookfield Renewable Partners L.P. in its Q1 2022 investor letter:
“Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada, focused on international hydro, solar, wind and storage technology. As more private and public institutions announce ambitious carbon reduction initiatives, Brookfield Renewable’s globally diversified, multi- technology renewables business makes it an attractive partner. Brookfield’s development pipeline stands at 18,000 MWs, providing confidence the company can meet its targeted double- digit cash flow growth through to 2025. The market narrative around the energy transition and energy security, along with increasing fossil fuels prices which have driven greater focus on switching to renewables, helped Brookfield shares in the quarter.”
8. SunPower Corporation (NASDAQ:SPWR)
Number of Hedge Fund Holders: 21
SunPower Corporation (NASDAQ:SPWR) is a California-based company focused on developing photovoltaic solar energy generation systems and battery energy storage products for residential customers. SunPower Corporation is one of the premier clean energy stocks to buy now. On November 8, the company reported a Q3 non-GAAP EPS of $0.13 and a revenue of $475.71 million, exceeding market estimates by $0.05 and $48.04 million, respectively.
On November 10, Credit Suisse analyst Maheep Mandloi upgraded SunPower Corporation to Neutral from Underperform with a price target of $17, down from $21. The analyst cited valuation for the upgrade, with the stock trading in line with the updated price target. In addition, SunPower Corporation management acknowledged and addressed primary investor concerns on the earnings call around leases, California, and Maxeon, the analyst wrote in a research note. He was more constructive on the stock after the earnings call.
Among the hedge funds tracked by Insider Monkey, 21 funds reported owning stakes in SunPower Corporation at the end of Q2 2022, and D E Shaw held the leading position in the company, with 2.5 million shares worth $40 million.
7. Bloom Energy Corporation (NYSE:BE)
Number of Hedge Fund Holders: 24
Bloom Energy Corporation (NYSE:BE) is a California-based company that manufactures and markets solid oxide fuel cells that produce electricity on-site. On November 4, Bloom Energy Corporation posted a Q3 revenue of $292.3 million, up 41.1% year-over-year, beating estimates by $17.38 million. The stock soared about 12% after the company reported Q3 results. Bloom Energy Corporation is one of the best clean energy stocks to invest in.
On October 19, Jefferies analyst Sam Burwell initiated coverage of Bloom Energy Corporation with a Buy rating and a $29 price target. He believes the “Option Value” of energy is up again, driven by a constrained capital cycle.
According to Insider Monkey’s Q2 data, 24 hedge funds were bullish on Bloom Energy Corporation, compared to 29 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is a prominent position holder in the company, with more than 1 million shares worth $17 million.
6. Sunnova Energy International Inc. (NYSE:NOVA)
Number of Hedge Fund Holders: 25
Sunnova Energy International Inc. (NYSE:NOVA) is a Texas-based company that provides residential solar energy systems in the United States. Sunnova Energy International Inc. reported a Q3 revenue of $149.36 million, up 116.8% from the prior-year quarter, outperforming estimates by $16.43 million. The company added 21,800 customers in the third quarter of 2022, bringing the total customer count to 246,600 as of September 30, 2022. Sunnova Energy International Inc. expects growth to increase further in 2023 due to higher demand for cheaper, more dependable energy services.
On October 25, B. Riley analyst Christopher Souther reiterated a Buy rating on Sunnova Energy International Inc. but trimmed the price target on the shares to $30 from $35. The analyst cited lower principal and loan interest in 2023 for the target drop amid the higher interest rate environment.
According to Insider Monkey’s data, 25 hedge funds were long Sunnova Energy International Inc. at the end of Q2 2022, compared to 26 funds in the preceding quarter. Jos Shaver’s Electron Capital Partners is a prominent stakeholder of the company, with over 3 million shares worth $56.5 million.
In addition to NextEra Energy, Inc., Enphase Energy, Inc., and First Solar, Inc., Sunnova Energy International Inc. is one of the premier alternative energy stocks to invest in.
Here is what the Clearbridge Investments Small Cap Strategy had to say about Sunnova Energy International Inc. in its Q1 2022 investor letter:
“We initiated a new position in Sunnova, in the energy sector. Sunnova is a residential solar and energy storage company that enables adoption through a network of installers with options for financing, service and broader home energy management. Rising interest rates and solar energy supply constraints weighed on the stock’s performance in the fourth quarter of 2021 but created a compelling valuation opportunity to buy this business when the market was embedding low growth expectations. We believe Sunnova will deliver value accretive growth for a much longer time, with its downside limited by the long-term, fixed-rate, high- quality contracts it has with customers.”
5. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 26
First Solar, Inc. is an Arizona-based company that provides photovoltaic solar energy solutions in the United States, Japan, France, Canada, India, Australia, and internationally. First Solar, Inc. is one of the best clean energy stocks to invest in. On November 7, KeyBanc analyst Sophie Karp raised the price target on First Solar, Inc. to $175 from $145 and maintained an Overweight rating on the shares. The analyst updated her estimates to completely reflect the impact of AMC on First Solar, Inc.’s earnings in 2023 and beyond and to properly account for the value of tax credits the company is eligible for.
According to the second quarter database of Insider Monkey, 26 hedge funds were long First Solar, Inc., compared to 35 funds in the preceding quarter. D E Shaw is a significant stakeholder of the company, with 1 million shares worth $68.7 million.
Here is what White Brook Capital had to say about First Solar, Inc. in its Q1 2021 investor letter:
“First Solar (FSLR) and Itron (ITRI), both of which I’ve written about in past In Focus sections, were long-term positions that were sold as their prices exceeded price targets. Both are solid companies that remain on my watchlist, but the opportunity cost of not investing in other potential investments exceeded their potential mid-term returns.”
4. Sunrun Inc. (NASDAQ:RUN)
Number of Hedge Fund Holders: 36
Sunrun Inc. (NASDAQ:RUN) is a California-based company that designs, develops, installs, and maintains residential solar energy systems in the United States. On November 2, Sunrun Inc. reported a Q3 GAAP EPS of $0.96 and a revenue of $631.91 million, exceeding Wall Street estimates by $1.01 and $63.28 million, respectively. The revenue jumped 44% on a year-over-year basis. The management expects Solar Energy Capacity Installed growth to be approximately 25% for the full year 2022. Sunrun Inc. is one of the best clean energy stocks to buy now.
On October 20, JPMorgan analyst Mark Strouse reaffirmed an Overweight rating on Sunrun Inc. but slashed the price target on the stock to $55 from $65. The analyst expects demand to remain robust in Q3 for most alternative energy and services companies, driven by increasing power prices, despite concerns about the overall economy.
According to Insider Monkey’s data, 36 hedge funds were bullish on Sunrun Inc. at the end of June 2022, compared to 37 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with approximately 13 million shares worth $303 million.
Here is what Horizon Kinetics had to say about Sunrun Inc. in its Q2 2021 investor letter:
“What this table did not cover is valuation. What’s expensive, what’s cheap? A good business that is too expensive is not a good investment. The most expensive business on the table is Sunrun. Sunrun is the nation’s largest residential rooftop solar panel system seller/installer. Sunrun’s valuation might also shed Thumbnail valuation.
To start at the top of the income statement, Sunrun shares trade at 10.3x revenues. The most profitable company in the S&P 500, Microsoft, trades at 13x revenues. Sunrun operates at a loss. Obviously, not only is tremendous growth anticipated, but tremendous profitability, too.
Let’s simply accept that investors have correctly anticipated Sunrun’s future success and make that the starting point for a valuation exercise.
If, 10 years from now, Sunrun is ultimately valued at 25x net income, and if today’s $9.5 billion valuation is appropriate, that would require $380 million of net income ($9,500 million ÷ 25).
Let’s say Sunrun will have the same net profit margin as the average S&P 500 company, which is 10%. That means it would need $3,800 million of sales to generate that level of earnings ($380 mill ÷ 10%).
Since sales are now $920 million, they would have to rise by 4.1x in the next 10 years. That would require annual sales growth of 15.2%.
You see how neatly that all works: investors accept the company’s 10-year, 15% annual sales growth projections, and if a 10% net profit margin and a P/E of 25x earnings are reasonable, then the company will have a $9.5 billion market cap at that time. Except that is the current price. That means a 10-year return of zero.
In order to get a 10% annualized return from the stock, Sunrun would need to be priced at a P/E of 65x its earnings 10 years from now, if at a 10% net margin. Or it would have to have some combination of lower P/E and higher growth and/or higher profit margin.
In the meantime, this is Sunrun’s recent pattern of revenue growth and profitability (the company did recently increase its estimate of installed-capacity growth in 2021 from 20-25% to a new estimate of 25% to 30%).
For the time being, Sunrun loses an extraordinary amount of money, an amount that has been getting larger. Perhaps there are economies of scale that will manifest in the future,so that it will attain profitability. Perhaps from the roughly one-half of Sunrun’s revenues that are from long-term customer service agreements that run up to 25 years. For now, though, the company would seem to require a lot of external financing, and that is one of the greatest business risks.”
3. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 40
SolarEdge Technologies, Inc. (NASDAQ:SEDG) is an Israel-based company that designs, develops, and sells direct current optimized inverter systems for solar photovoltaic installations worldwide. On November 7, SolarEdge Technologies, Inc. posted a Q3 revenue of $836.7 million, up 58.9% year-over-year, beating estimates by $12.29 million. The solar segment reported a record revenue of $788.6 million. SolarEdge Technologies, Inc. is one of the best clean energy stocks on Wall Street.
On November 10, Wells Fargo analyst Michael Blum raised the price target on SolarEdge Technologies, Inc. to $306 from $283 to reflect a higher EBITDA estimate, while maintaining an Overweight rating on the shares following the Q3 results. The analyst continues to like its broad geographic exposure and resilient market position, which should drive solid growth in the future.
According to Insider Monkey’s Q2 data, SolarEdge Technologies, Inc. was part of 40 hedge fund portfolios, compared to 47 in the prior quarter. Ian Simm’s Impax Asset Management held the largest stake in the company, consisting of 580,909 shares worth $158.20 million.
Here is what ClearBridge International Growth EAFE Portfolio has to say about SolarEdge Technologies, Inc. in its Q2 2022 investor letter:
“We are well-positioned to participate in the accelerating energy transition. High and rising utility costs combined with policy support are driving increased penetration of home solar plus storage systems in Europe. Israel-based SolarEdge Technologies expects to see significant growth in solar installations in this market led by Germany and Italy, among others, where consumers are not only demanding solar on the roof but a complete system solution including batteries. This phenomenon is accelerating revenue growth for these companies.”
2. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 53
Enphase Energy, Inc. is a California-based company that designs, develops, manufactures, and sells home energy solutions for the solar photovoltaic industry in the United States and internationally. On October 25, the company reported a Q3 non-GAAP EPS of $1.25 and a revenue of $634.71 million, topping Wall Street estimates by $0.16 and $18.85 million, respectively. The revenue increased 80.6% compared to the prior-year quarter.
On October 26, Cowen analyst Jeffrey Osborne raised the price target on Enphase Energy, Inc. to $335 from $278 and maintained an Outperform rating on the shares. The analyst noted that demand continues to be resilient as Enphase Energy, Inc. will add production capacity both in Europe and the United States.
Among the hedge funds tracked by Insider Monkey, Enphase Energy, Inc. was part of 53 public stock portfolios at the end of June 2022, compared to 57 in the prior quarter. Philippe Laffont’s Coatue Management is the biggest stakeholder of the company, with 1.36 million shares worth about $267 million.
Carillon Tower Advisers made the following comment about Enphase Energy, Inc. in its Q3 2022 investor letter:
“Enphase Energy, Inc. provides technology to manage solar generation, storage, and communication on one platform. The company reported an impressive quarter that exceeded investor expectations on all meaningful metrics, which sent shares higher. The stock remains a useful way to gain exposure to the secular theme of alternative energy and could benefit from the recently passed Inflation Reduction Act.”
1. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. is a Florida-based company that generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company generates electricity through wind, solar, nuclear, coal, and natural gas facilities. NextEra Energy, Inc. is one of the best clean energy stocks to buy now. On October 14, the company declared a quarterly dividend of $0.425 per share, in line with previous. The dividend is payable on December 15, to shareholders of record on November 25.
On October 24, Guggenheim analyst Shahriar Pourreza maintained a Buy rating on NextEra Energy, Inc. but trimmed the price target on the shares to $99 from $108. The analyst updated select estimates ahead of Q3 earnings season from the Power and Utilities group to reflect “known and measurable year-over-year items,” to adjust for seasonality, and to re-mark to the latest commodity curves.
According to the second quarter database of Insider Monkey, 59 hedge funds were bullish on NextEra Energy, Inc., compared to 64 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 16.2 million shares worth $1.25 billion.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NextEra Energy, Inc. was one of them. Here is what the fund said:
“We increased our exposure to the energy transition during the quarter with new positions in Iberdrola (OTCPK:IBDSF), a Spanish-based integrated utility that is also one of the leading renewable energy developers in the world, and NextEra Energy, Inc., an integrated utility business with a regulated utility operating in Florida and the largest wind business in the U.S. The war has opened the eyes of the world that energy independence is critical. Renewables are for many countries the only way to get to the target. It is expected that existing renewable project pipelines will be executed faster, and more projects added to existing pipelines.
The energy transition would be extremely helpful for climate change and Iberdrola ranks well on our ESG matrix. NextEra, meanwhile, recently raised future earnings forecasts, citing a very favorable macro environment for rapid renewable generation expansion driven by decarbonization of the U.S. economy and the relative attractiveness of renewable generation in the context of high natural gas and power prices.”
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This article is originally published at Insider Monkey.
