The U.S. energy sector has undoubtedly had a bad run in the last year, with the oil & gas drilling industry providing negative returns of 43.31% over the past 12 months, which has contributed to heavy job cuts ranging in the 10,000 to 15,000 layoffs-per-month range this year, according to a report from Moody’s Analytics. Considering the dismal performance of the energy sector throughout the year, we decided to uncover some potential investment opportunities in the alternative energy sector by uncovering the most popular alternative energy stocks among the hedge funds that we track at Insider Monkey, a collection of the best and brightest investment minds in the world today.
We pay attention to hedge funds’ moves because our research has shown that hedge funds are extremely talented at picking stocks on the long side of their portfolios. It is true that hedge fund investors have been underperforming the market in recent years. However, this was mainly because hedge funds’ short stock picks lost a ton of money during the bull market that started in March 2009. Hedge fund investors also paid an arm and a leg for the services that they received. We have been tracking the performance of hedge funds’ 15 most popular small-cap stock picks in real time since the end of August 2012. These stocks have returned 118% since then and outperformed the S&P 500 Index by over 60 percentage points (see the details here). That’s why we believe it is important to pay attention to hedge fund sentiment; we also don’t like paying huge fees.
5. First Solar, Inc. (NASDAQ:FSLR)
Investors with Long Positions (as of June 30): 30
Aggregate Value of Investors’ Holdings (as of June 30): $281.51 Million
Let us start with First Solar, Inc. (NASDAQ:FSLR), whose shares are up by 6.29% in 2015. The solar energy solutions company reported strong second quarter 2015 financial results, posting earnings per share (EPS) of $0.93 over revenues of $896 million against market expectations of $0.49 EPS and $793 million in revenues, respectively. First Solar, Inc. (NASDAQ:FSLR) has an average consensus rating of ‘Buy’ from analysts covering the stock, with a consensus one-year price target of $63.49, indicating an upside of 35% from its current trading price. The smart money was bullish on the stock during the second quarter, with aggregate holdings increasing by 1.20% during the second quarter despite a decline of 21.42% in the share price of First Solar, Inc. Cliff Asness’ AQR Capital Management topped the list of hedge funds holding a stake in the company, owning 626,158 shares worth $29.42 million.
4. Canadian Solar Inc. (NASDAQ:CSIQ)
Investors with Long Positions (as of June 30): 32
Aggregate Value of Investors’ Holdings (as of June 30): $243.95 Million
Canadian Solar Inc. (NASDAQ:CSIQ) is another potential alternative energy stock on our list. The solar energy company reported better-than-expected second quarter 2015 results, with earnings per share of $0.31 over revenues of $636.7 million. The analysts were expecting EPS of $0.13 and revenues of $592.5 million for the quarter. The shares of Canadian Solar Inc. (NASDAQ:CSIQ) have dropped by 19.87% year-to-date. The hedge funds in our database were expecting a slowdown, as their aggregate holdings in the company were down by 19.60% during the second quarter. It is important to consider that the shares of Canadian Solar declined by 14.35% during that time however, so the dip wasn’t caused primarily be selling. Millennium Management, led by Israel Englander, held the largest stake in the company in our database, having 2.12 million shares in its portfolio.
3. SolarCity Corp (NASDAQ:SCTY)
Investors with Long Positions (as of June 30): 34
Aggregate Value of Investors’ Holdings (as of June 30): $1.28 Billion
The solar energy company has attracted one of the most famous short sellers in the industry, Jim Chanos, who called SolarCity a “subprime financing company in effect” during an interview with CNBC, highlighting the high cash-burning rate of the firm. SolarCity Corp (NASDAQ:SCTY) gained popularity among hedge funds in our database, with the hedgies increasing their stakes in the company by 25.50%, along with cumulative ownership of 24.60% of the outstanding common shares of the firm. The shares of SolarCity were up by 4.43% during the second quarter, indicating considerable purchases from hedge funds. Heading into the third quarter, SRS Investment Management had the largest stake in SolarCity Corp (NASDAQ:SCTY), owning 8.0 million shares valued at $428.40 million.