Tom Konrad CFA
Clip Art by Phillip Martin
February was a month of consolidation after blistering January returns in clean energy stocks, and the market in general. My clean energy benchmark, the Powershares Wilderhill Clean Energy Index (PBW), declined 2.2%, while the broad universe of small cap stocks which I benchmark with the iShares Russell 2000 Index ETF (IWM) eked out a 0.6% gain.
My ten clean energy picks for 2013 (introduced here), put in a relatively strong showing of +1.5%, but that still leaves them trailing the benchmarks. For the year, PBW is up 8.7%, IWM is up 10.1%, and my picks are up 6.8%.
The chart and table show individual stock performance through March first, for my ten picks plus the six alternative picks I presented in a second article.
Below, I highlight significant events I feel affected stock performance.
||February USD Return|
|TSX:WFI||Waterfurnace Renewable Energy||-1%|
|NASD:ZOLT||Zoltek Companies, Inc.||18%|
|TSX-V:FVR||Finavera Wind Energy||4%|
|TSX:NFI||New Flyer Industries||2%|
|TSX:RPG||Ram Power Group||5%|
Lime Energy (NASD:LIME)
Lime Energy will continue to trade on NASDAQ until the exchange can review the company’s appeal of a possible delisting. There has not yet been any news about when the hearing will take place, or if the company is still on track to file restated earnings before March 31st.
On March 1st, Lime sold its ESCO business to PowerSecure International (NASD:POWR) for $5.5 million, leading to a 6% rally for the day capping off a 30% rally since the last update.
Maxwell Technologies (NASD:MXWL) gave back 10% after a 17% rally in February. I think the decline was caused by profit taking and concern that a date has not yet been set for Maxwell’s fourth quarter earnings announcement. Last year, Maxwell announced earnings on February 16th, and set the date a week earlier.
I don’t think investors should be worrying that the delay is due to a reluctance to reveal some nasty surprise. If management had been aware of such a surprise in the works, two small sales of stock by company insiders on February 7th would not have been allowed. These two sales were dwarfed by the amount of restricted stock which had recently become available for these two insiders to sell, so I don’t think the sales can be taken to imply that they think the stock has peaked, either.
Accell Group (Amsterdam:ACCEL)
Netherlands based global bicycle maker Accell Group fell 13% largely due to disappointing fourth quarter results. While total sales were up 23%, that was mostly due to last year’s acquisition of Raleigh. Organic worldwide sales growth was up only 3%, although sales shrank in its home market.
Operating profit excluding one-off items fell 17%, in line with previous guidance, but apparently lower than many investor’s expectations. The company expect to grow both sales and profit in 2013.
Electric bike continue to be Accell’s strongest performing segment, and now account for 32% of sales.
Zoltek Companies (NASD:ZOLT)
Carbon fiber maker Zoltek shot up18% after a brief decline following the company’s fourth quarter results on January 31st. When I highlighted Zoltek as a buying opportunity in last month’s update, I did not expect to be proven right so soon.
Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF)
Finavera was the other buying opportunity I highlighted last month. Although it has risen 4% since then, I continue to consider the stock dirt cheap.
Alterra Power (TSX:AXY, OTC:MGMXF)
Geothermal, Hydro, and Wind Power developer Alterra Power declined 9% on disappointing results from it’s 66% owned HS Orka power plant in Iceland. Over the longer term, Altera’s share price will be driven by the company’s ability to develop its projects and possible asset sales. Wiggles in the earnings from its operating power generation should have much less effect, so I think the decline has made the stock increasingly attractive, and added a little to my position.
New Flyer Industries (TSX:NFI, OTC:NFYEF)
New Flyer continues the steady stream announcements of new contract awards adding to its already solid backlog. A number of contracts for compressed natural gas buses drew the attention of Seeking Alpha author and advocate of natural gas for transportation Micheal Fitzsimmons. He wrote a good overview of the company, highlighting its strength in natural gas buses.
On March 1st, the company announced the acquisition of Orion’s aftermarket parts division. This acquisition fits nicely into New Flyer’s ongoing strategy of diversifying its revenue stream into businesses which are less cyclical than that for new heavy duty transit buses.
Daimler unit Orion announced its exit from the North American bus market last year. New Flyer has also taken up multiple contracts for new buses from Orion, including a contract for up to 381 hybrid buses announced on February 12th.
LSB Industries (NYSE:LXU)
Chemicals and climate control conglomerate LSB Industries announced earnings on February 28th, comfortably beating analyst expectations for earnings, but missing slightly on revenue. After rallying strongly (19%) in January, the stock fell back 11% in the lead-up to the earnings announcement. Market reaction since has been tepid.
My Forbes readers should have been able to play the company’s large swing, since I highlighted LXU as a stock to sell on February 12th, with a suggested limit price of $42. The stock traded as high as $42.15 on February 15th, but has since fallen to $38.27. I personally sold covered calls on LXU, and intend to continue to do so until I’m eventually taken out of my position. Time will tell which will turn out to be the best strategy.
Ameresco, Inc. (NASD:AMRC)
Performance Contracting Firm Ameresco fell 13% in February after warning that its fourth quarter earnings would be worse than expected on February 15th. It said results would be impacted by storm related delays and fiscal uncertainty. The actual earnings release was delayed on March 1st as Ameresco reviews the accounting treatment of an interest rate swap.
Proper accounting for financial derivatives is always tricky and subject to judgement calls, so this accounting issue is unlikely to make a big difference to shareholders focused on the long term viability of Ameresco’s business.
The fiscal uncertainty and total dysfunction in Washington DC, is a more serious concern. Ameresco’s largest customer is the federal government. However, I believe that the executive branch has the power and will to push ahead with initiatives which are likely to substantially increase the size of the performance contracting market over the next four years. Hence, I continue to see the current weak stock price as a buying opportunity.
Ram Power Group (TSX:RPG)
Stock in geothermal developer Ram Power rose 5% in February on news that the second phase of its San Jacinto-Tizate project in Nicaragua had achieved full commercial operation and passed a 30 day performance test. The company also announced a best efforts offering of secured debt and warrants.at C$0.30 (slightly above the current price) on February 27th. The non-dilutive offering has so far had little effect on the stock price.
My picks so far continue to lag the bulk of clean energy stocks and the broad market, but they made up some ground in February. Readers who purchased Zoltek and Finavera when I called them buying opportunities last month did very well on the former, and made small gains in the latter.
I continue to see Finavera as a buying opportunity, now joined by Ameresco and Alterra. I personally added to my positions in Ameresco, Alterra, and Zoltek in February.
Disclosure: Long WFI, LIME, PFB, MXWL, ACCEL, ZOLT, KNDI, FVR, AXY, WM, NFI, LXU, AMRC,PW, HTM, RPG.
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.