In this article we take a look at 10 companies that will benefit from global warming.
In a race against time for survival and existence, the developed world has launched a multi-pronged initiative to cut net carbon emissions to zero by 2050, an ambitious goal set by the Paris Agreement. The arrival of President Biden in the White House and U.S. rejoining the Paris agreement will infuse a new hope in the renewable energy industry and give rise to a barrage of investments in the already expanding green energy sector.
Explosive Growth Opportunities
According to a report by UNEP, Bloomberg New Energy Finance and the Frankfurt School, global investment in new clean energy capacity rose 1% in $282.2 billion. Investments in the U.S. jumped 28% to reach $55.5 billion. The report said that declining costs for solar and wind projects are making it easier for new entrants to invest in the market. As compared to the conventional energy projects, renewable energy projects are more profitable, a study done by Imperial College London and the International Energy Agency found. The research analyzed stock market data to determine the rate of return on energy investments over a five- and 10-year period. The results showed that investments in renewable energy in Germany and France yielded returns of 178.2% over a five year period, compared with -20.7% for fossil fuel investments. In the U.K. investments in renewable energy generated returns of 75.4%, compared to just 8.8% for fossil fuels. In the U.S., returns came in at 200.3%, significantly above 97.2% for fossil fuels.
Global warming and climate change has drastic effects on various sectors, industries and segments. For example, massive wildfires in the U.S. caused by climate change caused major utility company PG&E to declare bankruptcy after failing to service potential liabilities of at least $30 billion. Similarly, insurance companies are at the risk of facing heavy liabilities and claims amid raging wildfires and effects of climate change in the U.S. A report by RAND found that wildfires in the U.S. caused by greenhouse gas emissions (GHG) could potentially affect the health of the insurance market, policy affordability, coverage adequacy, and insurer profitability. Effects of global warming will also be consequential for water utility companies as they will have to find new methods of water delivery and management.
Winds of Change
The energy sector is already facing the heat after President Biden’s immediate action against major oil projects. The President revoked the permit for the Keystone XL pipeline from Canada and moved to stop oil companies from drilling in Alaska’s Arctic National Wildlife Refuge. Biden had clearly announced his plans to “transition away from the oil industry” during his candidacy.
With this context in mind, let’s take a look at 10 companies that will benefit from global warming.
10. NV5 Global Inc (NASDAQ: NVEE)
Florida-based NV5 Global is a relatively unknown stock, but it has a technology that resolves a key problem caused by global warming. The company struck deals with the California government to provide underground power line technology, reducing the risks of damages and infrastructure collapse during wildfires. The company also provides solutions to monitor and save energy.
A total of 9 hedge funds tracked by Insider Monkey held stakes in NV5 global entering the fourth quarter. Charles Paquelet’s Skylands Capital owns 87,766 shares of the company, worth $4.63 million. (Read: Here is What Hedge Funds Think About NV5 Holdings Inc (NVEE))
9. SunPower Corporation (NASDAQ: SPWR)
Sun Power is one of the 10 companies that will benefit from global warming. The company sells crystalline silicon photovoltaic cells and solar panels based on an all-back-contact solar cell invented at Stanford University.
As of the end of the third quarter, 14 hedge funds tracked by Insider Monkey held stakes in the company. The net value of these positions is $91.3 million.
SunPower shares have gained about 700% over the last 12 months.
Read: Why SunPower (SPWR) Is Surging?
8. Brookfield Renewable Partners LP (NYSE: BEP)
BEP ranks 8th in our list of the companies that will benefit from global warming. Brookfield Renewable Partners operates renewable energy projects, with over 200 hydroelectric plants and 100 wind farms. It has a total capacity of about 19,400 MW, with 5,318 generating facilities in North America, South America, Europe and Asia. Hydroelectric power projects account for about 64% of the company’s portfolio.
In October 2020, the company entered a five-year agreement with JPMorgan for supplying the firm’s 500 offices with renewable energy.
Hedge funds are showing interest in Brookfield Renewable Partners. As of the end of the third quarter, 16 funds in Insider Monkey’s database held positions in the company, compared to just 5 funds a quarter earlier. (Don’t Miss: Brookfield Renewable Partners L.P. (BEP): Hedge Funds Are In Wait-and-See Mode)
7. Plug Power Inc (NASDAQ: PLUG)
PLUG ranks 7th in our list of the companies that will benefit from global warming. New York-based Plug Power sells hydrogen fuel cell systems that replace conventional batteries in electric cars. The stock is up a whopping 1400% over the last 12 months. It is gaining immense popularity in Reddit chat boards. In January, JPMorgan started covering Plug Power at Neutral rating with a $60 price target. The bank’s analyst Paul Coster said that PLUG is his top pick in the hydrogen space. However, the analyst said that the stock is now fully valued.
A total of 21 hedge funds tracked by Insider Monkey held long positions in Plug Power at the end of the third quarter.
Here’s what Massif Capital said about Plug Power stock in its Q2 Investor Letter:
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.
6. Canadian Solar Inc. (NASDAQ: CSIQ)
Canadian Solar sells solar PV modules and operates major solar projects. The company has delivered around 52 GW of solar modules to customers in 150 countries, as of the end of 2020. In January, Citi initiated coverage of Canadian Solar stock with Buy rating and $71 price target. Citi’s analyst J.B. Lowe believes the stock has more room to run even after hitting new highs recently on the back of module capacity expansion and vertical integration.
Hedge funds are loading up on Canadian Solar. At the end of the third quarter, 25 elite funds tracked by Insider Monkey held stakes in the company, up from 12 funds a quarter earlier.
5. Solaredge Technologies Inc (NASDAQ: SEDG)
Israel-based Solaredge Technologies sells power optimizers, solar inverters and monitoring systems for photovoltaic arrays to increase energy output through module-level Maximum Power Point Tracking. The company offers a variety of products and services, including residential, commercial and large scale PV, energy storage and backup solutions, EV charging and UPS systems.
4. Pool Corporation (NASDAQ: POOL)
Pool Corporation is one of the 10 best companies that will benefit from global warming. As temperatures rise across the globe, the demand for swimming pools is expected to surge. Pool Corporation is a wholesale distributor of swimming pool supplies and related equipment. In October 2020, the company posted a 26.6% growth for its Q3 net sales, while adjusted EPS in the period jumped 47%. The company said it is experiencing a rise in residential pool products, driven by home-centric trends amid the coronavirus pandemic.
A total of 36 funds tracked by Insider Monkey held stakes in Pool Corporation entering the fourth quarter.
Here’s what Wasatch Core Growth Fund said about POOL stock in its Q3 2020 Investor Letter:
“Pool Corp. (POOL) saw its stock price increase as the wholesale distributor of swimming pools and related equipment and supplies benefited from rising demand precipitated by families increasingly favoring activities that can be enjoyed at home. The company also benefited from costsaving measures put in place at the start of the pandemic. We believe Pool Corp. is on a promising long-term growth trajectory and also has the potential to see more business in the short term from greater use of swimming pools by housing communities and individual households.”
3. First Solar, Inc. (NASDAQ: FSLR)
Arizona-based First Solar sells solar panels and operates utility-scale PV power plants. The company is known for its cadmium telluride (CdTe)-based photovoltaic (PV) modules, which produce electricity with a thin CdTe film on glass. In October 2020, First Solar shares rallied after the company said its sales jumped 70% in the third quarter. EPS in the quarter came in at $1.45, easily beating the Wall Street’s estimate of $0.63 per share. For 2020, the company expects to earn between $2.6 billion and $2.9 billion.
The smart money is turning bullish on First Solar. A total of 40 hedge funds tracked by Insider Monkey held positions in the company at the end of the third quarter, significantly up from 16 funds a quarter earlier.
2. Enphase Energy Inc (NASDAQ: ENPH)
California-based Enphase Energy is one of the largest solar companies in the U.S., with a market cap of about $22 billion. The company sells software-driven home energy solutions. The company has shipped about 20 million solar microinverters in North America, Europe and Australia.
Enphase shares rallied recently after Goldman Sachs upped the stock to Buy from Neutral with a $232 price target.
Overall, 42 hedge funds tracked by Insider Monkey were bullish on Enphase Energy at the end of the third quarter. The net value of the stakes these funds had in the company is $1.04 billion.
Read: Was The Smart Money Right About Crowding Into Enphase Energy Inc (ENPH)?
1. NextEra Energy Inc (NYSE: NEE)
Florida-based NextEra NextEra Energy, Inc is one of the largest green energy companies in the world. The company has tripled its wind energy capacity over the last 10 years. It operates over 14,100 MW of emissions-free wind energy, along with several solar and nuclear energy projects. The company is behind Florida Power & Light, which is the biggest producer of solar energy in Florida with 28 major solar power plants, having a capacity of about 2,000 megawatts of solar generation.
A total of 63 hedge funds tracked by Insider Monkey held long positions in NextEra Energy as of the end of the third quarter.
Please also see 10 Largest Wind Energy Companies and 5 Best Mid-Cap Stocks Billionaire Brian Higgins’ King Street Loves the Most.
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This article is originally published at Insider Monkey.
