Tom Konrad. CFA

A "bonus" stock pick this year.  Also, notes on New Flyer Industries and Finavera Wind Energy.

Maybe it was because Seeking Alpha did not carry my annual list of 10 Clean Energy Stocks for 2012 this year, but no one seems to have noticed that there were actually 11 stocks in the list.  Call it the Spinal Tap of top-ten lists.

If anyone did notice the extra pick, they didn't leave a comment.  What happened was that I have two number 8 stocks, but there is enough text between them that neither I nor most of my readers could see both 8's at once on the same screen.  Oops!

I had 10 originally, but my messed up numbering led me to think I did not have enough, and so I went back and added Honeywell (HON) at the last minute, choosing to play it safe with a large cap energy efficiency company.  So far this year, Honeywell has produced the expected safe results, but because clean energy stocks (especially solar) have been on a tear,  Honeywell's 10.5% return has dragged down the portfolio's average a little.  But who's complaining?

Performance

I'll be complaining if including Honeywell makes my list not beat PBW, my clean energy benchmark for the first time in 2012.  As of February 3rd, PBW is up 20.7% and my broad market benchmark IWM is up 12.3%.  Meanwhile, my (ahem) eleven stocks are up an average of 15.0%, with New Flyer's monthly dividend payment bringing the portfolio's total return to 15.1%.  Readers who hedged their portfolios by buying a put on SPY as I suggested did worse (since the market was up in January), slightly under-performing even the broad benchmark with a total return of 12.0%.  But the year is still young.

Solar

The main reason this portfolio has underperformed broader clean energy was my decision not to include any solar stocks.  Solar stocks have been rapidly making large percentage gains from the miserable lows they hit at the end of last year.  The Guggenheim Solar ETF TAN is up 32% so far this year, and solar stocks are prominent among PBW's holdings.

I toyed with including a solar stock or two in the list, for similar reasons to those I discussed last October, but I decided to hold off simply because I don't follow solar closely enough to make informed selections. 

Finavera Wind Blows Back

In truth, the portfolio was doing considerably worse only a week ago, but recently got a boost from a couple stocks which had been lagging.  First, Finavera Wind Energy (FNVRF.PK)
 updated investors on progress towards environmental permitting of its projects, highlighting the fact that two of their projects are within months or receiving final permits:

Regularly published power industry data provides some context for the valuation of wind energy projects. The data illustrates the average multiples paid for projects in 2011. Early stage projects have sold for more than $60,000/MW. Projects that are fully permitted and have a power purchase agreement have sold for more than $500,000/MW. The jump in value from the early stage to the next stage is significant. Finavera currently finds itself at this inflection point. Our projects are being valued in the public markets as early stage, yet we are a few short months away from being fully permitted on our first two projects. We believe Finavera is on the cusp of a significant asset re-valuation.

At $0.43, Finavera is now up only 5% for the year, but if those permits are granted it has a lot farther to go.  Investors who bought the stock last month when it was trading in the $0.25-$0.30 range are already feeling smug (I added to my positions, but mostly between $0.35 and $0.40.)

New Flyer Puts the Pedal to the Metal

Second, New Flyer Industries (NFYEF.PK/NFI.TO) stock has been accelerating since January 19th.  The unusual action prompted regulators to ask New Flyer to disclose that New Flyer has been in discussions "regarding a potential commercial and strategic relationship."  But company CEO Paul Soubry says there are no deals closing, and several analysts agree.

The stock has been incredibly under-priced since last summer.  North American transit bus orders have been slow for the past two years, and New Flyer has been reducing its backlog as a result.  But the flip side of the slow bus market has been a rapidly aging bus fleet and increasing pressure on transit operators to replace aging buses. 

The share price run-up is most likely the result of investors realizing that this is a massively under-priced stock in a cyclical market which is about to enter an expansionary phase.

Conclusion

Although my stocks are suffering this year from my long-term decision to mostly avoid solar, I'm not complaining about the returns, and I'm very happy to see Clean Energy stocks finally heading in the right direction after a gruesome year in 2011.

DISCLOSURE: Long NFYEF, FNVRF, and puts on IWM and SPY.

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.