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Why Billionaire Chase Coleman Has Just Acquired a Big Stake in Sunrun

Among the hedge funds in our database, Sunrun saw 10 funds long its stock at the end of 2017, down by four over the quarter, but higher than 14 funds that held shares at the end of 2016. Vivint Solar Inc (NYSE:VSLR) is less popular with just six funds holding shares as of the end of last year. In Tesla Inc. (NASDAQ:TSLA) there were 38 funds, but it’s mostly because of its core car manufacturing business. Overall, Sunrun Inc. (NASDAQ:RUN) is the fifth most popular solar stock among the hedge funds we track, behind First Solar, Inc. (NASDAQ:FSLR), Solaredge Technologies Inc (NASDAQ:SEDG), TerraForm Power Inc (NASDAQ:TERP), and Canadian Solar Inc. (NASDAQ:CSIQ).

Looking at the consensus sentiment among hedge funds towards individual companies is an important metric, because stocks that see more bullish investors among smart money tend to perform better than their peers. Our investment strategy focuses on consensus picks among 100 best-performing hedge funds and it has returned over 74% since May 2014, beating the S&P 500 ETF (SPY) by more than 20 percentage points. You can take a closer look at our strategy and see the latest picks by accessing our newsletters free of charge for 14 days.

There are several reasons to like Sunrun Inc. (NASDAQ:RUN), aside from its leading market position. The company saw its revenue grow by 37% to $231.43 million last year and it had a net income of $1.15 per diluted share, up from $0.87 a year earlier. Sunrun Inc. (NASDAQ:RUN) became cash flow positive last year and if the company continues to grow its installation capacity it should generate cash flow even higher.

In addition, last year Sunrun reached an unlevered net present value of $1.22 per watt, the highest in company’s history. The net present value of a project is the difference between the project value and the creation cost and can show the value of future income from solar installations. Even if the tariffs raise the costs, the company still expects the net present value to stay above $1.0 per watt this year and is likely to grow as Sunrun Inc. (NASDAQ:RUN) will explore new ways to cut costs.

Sunrun Inc. (NASDAQ:RUN) might face headwinds as it tries to maintain its leadership position on the US residential solar market. Last year it managed to gain market share because both SolarCity and Vivint Solar Inc (NYSE:VSLR) sacrificed growth to improve profitability. Vivint expects this year to become cash flow positive as well and to return to growth. Therefore, Sunrun might face tougher competition, which might affect its ability to grow at 15% per year.

To diversify its business, Sunrun has launched BrightBox, a battery system that can store and power houses in case of outages or during dark hours. As households lose the incentive of net metering, solar-plus-storage is expected to grow faster and become an important part of the industry. Sunrun started offering BrightBox systems with Tesla Inc. (NASDAQ:TSLA)’s Powerwall batteries in 2016, but after Tesla Inc. (NASDAQ:TSLA) bought SolarCity, it moved to LG Chem batteries. BrightBox system is currently available in six US states.

To sum up, Sunrun’s stock has potential to grow further as the company has growth on its side and other markets to tap into, such as expanding its battery business and exploring the energy grid services market that solar companies are just starting to explore.

Disclosure: none

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