Tom Konrad CFA

July Overview

July was a good month for my Clean Energy model portfolio.  Since the last update, these 11 stocks are up an average of 3.3%, with a year to date return total return a tiny loss of -0.5%.  While it's never pleasant to be down for the year, it's helpful to compare this performance to that of the most widely held clean energy ETF, the Powershares Wilderhill Clean Energy ETF (PBW), which was down 8.7% for the month, and down 21% year to date.  All in all, it has been a miserable year so far for most clean energy investors, and I'm happy to say that my model portfolio has managed to avoid almost all of that misery.

The broader market, as measured by the Russell 2000 index (^RUT), had a weak July as well, down 2.5% for the month, but it is still up 7.1% for the year.  With the broad market up, my hedged portfolio, which includes a put on the broad market ETF SPY, is lagging the model portfolio, with a total loss of -6.5% year to date.

I believe the model portfolio's year to date out performance is mostly due to avoidance of the moribund solar sector, which has declined 37% since the start of the year, even after a 63% decline in 2011, as measured by the Guggenheim Global Solar ETF (TAN).  However, TAN gained 3% since the last update, even as PBW declined, so this month's strong performance is due to other factors.

News Driven Returns

Company-specific news events drove the model's July performance.   New Flyer Industries (TSX:NFI / NFYEF), Western Wind Energy (TSX:WND, WNDEF) and Finavera Renewables (TSX-V:FVR, FNVRF), which were up 25%, 35%, and 23% for the month all gained because of significant news releases.  This more than compensated for bad news from Lime Energy (LIME), which lost 40% (see below for details.)

While those four stocks were charging ahead or falling off a cliff, the rest of the portfolio was more sedate.

Europe-based stocks Veolia (VE), Rockwool (RKWBF), and Accell Group (ACCEL.AS) all declined modestly (-8%, -4%, and -4%) becaue of continued concerns over the Euro crisis.  Nevertheless, these three remain positive or flat for the year (2%, 8%, and 0%.)  Domestic companies Waterfurnace Renewable Energy (TSX:WFI / WFIFF), Waste Management (WM) and Honeywell (HON) produced modest gains of 4%, 5%, and 8%, partially offsetting the losses among the European companies and Canadian Alterra Power (TSX:AXY / MGMXF), which gave back -5% after a strong showing in June.

I've written extensively about three of the big movers elsewhere, so I will just provide a quick summary for each and links:

• Western Wind Energy put itself up for sale under increasing pressure from shareholders.
• Finavera sold one of its wind projects for $22 million, greatly easing liquidity concerns.
• Lime Energy announced that its audit committee had discovered mis-reporting of revenue over the last nine quarters, possibly including the booking of non-existent revenue.  The stock plunged while the market awaits the results of the full review currently being conducted.
  

Distracted by all the news at these three companies, I have not found time to write about the news at New Flyer Industries, which over the last month has announced strong order activity and backlog for the second quarter, and has snagged an order in the New York market as a consequence of the exit of Daimler's Orion division from the North American bus market. 

My Trades

During the month, I bought Western Wind (both before and immediately following the sale announcement), Finavera (right after the wind farm sale), and Lime, where I think the current price has discounted all the very real accounting risk and then some.  I also re-entered Veolia at $10.36, having sold in June when the stock was above $12.  The decline in price and some progress cleaning up the balance sheet combined to make this stock attractive to me again.

DISCLOSURE: Long WFIFF, LIME, RKWBF, WM, ACCEL, NFYEF, FNVRF, WNDEF, MGMXF, VE.

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 guaranteed.