Ten Clean Energy Stocks For 2014: February Update
Tom Konrad CFAThe stock market has had a rough five weeks since I introduced my annual Ten Clean Energy Stocks model portfolio on December 27th. My broad market benchmark (the iShares Russell 2000 index) is down 5.6% for the period. Clean energy stocks fared better, with the Powershares WilderHill Clean Energy ETF (NYSE:PBW) down only 0.5% as I write. My model portfolio of ten clean energy stocks is up 0.9% in local currency terms, but the weak Canadian dollar (down 3.5%) and Euro (down 1.5%) turned this into a US dollar decline of 1.0%.
In general the more speculative stocks performed better, but with much greater variation. The first six income stocks lost an average of 2% in US dollar terms, with a standard deviation of 3%. The next four growth stocks were flat on average, with a standard deviation of 8%. The two extra "speculative" picks performed speculatively, with one up 35%, and the other down 22%, for an average of 7%.
January has been fairly quiet for individual stocks in the portfolios, but where there has been significant news, I note it below.
Individual Stock Notes
(Current prices as of February 3rd, 2014. The "High
Target" and "Low Target" represent the ranges within which I
predicted these stocks would end the year, although I expect a
minority will stray beyond these bands due to unanticipated
Sustainable Infrastructure REIT Hannon Armstrong fell back to the
low end of the range between my high and low targets after a quick
run-up based in its big dividend increase in December. The
only slightly negative news was an SEC filing in which the company
stated that it had agreed to amend the terms of a portfolio loan
to geothermal developer EnergySource LLC. The balance of the
loan amounts to $11.8 million or 74¢ a share. If the loan
were in default and there were no chance of recovering any of its
value, a 74¢ decline would be justified. That's far from the
case; a decline of around 5¢ a share seems more appropriate than
the 85¢ decline we've seen. Hence, I have to attribute the
vast majority of the pull-back to profit taking, and consider $13
an excellent entry point for anyone who does not already own the
Capstone Infrastructure Corp (TSX:CSE.
Current Price: C$3.55. 12/26/2013 Price: C$3.55. Annual Yield: 8.5%. Low Target: C$3. High Target: C$5.
YTD Total C$ Return: 1.1% . YTD Total US$ Return: -2.4%
Capstone paid its regular quarterly dividend of C$0.075 on
4. Primary Energy
Recycling Corp (TSX:PRI,
Current Price: C$5.00. 12/26/2013 Price: C$4.93. Annual Yield: 4.1%. Low Target: C$4. High Target: C$7.
YTD Total C$ Return: 1.4% . YTD Total US$ Return: -2.1%
I interviewed Primary Energy's CEO and wrote an in-depth article,
which you can find here.
I've also been adding to my position.
Current Price: €13.61. 12/26/2013 Price: €13.59. Annual Yield: 5.5%. Low Target: €11.5. High Target: €18.
YTD Total € Return: 0.1% . YTD Total US$ Return: -1.5%
Bicycle manufacturer and distributor Accell continues to rationalize its European operations. The company sold Hercules, one of its four German brands. Accell has owned Hercules for the last 20 years and will book a €3 million (€0.12) profit on the transaction.
6. New Flyer Industries
Current Price: C$11.04. 12/26/2013 Price: C$10.57. Annual Yield: 5.1%. Low Target: C$8. High Target: C$16.
YTD Total C$ Return: 4.4% . YTD Total US$ Return: 0.8%.
Cannaccord Genuity upgraded bus manufacturer New Flyer to a
"Buy," most likely in response to
strong deliveries in the fourth quarter. The company
reiterated a warning that 2014 margins would be weak due to
expected deliveries on bus contracts signed during the very
competitive pricing market of the financial crisis.
New Flyer also received
a $375,000 grant to work with a local community college to
train employees at its St. Cloud Minnesota facility to build its
new mid-size ("Midi") buses. The company also paid its
normal C$0.04875 monthly dividend.
Energy performance contracting firm Ameresco started the year
strong, but has since fallen back, seemingly in sympathy with the
broader market decline. From the steady stream of contract
announcements, it seems to me like the company's pace of business
may be picking up a little, but since the size of contracts varies
widely, I'm far from confident about this.
Ameresco also announced a new tool
using wireless sensing technology to allow a building's
controls to learn occupant behaviors and adapt energy use
accordingly. A pilot test in a commercial office building
produced 18% energy savings. I speculate that it might be
possible to apply this tool to buildings under both future and
existing performance contracts, which should improve their
profitability to Ameresco and/or allow them to be offered to
clients at more competitive prices.
Current shareholders and non-accredited investors are eligible to participate in the Preferred stock offering, which should appeal to income investors. While cash dividends on the preferred will not be paid until the civil action with Norfolk Southern (NSC) and Wheeling and Lake Erie (WLE) is resolved, the rent payable under NSC and WLE's interpretation of the lease should be sufficient to both pay off Power REIT's legal bills and allow the company to catch up with the cumulative preferred dividends.
9. MiX Telematics Limited (NASD:MIXT).
Current Price: $11.16. 12/26/2013 Price: $12.17. Annual Yield: N/A. Low Target: $8. High Target: $25.
YTD Total US$ Return: -8.8%
A South Africa based global provider of software as a service fleet and mobile asset management, MiX Telematics initially rose but then sold off in the last couple weeks along with the general emerging market decline. There was no significant news, but I thought this report from MiX on when and why drivers speed was interesting.
Like Primary Energy, I was planning on writing an in-depth article on MiX based on a CEO interview, but the company preferred to delay an interview until after its third quarter conference call coming on February 6th. I expect to write that article later this month.
10. Alterra Power Corp.
Current Price: C$0.29 12/26/2013 Price: C$0.28. Annual Yield: N/A. Low Target: C$0.20. High Target: C$0.60.
YTD Total C$ Return: 1.8% . YTD Total US$ Return: -1.8%.
Renewable energy developer and operator Alterra Power expanded
its joint venture with Philippine geothermal power developer
Energy Development Corp. to the rest of its Peruvian geothermal
projects. This is in line with Alterra's recent strategy of
focusing on core projects and either disposing of other assets or
developing them with funds from joint venture partners, as is the
Two Speculative Penny Stocks for 2014
Ram Power Corp (TSX:RPG,
Current Price: C$0.065 12/26/2013 Price: C$0.08. Annual Yield: N/A. Low Target: C$0.20. High Target: C$0.60.
YTD Total C$ Return: -18% . YTD Total US$ Return: -22%.
Geothermal power developer Ram completed the remediation of its
San Jacinto-Tizate project on January 22nd, although the company
did not provide any indication of how successful the remediation
was. Management reiterated that the drilling is expected to
increase output by 9 to 14 MW. The results of a plant
capacity test are expected in March.
Finavera Wind Energy
Current Price: C$0.105 12/26/2013 Price: C$0.08. Annual Yield: N/A. Low Target: C$0.20. High Target: C$0.60.
YTD Total C$ Return: 40% . YTD Total US$ Return: 35%.
There was no news for wind project developer Finavera, and the
increase seems most likely to be a low-volume recovery from a
share price depressed by tax loss selling at the end of 2013.
My picks and clean energy in general have mostly held up will during
the sell off so far this year. The income stocks at the start
of the list should hold up well in a market sell off, while many of
the riskier stocks later in the list are more likely to be driven by
company events than broad market moves. The exceptions are
Ameresco and MiX, which will probably continue to follow broader
market trends, hopefully with an upward bias.
Disclosure: Long HASI, PFB, CSE, ACCEL, NFI, PRI, AMRC, MIXT, PW, AXY, RPG, FVR.
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