Below we presented the list of 5 Best Clean Energy Stocks to Buy Now. For our detailed discussion and a more comprehensive list please see 11 Best Clean Energy Stocks to Buy Now.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the best clean energy stocks to buy:
5. Sunrun, Inc. (NASDAQ:RUN)
No of HFs: 29
Total Value of HF Holdings: $3.27 Billion
The top hedge fund holder of this stock is Chase Coleman’s Tiger Global Management which had $2.29 billion invested in the stock at the end of September. An insider recently purchased 59,057 shares at around $16 in October 2019. The stock is up 440% since then. Massif Capital talked about the stock in its Q2 2020 investor letter,
We laid out our thesis on Sunrun (NASDAQ:RUN) in our first-quarter letter to investors and concluded that while the company had dropped 50% in March, we still felt comfortable holding the short position, this was an error. We re-evaluated that posture in May, following a rapid rise in the stock price, and decided to exit the position as the title wave of liquidity entering the markets seemed more than enough to continue to support a firm dependent on capital markets for cash. Given the level of support we see in credit markets right now, our misgivings about their business model do not add up to sufficient catalysts to allow us to hold the position. We encourage readers to revisit our thesis on the company. We would highlight that our decision to re-enter at any point in the future will likely be a function of regulatory rulings on utility net metering practices or compelling evidence to suggest a decline in tax equity investing.
We also closed our short position in Plug Power (NASDAQ:PLUG) this quarter as the market was subsumed with enthusiasm over their recent acquisitions, resulting in an almost 80% rally in the stock over ten trading days. Our decision to exit was painful at the time as we were forced to reconcile with a collective exuberance that was (and is, in our opinion) not grounded reality. In hindsight, it was the correct decision as we avoided most of its recent vertical trajectory. Like SunRun, we have several signposts in front of us for Plug Power that would prompt a re-enter.
The alternative energy landscape is a tricky environment right now. We are enthusiastic about many of the technology and market-driven solutions that are moving society closer to carbon neutrality. A component of our core strategy is deeply rooted in the belief that assets are increasingly mispriced in a rapidly changing energy landscape. We are believers in some young technology companies, wary of stranded asset risks, and understand that many currently out of favor industries will require investment in decarbonization efforts, not divestment.3 Yet, the nascent stage of the energy transition we find ourselves in also invites the creation of businesses that will ultimately prove unsuccessful. Positive sentiment in the collective is necessary to drive complex and challenging societal issues like decarbonization. Still, it can be dangerous at the individual (company) level if it results in the misallocation of resources – purposefully or otherwise.
We are likely to remain patient right now with many of these firms. The attractive trade in alternative energy right now certainly appears to be on the long side. We will continue building into many of our wind investments and are intrigued by developments in the European utility space, and international power developers.
4. Renewable Energy Group, Inc. (NASDAQ:REGI)
No of HFs: 30
Total Value of HF Holdings: $139 Million
The top hedge fund holder of this stock is Ken Griffin’s Citadel Investment Group which had $134 million invested in the stock at the end of September. An insider purchased 3,000 shares at around $16 in March 2020. The stock is up 506% since then. During the third quarter of 2020, the company reported a revenue of $576 million on 176 million gallons of fuel sold. The company recently announced a change in the organizational construct of its senior leadership team. Chad Stone will move from CFO to Senior Vice President, Commercial Performance. REG President & CEO, Cynthia “Cj” Warner said,
“I am delighted to announce these exciting changes to our leadership team. We believe these changes will strengthen our senior leadership team and create a more streamlined reporting structure to accelerate growth in our areas of focus. We believe these organizational changes will allow us to better recruit, promote and develop strong talent within REG.”
foxbat/Shutterstock.com
3. Solaredge Technologies, Inc. (NASDAQ:SEDG)
No of HFs: 31
Total Value of HF Holdings: $553 Million
SEDG ranks as the third-best clean energy stock to buy now. The company is known for the design, development, and marketing of direct current optimized inverter systems for solar photovoltaic installations worldwide. During the third quarter of 2020, the company reported revenue of $338.1 million. Zivi Lando, CEO of SolarEdge said,
“Our third quarter results reflect significant growth in Europe, despite the current economic slowdown caused by the global pandemic. Our solar business outside the U.S. reached an all-time high and the U.S. market is showing signs of return to pre-pandemic installation levels. In our non-solar business, our e-Mobility team is gearing up to deliver to our customer the first significant batch of full powertrain solutions for assembly in electric vehicles in the fourth quarter. In addition to continuing to generate significant cash from operations this quarter, we raised $618 million, net of expenses, in convertible debt providing additional support for our continued organic and non-organic growth.”
2. First Solar, Inc. (NASDAQ:FSLR)
No of HFs: 40
Total Value of HF Holdings: $283 Million
In an article, White Brook Capital mentioned some commented about FSLR in their Q2 2019 investor letter
“First Solar is a provider of solar modules to the industrial and commercial segment. Despite lackluster earnings reported during the second quarter, the stock appreciated due to the growth in the backlog as their offering continues to be attractive to industrial customers globally.
Solar is having its second moment, and I believe that First Solar is the best positioned to take advantage. First Solar is an industrial and commercial solar module producer. While often thought of as a homogenous solution, solar generation assets should be considered on a spectrum with retail and industrial applications on opposite ends.
Industrial solar installations are built for utilities, usually with production capacity confirmed before installation, or less frequently on spec, with multiple potential proximate commercial customers.
Commercial installations are also large, but significantly smaller than industrial installations, and are built to offset a company’s carbon footprint or to provide electricity for manufacturing or data center operations at a specific site.
Retail commercial is becoming more commonplace, with retailers like Walmart commissioning builds at their stores or distribution centers. Community solar projects also fit within this category, where a group of residential customers will agree to use a specific solar project for their electricity alleviating the negative impact of rooftop solar.
Finally, residential which is often installed on homes.
The physics of generating electricity using solar technology are the same across the spectrum. A solar module produces electricity at the rate that the solar panel is exposed to sunlight, limited by the efficiency of the panel and the inverter used to make the electric current generated, usable. Sun exposure to the panel is different from sun exposure through the panel. A well-tuned solar module needs foliage cleared (obvious) and dust washed away (less-obvious) to achieve its potential. Once the electricity is in the panel, the electricity needs to make its way to the grid. Solar module makers use solar inverters that condition the electricity for use at the individual panel, the multi-panel, or the node level – all which impact the efficiency of the entire installation, its cost, and its resiliency to failure. Efficiency, therefore, shouldn’t just be considered on as a point in time, but over time, accounting for the lifespan of the installation, and the probability and cost of part failure.
Residential customers have a proclivity to install the most theoretically efficient panels and inverters possible, but due to the limited space on a roof and the need to get costs down, to have a very limited number of inverters. This means that while they’re potentially incredibly capable, they’re not very resilient. Additionally, a residential customer’s tolerance to pay the necessary operating costs to maintain and clean the panels is low. In real life, consumers treat their panels like consumer electronics, their value is higher than the cash flows generated at the initial installation, and the perceived value declines below cash flow relatively quickly as the technology ages. Finally, the average house is owned for 7 years, while an installation is capable for 20 years. If the new buyer does not agree on the aesthetics of the installation, solar devalues the home. Residential solar, in my view, is not a great area for investment for the consumer or for an investor.
The shortfalls present in the residential market, decline the “more industrial” the installation. In that segment, the costs to install and upkeep the modules near peak efficiency are critical to achieve the priority of the investment – a solid IRR. First Solar’s modules are exceptionally cheap to install and maintain – producing consistent predictable current even if the peak efficiency is slightly lower than peers. Given the advantages of large solar installations vs distributed residential, I believe that generation is likely to increasingly tilt towards those use cases. First Solar is extremely well positioned, and I look forward to continued gains.”
Pixabay/Public Domain
1. Enphase Energy, Inc. (NASDAQ:ENPH)
No of HFs: 42
Total Value of HF Holdings: $1.04 Billion
ENPH is the best clean energy stock to buy now. The stock was mentioned as one of the Top 11 Lithium and Battery Stocks to Buy Now. An insider purchased 52,400 shares at around $19 in November 2019. The stock is up 1015% since then. The company is known for its software-driven home energy solutions that span solar generation, home energy storage, and web-based monitoring and control. During the third quarter of 2020, the company reported a revenue of $178.5 million along with a record 41.0% for non-GAAP gross margin.
Please also see 10 Best Solar Energy Stocks to Buy Now and 10 Best Hydrogen Fuel Cell Stocks to Buy Now
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Disclosure: No positions.
