Ten Clean Energy Stocks for 2011: Year In Review
Tom Konrad CFA
My clean energy portfolio outperformed again in 2011, but it was
a Pyrrhic victory.
Without a doubt, 2011 was a horrible year for Clean Energy
as bad as 2008. The difference was that, in 2008, the
entire stock market was crushed, while this year, the broad market
ended with only modest declines compared to clean energy stocks.
Based on 2010 and 2011 closing prices, the broad market (as
measured by the performance of the Russell 2000 index), was down
10%, while clean energy stocks were down 52%, as measured by the
most widely held clean
energy ETF, the Powershares Wilderhill Clean Energy ETF (PBW),
which I use as a benchmark for the sector. For the fourth
year running since I began publishing an annual list of picks, my
portfolio again beat my clean energy benchmark, but only because
of the miserable performance of PBW. The portfolio as a
whole lost 48% after taking into account the effect of
dividends. (My portfolio exceeded its benchmark by 12%
in 2008, 45%
in 2009, and 10%
in 2010.) You can find the original article
clean energy picks here.
I attribute my superior performance in previous years to better
sub-sector selection. I generally avoid solar
stocks because I have long felt that the solar sector was
too popular among people who should know better and too
competitive for companies to retain consistent long term
margins. Declining solar manufacturing margins arrived with
a vengeance in 2011, causing an implosion of solar stock prices,
including a couple high-profile bankruptcies.
Efficiency stocks are usually central to my portfolios,
since energy efficiency has better economics that other energy
technologies (including fossil fuels), although this year I chose
to include two demand-response stocks EnerNOC (ENOC)
and Comverge (COMV)
among the energy efficiency picks and got badly burned, as
demand-response seems to be becoming commoditized as well.
Despite the fact that I managed to squeak out a win over PBW, I
consider 2011 my worst year to date. Not only did I make the
inauspicious choice to bet on demand response, but I also picked
two geothermal developers, in the expectation
that 2011 would be a good year for geothermal stocks.
In fact, not only did geothermal stocks fall even further out of
favor in 2011, but both of my picks suffered from nasty surprises
early in the year, with Ram Power (RAMPF.PK)
cost overruns in the company's flagship San Jacinto-Tizate
project in Nicaragua, followed by the resignation of the
company's CEO Hezy
Ram. Ram later told me that he left over
"Irreconcilable differences with the board and controlling
shareholders, about the future course of the company and how to
The news at Nevada Geothermal Power (NGPLF.OB)
was even worse. In May, the company announced a power
production shortfall and forecast a gradual temperature (and
output) decline at their flagship
Faulkner 1 geothermal plant at Blue Mountain.
According to Nevada Geothermal CEO Brian Fairbank in a personal
conversation, the problem was that fractured rock at Blue Mountain
allows water from reinjection wells to travel much more quickly
than anticipated to the production wells, which has the effect of
cooling the produced water over time.
Bad news for specific stocks did not stop with these. In
April, American Superconductor, now renamed AMSC (AMSC)
admitted that their major customer had
refused shipments and had not paid for some previous shipments.
As details emerged, the news only got worse. Sinovel had
to set up a Chinese supplier whose products competed with AMSC's,
with some of the new rival's technology stolen
from AMSC by a former employee. AMSC is now pursuing
Sinovel in Chinese courts, but Chinese courts are not known for
their diligence in the protection of international intellectual
For stock-by-stock performance, see the chart and table below:
|Q1 change||Q1 div||Q2 change||Q2 div||Q3 change||Q3 div||Q4 change||Q4 div||Total Return|
Outlook for 2012
With fully 30% of the companies in my list suffering from
unanticipated bad news, I'm a bit shocked that the portfolio still
managed to beat its benchmark. But with my portfolio down by
almost half, this is a victory of the "Win the battle, lose the
war" variety, and not one I care to repeat. Fortunately, I
don't think I'll have to.
With so many clean energy stocks having fallen so far, I have
been finding stocks which I consider good values for much of the
last 6 months. While 2011
felt a lot like 2008, I think 2012 has the potential to be a
lot more like 2009 than any other year since I started this
series. In 2009, my picks were up 57%, while PBW was up
Expect to see my new list for 2012 in the next few days.
DISCLOSURE: Long VE, RAMPF,
NFYEF, WFIFF, CVTPF, and calls on AMSC.
DISCLAIMER: The information and trades provided here are for informational purposes only and are not a solicitation to buy or sell any of these securities. Investing involves substantial risk and you should evaluate your own risk levels before you make any investment. Past results are not an indication of future performance. Please take the time to read the full disclaimer here.