Tom Konrad CFA
The first half of 2015 saw a mild advance in the broad market, but
concerns about rising interest rates and the ongoing Greek debt
drama sent income stocks, clean energy, and most non-US currencies
down decisively. My Ten
Clean Energy Stocks for 2015
model portfolio has heavy
exposure to not only clean energy, but income stocks (6 out of 10)
and foreign stocks (4 out of 10.) Despite this the stormy
market for all three, the portfolio delivered admirably.
The model portfolio ended the second quarter up 9.7%, compared to
its broad market benchmark, which was up only 4.4%. Its clean
energy benchmark is a 40/60 blend of its growth oriented benchmark
and its income-oriented benchmark, matching the 4/6 ratio of growth
and income stocks in the portfolio. These two benchmarks are
discussed below. The blended benchmark fell 5.1%.
For the month of June, the portfolio gained 3.1%, compared to only
0.8% for the broad market IWM and a 6.2% decline of the blended
Value/Growth and Income Sub-Portfolio Performance
The four stock value and growth sub-portfolio reversed most of
its previous losses in June, up 7.4% for the month to end the
first half down only 0.4% for the year. Its benchmark, the
Powershares Wilderhill Clean Energy ETF (NASD:
), fell 3.8% for the month but remains in the black with a
2.3% gain for the first half.
The six stock income sub-portfolio inched up another 0.3% on top
of its already impressive gains, ending up 16.4% year to date,
despite rising interest rates. The income benchmark fared much
worse. This benchmark was The Global Utilities Index Fund, JXI
for the first 5 months, replaced by the more clean-energy oriented Global X YieldCo Index ETF
when that began trading at the end of May. It dropping 5.3%
for the month for a loss of 7.7% year to date, despite the fact that
YLCO fared better than JXI in June.
The chart below (click for larger version) gives details of
individual stock performance, followed by a discussion of the
month's news for each stock.
The low and high targets given below are my estimates of the range
within which I expected each stock to finish 2015 when I compiled
the list at the end of 2014.
1. Hannon Armstrong
Sustainable Infrastructure (NYSE:HASI).
12/31/2014 Price: $14.23. Annual Dividend: $1.04.
Beta: 0.81. Low Target: $13.50. High Target: $17.
6/30/2015 Price: $20.05. YTD Dividend: $0.52
YTD Total Return: 44.6%.
Sustainable infrastructure financier and Real Estate
Investment Trust Hannon Armstrong started the month strong, and I
hope some of my readers took the opportunity and followed my lead
by taking some gains as it briefly rose above $21. At that
point, Bank of America broke it's long climb by lowering
its rating to Neutral based on valuation. This is
in-line with my own assessment: I like Hannon Armstrong for the
long term, but, because of its much higher price than when it
began the year, no longer feel that it deserves to be such a large
part of my managed portfolios.
Cable Corp. (NYSE:BGC)
12/31/2014 Price: $14.90. Annual Dividend:
$0.72. Beta: 1.54. Low Target: $10. High
6/30/2015 Price: $19.73. YTD Dividend: $0.18
YTD Total Return: 33.6%.
International manufacturer of electrical and fiber optic cable
General Cable Corp. rose strongly on the news that it had sold
the rest of its Asia Pacific operations for $205
million. This was a significant step in its ongoing
reorganization, which has the goals of simplifying its geographic
portfolio, reducing debt, and improving profitability.
Renewables Inc. (TSX:RNW,
12/31/2014 Price: C$11.48. Annual Dividend:
C$0.84. Low Target: C$10. High Target: C$15.
6/30/2015 Price: C$12.36. YTD Dividend: C$0.39 YTD
Total C$ Return: 11.1%. YTD Total US$ Return: 3.3%.
Unlike most of the other income picks, Yieldco TransAlta
Renewables fell 2% in June, deepening the undervaluation which
made me predict it would rise in the last update. The
decline was likely in sympathy with the larger, interest rate
related, decline of Yieldcos and utilities in general (down 5.3%
and 7.7%, as discussed above.)
Capstone Infrastructure Corp (TSX:CSE.
12/31/2014 Price: C$3.20. Annual Dividend
C$0.30. Low Target: C$3. High Target: C$5.
6/30/2015 Price: C$2.99. YTD Dividend: C$0.15
YTD Total C$ Return: -1.9%. YTD Total US$
Canadian power producer and developer (Yieldco) Capstone
Infrastructure also declined 2.3% despite my prediction for this
stock. As with TransAlta Renewables, I believe the decline was
industry related, not specific to Capstone. In fact, the
company announce progress with its wind projects in Ontario, where
it received a
final Renewable Energy Approval
from the Ontario Ministry of
the Environment and Climate Change for the 10-megawatt Snowy Ridge
New Flyer Industries (TSX:NFI,
12/31/2014 Price: C$13.48. Annual
Dividend: C$0.62. Low Target: C$10. High
6/30/2015 Price: C$15.48. YTD
Dividend: C$0.30 YTD Total C$ Return:
17.1%. YTD Total US$ Return: 8.8%.
Leading North American bus manufacturer New
Flyer got a very favorable write-up at Seeking Alpha,
including speculation that its Brazillian partner, Marco Polo,
might acquire the 80% of the company it does not already own in a
buy-out. I'm a little skeptical about such buy-out
speculation- I think both companies seem to be benefiting well
from the alliance as it is, but I agree that New Flyer remains an
inexpensive company with a dominant position in the North American
bus industry, which continues to rebound from a long slump.
12/31/2014 Price: €13.60. Annual Dividend:
€0.61. Low Target: €12.
High Target: €20.
6/30/2015 Price: €16.65.
YTD Dividend: €0.61 YTD
Total € Return: 26.9%. YTD
Total US$ Return: 16.8%.
Despite Greek wobbles, bicycle manufacturer Accell Group, which
makes most of its sales in Europe, maintained its balance with the
stock up 2% for the month and 17% for the first half. The
company is a leader in e-bikes, and introduced
its own "mid-motor" (i.e. near the pedals so that the motor
can take advantage of the bike's gears) with hardware supplied by
are a premium option, offering better balance, efficiency,
and handling than the more common hub motors, but are more complex
and come with a higher price tag.
12/31/2014 Price: $13.02. Annual Dividend:
$0.24. Beta 0.36. Low Target: $10. High
6/30/2015 Price: $12.87 YTD Dividend: $0.12.
YTD Total Return: -0.2%.
Alone among my three predictions for stocks to perform well in
June, biodiesel producer FutureFuel did not disappoint. The
company gained 8% for the month on the EPA's proposed
biomass-based diesel volumes for 2014-2017, which were announced
on the last trading day of May. I predicted that the
targets, which were good news for biodiesel producers, would
continue to propel the stock upward in early May. That
turned out to be the case, and the stock stayed above $13 for most
of the month before giving back some of its gains in the recent
8. Power REIT (NYSE:PW).
12/31/2014 Price: $8.35. Annual
Dividend: $0. Beta: 0.52. Low
Target: $5. High Target: $20.
6/30/2015 Price: $5.80. YTD Total Return: -30.5%.
Solar and rail Real Estate Investment Trust Power REIT's stock
fell briefly below $5, a price at which I think it represents a good
buy despite the negative summary judgement in March.
The two remaining issues in the lessee's civil case against it will
go to trial in August.
The lessees, Norfolk Southern (NSC) and Wheelling and Lake Erie
(WLE) claim that Power REIT and its CEO, David Lesser, acted
fraudulently when Power REIT was created and the Pittsburgh and West
Virginia (P&WV) (which owns the leased property) became its
subsidiary through a reverse merger. They are claiming damages
in the amount of approximately $3 million based on interest on funds
withheld by third parties, which NSC and WLE claim is due to
Lesser's actions. It seems to me that if interest is owed, it
would be by the third parties. But, given my track record
predicting the court's rulings, readers should form their own
9. Ameresco, Inc.
12/31/2014 Price: $7.00. Annual
Dividend: $0. Beta: 1.36. Low
Target: $6. High Target: $16.
6/30/2015 Price: $7.65. YTD Total Return: 9.3%.
Energy service contractor Ameresco released the usual press
releases about new contracts. Given the timing of the rally,
my best guess is that the company attracted the interest of one or
more institutional investors by presenting
at ROTH London Cleantech Day.
10. MiX Telematics
12/31/2014 Price: $6.50. Annual
Dividend: $0. Beta:
0.78. Low Target: $5. High Target: $20.
6/30/2015 Price: $7.77. YTD Dividend: $0. YTD
Total South African Rand Return: 26.3%. YTD Total
US$ Return: 19.8%.
Vehicle and fleet management software-as-a-service provider MiX
Telematics published its annual report, which seems to have boosted
the stock slightly. The annual report does not contain
information which was not included in its annual results, published
at the end of May, but could have drawn the attention of investors
to its long term progress. As I discussed last month, the
annual results were very encouraging, and MiX continued to trade
at a fraction of the valuation of its developed-market peers
The Annual General Meeting was also set for September 11th.
Last month, I predicted TransAlta Renewables, Capstone
Infrastructure, and FutureFuel would advance in June. The
sharp decline in utility and Yieldco stocks prevented the advance
and led to a small decline in the first two, but FutureFuel advanced
strongly, pulling the average gain to 1.1% for the three
stocks. Over the past four months, I've managed to pick 7 out
of 9 monthly winners, my average pick has advanced each month.
While I'm satisfied with both my overall track record and my monthly
picks, I don't encourage readers to trade based on my monthly
hunches: Transaction costs would probably cost more than my market
timing would help. That said, for readers new to the list,
these monthly picks have so far proven to be among the best stocks
to buy if you have new money to invest.
Since the monthly picks have so far seemed useful, I'll continue my
predictions. Although it did not work out last month, I'll be
sticking with Capstone and TransAlta Renewables. Despite
rising interest rates, both are trading at excellent
valuations. Also, I feel the rapid decline of income stocks
over the last couple months is due for a pause or even a small
Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC,
MIXT, PW, PW-PA, FF, BGC, RNW/TRSWF, REGI. I am the
co-manager of the GAGEIP strategy.
DISCLAIMER: Past performance is
not a guarantee or a reliable indicator of future results.
This article contains the current opinions of the author and
such opinions are subject to change without notice. This
article has been distributed for informational purposes only.
Forecasts, estimates, and certain information contained herein
should not be considered as investment advice or a
recommendation of any particular security, strategy or
investment product. Information contained herein has been
obtained from sources believed to be reliable, but not