In this article, we discuss the 11 best climate change stocks to buy according to hedge funds.
Climate change has been a top priority of United States President Joe Biden ever since he assumed office. The flagship $2 trillion American Jobs Plan has set aside over $35 billion for just research and development into emerging clean technologies. Biden has committed to a goal to cut the carbon emissions of the US in half by the end of this decade, an ambitious undertaking that requires greater investments in solar, wind, battery storage, and hydrogen energy solutions. Climate change stocks, in context of this, are buzzing.
With tax credits extended for firms working in the clean energy sector and incentives put in place for American manufacturers to shift to greener consumption, climate change stocks have soared since the Biden administration announced the plan. A new report by the US Department of Energy has unveiled plans for massive investments in solar that would employ over 1.5 million people and produce enough power to power all US homes by 2035. Investors who are eager to explore opportunities in this sector should follow the smart money.
Some of the best climate change stocks to buy now according to hedge funds include Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA), among others discussed in detail below. The US poured over $55 billion into clean energy initiatives in 2020, a number expected to increase dramatically this year as the new Jobs Plan is approved and put into action. Even the finance world is feeling the heat, with climate-focused hedge funds like Engine No. 1 LLC fast becoming trend setters.
Our Methodology
With this context in mind, here is our list of the 11 best climate change stocks to buy according to hedge funds. Even institutional investors have started prioritizing investments in companies that do business while minimizing their carbon footprint. This article lists down the most popular of these firms, according to a database of 873 hedge funds maintained by Insider Monkey.
The list is compiled according to the number of hedge funds having stakes in each company. Companies working in the renewable sector feature heavily. The analyst ratings of the stocks and the basic business fundamentals are also discussed to provide readers with some context for smarter investments.
Why should we pay attention to hedge fund sentiment? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Climate Change Stocks To Buy According To Hedge Funds
11. Orbital Energy Group, Inc. (NASDAQ:OEG)
Number of Hedge Fund Holders: 4
Hedge funds are not known for investing in stocks that trade under $5 per share and it is somewhat surprising that multiple hedge funds hold stakes in Orbital Energy Group, Inc. (NASDAQ:OEG), according to the latest filings. This indicates that the company offers value for money, despite the fact that it is trading at such a cheap price. Perhaps one reason why the firm, which provides solar infrastructure and electric power, has seen investments from hedge funds is that it was recently awarded a contract to build close to 2,000 miles of a rural broadband network in Virginia.
The firm has also recently pledged to provide support to those affected by Hurricane Ida, primarily in the critical utility infrastructure domain. This implies the firm has a long-term commitment to the community, a hallmark of a good business. Orbital Energy Group, Inc. (NASDAQ:OEG) is placed eleventh on our list of 11 best climate change stocks to buy according to hedge funds.
At the end of the second quarter of 2021, 4 hedge funds in the database of Insider Monkey held stakes worth $4.1 million in Orbital Energy Group, Inc. (NASDAQ:OEG), down from 5 in the preceding quarter worth $1.8 million.
Just like Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA), Orbital Energy Group, Inc. (NASDAQ:OEG) is one of the stocks attracting the attention of hedge funds.
10. Sunworks, Inc. (NASDAQ:SUNW)
Number of Hedge Fund Holders: 5
Sunworks, Inc. (NASDAQ:SUNW) is ranked tenth on our list of 11 best climate change stocks to buy according to hedge funds. Apart from hedge funds, market analysts are also bullish on the future growth of the firm. On October 11, investment advisory Jefferies projected that installation for solar PVs would increase by 25% this year with prices remaining high due to supply issues. Sunworks makes and sells photovoltaic based power systems. The share price of the firm jumped over 13% after the Jefferies projection was released.
Sunworks, Inc. (NASDAQ:SUNW) beat market expectations on earnings per share in the second quarter and increased revenue by over 230% year-on-year. The company joined the Russell Microcap Index in June this year, increasing the visibility of the firm to investors. It has also invested in growth, purchasing fast-growing solar firm Solcius for $51 million in April.
At the end of the first quarter of 2021, 5 hedge funds in the database of Insider Monkey held stakes worth $3.1 million in Sunworks, Inc. (NASDAQ:SUNW), down from 6 in the previous quarter worth $13 million.
Along with Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA), Sunworks, Inc. (NASDAQ:SUNW) is one of the stocks that institutional investors are buying.
9. Canadian Solar Inc. (NASDAQ:CSIQ)
Number of Hedge Fund Holders: 13
On September 9, the US Department of Energy released a report titled Solar Futures Study that details a plan to shift nearly 40% of national power consumption to solar. With President Joe Biden behind the push for greener initiatives, the proposal may soon be a part of policy. Solar companies, like Canadian Solar Inc. (NASDAQ:CSIQ), will benefit greatly from the whole process. Market analysts are bullish on the future of the firm as well, with Citi analyst JB Lowe giving the stock a Buy rating on August 24 with a price target of $57.
Canadian Solar Inc. (NASDAQ:CSIQ) is placed ninth on our list of 11 best climate change stocks to buy according to hedge funds. Investors keen for an entry into the solar universe can pick up the shares of the company at lower prices since a recent government decision to limit solar panel imports from China has resulted in a pullback in the share prices of solar stocks. The move, which many see as temporary, could soon be lifted owing to increased demand, sending prices skyrocketing.
At the end of the second quarter of 2021, 13 hedge funds in the database of Insider Monkey held stakes worth $95 million in Canadian Solar Inc. (NASDAQ:CSIQ), down from 17 in the preceding quarter worth $96 million.
In addition to Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA), Canadian Solar Inc. (NASDAQ:CSIQ) is one of the stocks that the smart money seems to favor.
8. Brookfield Renewable Partners L.P. (NYSE:BEP)
Number of Hedge Fund Holders: 20
Brookfield Renewable Partners L.P. (NYSE:BEP) is one of the most trusted names in the renewables energy business. The firm owns and runs a wide range of power-generating facilities across the world with 19,000 megawatts of installed capacity. It is ranked eighth on our list of 11 best climate change stocks to buy according to hedge funds. The stock was recently upgraded by Credit Suisse. Analyst Andrew Kuske bumped up the rating to Outperform from Neutral with a price target of $45 in late June.
Brookfield Renewable Partners L.P. (NYSE:BEP) is one of the few solar stocks that pay a regular dividend. It declared a quarterly dividend of $0.3038 per share in August with a forward yield of 3.17%. It also beat market expectations on revenue in the second quarter earnings results by more than $90 million.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Renaissance Technologies is a leading shareholder in Brookfield Renewable Partners L.P. (NYSE:BEP) with 203,417 shares worth more than $7.8 million.
Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA) are some of the top climate change stocks to buy now, alongside Brookfield Renewable Partners L.P. (NYSE:BEP).
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Brookfield Renewable Partners L.P. (NYSE:BEP) was one of them. Here is what the fund said:
“U.S. renewables utility Brookfield Renewable was another detractor. Brookfield Renewable is a pure-play renewables operator and developer headquartered in Canada and domiciled in the U.S., 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. Its development pipeline stands at 18,000 megawatts, providing confidence the company can meet its targeted double-digit cash flow growth through to 2025. Shares moderated amid expectations of rising bond yields, and a cool-off on the green trade.”
7. Plug Power Inc. (NASDAQ:PLUG)
Number of Hedge Fund Holders: 34
Innovative methods of harnessing energy do not get much airtime in the media. With solar and hydro dominating the headlines in the clean energy world, other methods, like the hydrogen fuel cell solutions championed by Plug Power Inc. (NASDAQ:PLUG), are not on the radar of investors. However, the incredible growth of the company in the past few years is evidence of the potential of the new technology. Over the past twelve months, the share price of the firm has jumped over 61%.
In late September, Citi analyst PJ Juvekar visited the facilities of the company to assess the hype around the new tech, coming away impressed with a Buy rating and a price target of $35. Plug Power Inc. (NASDAQ:PLUG) is placed seventh on our list of 11 best climate change stocks to buy according to hedge funds.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm DE Shaw is a leading shareholder in Plug Power Inc. (NASDAQ:PLUG) with 14 million shares worth more than $507 million.
Alphabet Inc. (NASDAQ:GOOG), General Electric Company (NYSE:GE), and Tesla, Inc. (NASDAQ:TSLA) are some of the elite climate change stocks to buy now, just like Plug Power Inc. (NASDAQ:PLUG).
In its Q2 2020 investor letter, Massif Capital, an asset management firm, highlighted a few stocks and Plug Power Inc. (NASDAQ:PLUG) was one of them. Here is what the fund said:
“We also closed our short position in Plug Power 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.”
6. SolarEdge Technologies, Inc. (NASDAQ:SEDG)
Number of Hedge Fund Holders: 37
SolarEdge Technologies, Inc. (NASDAQ:SEDG) works in a very specific domain within the solar industry but is still ranked sixth on our list of 11 best climate change stocks to buy according to hedge funds because of the potential it offers to investors in the long-term. The company makes and sells semiconductor equipment to firms who develop solar photovoltaic (PV) installations. The firm was founded in 2006 and is already worth over $13 billion in market capitalization. It recently beat market expectations on earnings per share and revenue in the second quarter.
Market analysts also seem bullish on SolarEdge Technologies, Inc. (NASDAQ:SEDG), along with hedge funds. BMO analyst Ameet Thakkar initiated coverage of the stock in late September with an Outperform rating and a price target of $357. The analyst told investors in a research note that the stock was a “compelling way to play multiple energy transition themes”.
At the end of the second quarter of 2021, 37 hedge funds in the database of Insider Monkey held stakes worth $675 million in SolarEdge Technologies, Inc. (NASDAQ:SEDG), up from 32 in the previous quarter worth $420 million.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and SolarEdge Technologies, Inc. (NASDAQ:SEDG) was one of them. Here is what the fund said:
“Our sustainability orientation has led us to favor renewable energy providers such as SolarEdge over traditional fossil fuel energy companies. Renewables stocks moved up very strongly over the last several quarters on optimism about huge green stimulus plans in Europe and the U.S. so we took profits and sold SolarEdge Technologies as valuations became demanding.”
5. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 44
Few renewable energy firms have the global clout that Enphase Energy, Inc. (NASDAQ:ENPH) possesses. The company markets home energy solutions and has operations across the world. It recently announced plans to market microconverters to residential and commercial users in Brazil. The company has also teamed up with a fast-growing domestic solar service provider in the US to market solar systems to a wider audience in the country. It is placed fifth on our list of 11 best climate change stocks to buy according to hedge funds.
The growth of Enphase Energy, Inc. (NASDAQ:ENPH) as a household name in the US solar market is acknowledged by investment advisory KeyBanc. Analyst Sophie Karp initiated the stock with an Overweight rating and a price target of $179 on September 21. Karp said the firm “enjoys significant market share in its core microinverters business”.
At the end of the second quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $724 million in Enphase Energy, Inc. (NASDAQ:ENPH), down from 49 the preceding quarter worth $803 million.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Enphase Energy, Inc. (NASDAQ:ENPH) was one of them. Here is what the fund said:
“Also in the solar space, we initiated a position in Enphase Energy (classified in the IT sector), which designs and manufactures microinverters for residential and small commercial solar photovoltaic (PV) systems. Enphase was the first company to commercialize microinverters for residential and small commercial solar PV systems. A microinverter, a type of MLPE, is a small inverter placed directly on the back of each solar module, as opposed to the traditional system of one string inverter on the side of the building.”
4. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 59
NextEra Energy, Inc. (NYSE:NEE) operates in the electrical utility sector and has interests in power generation through wind, solar, nuclear, and other methods. The stock was assumed with an Outperform rating and a price target of $85 by Credit Suisse analyst Maheep Mandloi in July. It is ranked fourth on our list of 11 best climate change stocks to buy according to hedge funds. The firm has recently been making renewed efforts to get the operating license of a Florida nuclear power plant it runs extended for another 20 years. The firm had already obtained approval for the extension of a license of a similar plant in Florida earlier.
NextEra Energy, Inc. (NYSE:NEE) is expected to benefit from a predicted rise in utility prices after the longest rout the industry has seen came to end last month. With the gains of September 29, the utility sector was up 2.7% year-to-date, ending a record 14-day slide. The firm beat market expectations on earnings per share in the second quarter.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NextEra Energy, Inc. (NYSE:NEE) with 14 million shares worth more than $1 billion.
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 60
Tesla, Inc. (NASDAQ:TSLA) is perhaps the most well-known renewable energy company in the world. Although it is famous for producing electric cars that help reduce the carbon footprint of the auto industry, it also makes and sells solar energy solutions. In fact, the solar business of the firm is growing at a spectacular pace. In the second quarter, the firm installed 1,274 megawatt-hours of energy storage. This was a 205% increase from the same period last year and brought in revenue worth $370 million.
Tesla, Inc. (NASDAQ:TSLA) is placed third on our list of 11 best climate change stocks to buy according to hedge funds. The firm recently announced plans to shift headquartered to Texas from California. Several market analysts remain bullish on the firm, with advisories like Wedbush, Canaccord, and Deutsche Bank highlighting several growth catalysts for the firm in investor notes recently.
At the end of the second quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $9 billion in Tesla, Inc. (NASDAQ:TSLA), down from 62 in the previous quarter worth $10 billion.
Here is what Baron Partners Fund has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2021 investor letter:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
2. General Electric Company (NYSE:GE)
Number of Hedge Fund Holders: 67
General Electric Company (NYSE:GE) has invested heavily in clean and green initiatives in recent years, pouring over $15 billion into wind, solar, and hydro projects. The company claims it has installed 400 gigawatts of renewable energy globally. This includes 40,000 wind turbines and 25% of the hydropower installations worldwide. It is ranked second on our list of 11 best climate change stocks to buy according to hedge funds. It recently signed an MoU with General Motors for supply of rare-earth minerals that are used in renewable energy generation.
Wells Fargo analyst Joseph O’Dea initiated coverage of the stock on October 7 with an Equal Weight rating and a price target of $107. General Electric Company (NYSE:GE) was also recently named among a list of top picks for the fourth quarter by Bank of America.
At the end of the second quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $6.08 billion in General Electric Company (NYSE:GE), down from 68 in the previous quarter worth $6.16 billion.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and General Electric Company (NYSE:GE) was one of them. Here is what the fund said:
“General Electric is outperforming our expectations for 2021 as the economic recovery is occurring faster than expected. We are particularly pleased with its free cash flow generation. We are happy to own it in our portfolio.”
1. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 155
Alphabet Inc. (NASDAQ:GOOG) is the only technology company on the climate change stock list and it is placed first on our list of 11 best climate change stocks to buy according to hedge funds. Since inception, the firm has set a standard for other corporate businesses in the clean energy adoption race. Despite being among the most valuable companies in the world, it has been carbon neutral since 2007 and has invested heavily in clean energy programs. In 2020, the firm announced that the net carbon footprint of the firm was zero.
Alphabet Inc. (NASDAQ:GOOG) is the largest corporate purchaser of clean energy. There is no indication that this will change in the near-future and will provide the firm with an advantage while other big firms undergo energy transitions in the next decade or so, balancing their business activity with green spending.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $7.3 billion.
In its Q1 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“Large-cap tech companies have been resilient through the pandemic—Alphabet among them. A top contributor, Alphabet’s Play Store and Google Cloud are in demand as businesses accelerate online activity which, along with strong YouTube user growth, is helping stabilize temporarily weaker search ad revenue trends. Through the lens of our disciplined bottom-up research process, we view Alphabet as one of the best businesses in the world, capable of expanding revenues at a rapid rate for years to come, with a bullet proof balance sheet and an average asking price. It’s a name we’ve owned since 2012 and for which we continue to have high hopes regarding future prospects.”
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Disclosure. None. 11 Best Climate Change Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
