Ten Clean Energy Stocks: A Rocky Start To 2015
Tom Konrad CFA
For the month, the model portfolio was down 3.6% in local currency terms, but fell 7.2% in dollar terms. For comparison the broad universe of US small cap stocks was down 3.3% (as measured by IWM, the Russell 2000 index ETF), and the most widely held clean energy ETF, PBW, was down 6.6%.
This year I split the model portfolio into two sub-portfolios of six income stocks (NYSE:HASI, NYSE:BGC, TSX: RNW, TSX: CSE, TSX:NFI, and XAMS:ACCEL) four value and growth stocks (NYSE:FF, NYSE:PW, NASD: AMRC, and NASD:MIXT).
PBW (-6.6%) is a good benchmark for the value and growth stocks, which fell 6.6% in local currency terms and 6.8% in dollar terms. The six income stocks fell 1.6% in local currency terms and 7.4% in dollar terms.
All three of the Canadian stocks mentioned above are income stocks, as is the lone European stock, which was hurt by the 6.8% decline in the Euro compared to the dollar. I have searched in vain for good benchmarks for equity income portfolios, but have not found any that do not contain some aspect of active management, making them poor benchmarks for differentiating between category performance and stock picking skill. The best I could come up with are JXI, the iShares Global Utilities index, since many income stocks are also global utilities. Global utilities are a very defensive sector, with JXI rising 1% for the month.
To date, there are no income oriented clean energy ETFs or mutual funds, so I instead settled on the Green Alpha Global Enhanced Equity Income Portfolio (GAGEEIP), a fossil-free equity income strategy which I co-manage. GAGEEIP fails several tests of a good benchmark. Most importantly, it is actively managed in large part by me, meaning I'm simply comparing one of my strategies to another. It also is not a pure equity strategy, in that covered call options are used to reduce risk and increase income. The best benchmarks are easily investable, and GAGEEIP is not yet available to investors except as separately managed accounts through Green Alpha Advisors. For January, GAGEEIP fell 0.7%. The large difference between its performance and the income stocks in the model portfolio is mostly due to better diversification, and the advantage of the covered call strategy in a down market.
The chart below gives details of individual stock performance, followed by a discussion of January company news for each stock.
The low and high targets given below are my estimates of the range within which I expect each stock to finish the year.
1. Hannon Armstrong
Sustainable Infrastructure (NYSE:HASI).
12/31/2014 Price: $14.23. Annual Dividend: $1.04. Beta: 0.81. Low Target: $13.50. High Target: $17.
1/31/2015 Price: $13.70. YTD Dividend: $0. YTD Total Return: -3.7%.
Sustainable infrastructure financier and Real Estate
Investment Trust Hannon Armstrong did not announce any significant
news for the quarter. Analysts at Roth Capital initiated the
stock with a very bullish "buy" rating and a $19 price
target. Zacks upgraded the stock from "underperform" to
"neutral," and now has a $14.60 price target on HASI.
Cable Corp. (NYSE:BGC)
12/31/2014 Price: $14.90. Annual Dividend: $0.72 (4.8%). Beta: 1.54. Low Target: $10. High Target: $30.
1/31/2015 Price: $11.44. YTD Dividend: $0. YTD Total Return: -23%.
International manufacturer of electrical and fiber optic cable,
General Cable Corp. was already cheap as the month began, and sold
off by more than a quarter in mid-January before staging a slight
recovery to a loss of 23% at $11.44 at the end of the month.
The decline seemed to halt when S&P removed its negative
credit watch for the company's bonds. Stock analysts were
more bearish. Analysts and Longbow Research downgraded BGC
from buy to neutral, those at DA Davidson dropped their price
target from $14 to $12, while Stifel Nicolaus cut its price target
to $13 from $17.
The company will release fourth quarter earnings after market
close on February 4th.
Renewables Inc. (TSX:RNW,
12/31/2014 Price: C$11.48. Annual Dividend: C$0.77 (6.7%). Low Target: C$10. High Target: C$15.
1/31/2015 Price: C$12.74. YTD Dividend: C$0.064 YTD Total C$ Return: 11.0%. YTD Total US$ Return: 1.2%.
Analysts at Scotiabank increased their price target on Canadian
yieldco TransAlta Renewables from C$13 to C$14, and this may have
contributed to the stock's 11% local currency gain for the month.
Capstone Infrastructure Corp (TSX:CSE.
12/31/2014 Price: C$3.20. Annual Dividend C$0.30 (9.4%). Low Target: C$3. High Target: C$5.
1/31/2015 Price: C$3.37. YTD Dividend: C$0. YTD Total C$ Return: 5.3%. YTD Total US$ Return: -4.0%.
5. New Flyer Industries
12/31/2014 Price: C$13.48. Annual Dividend: C$0.585 (4.3%) Low Target: C$10. High Target: C$20.
1/31/2015 Price: 13.72$. YTD Dividend: C$0.04875 YTD Total C$ Return: 1.8%. YTD Total US$ Return: -7.2%.
Leading North American bus manufacturer New Flyer announced its
fourth quarter deliveries and backlog. Orders remain strong,
and the company continues to rebuild its backlog of firm orders as
the industry recovers from a prolonged downturn, and management
expects that recovery to continue.
12/31/2014 Price: €13.60. Annual Dividend: Varies: at least 40% of net profits. €0.55 in 2014 (4.0%). Low Target: €12. High Target: €20.
1/31/2015 Price: €13.50. YTD Dividend: €0. YTD Total € Return: -0.7%. YTD Total US$ Return: -7.4%.
The main news for bicycle manufacturer Accell Group was the
decline of the Euro, which not only hurt the returns of US
shareholders, but may eventually lead to price hikes from some of
its European customers due to the increased price of parts sourced
from Asia when bought in Euros. The flip side of this coin
is that the strong dollar may help the company in its efforts to
spread the adoption of e-bikes on this side of the Atlantic.
12/31/2014 Price: $13.02. Annual Dividend: C$0.24 (1.8%). Beta 0.36. Low Target: $10. High Target: $20.
1/31/2015 Price: $10.99. YTD Dividend: $0. YTD Total Return: -15.6%.
Lee Mikles resigned as President of specialty chemicals and biodiesel producer FutureFuel, but will remain as a member of the board, and the retirement was not the result of a dispute, but for personal reasons. Analysts at Roth Capital maintained their $19 price target and buy rating.
posted the transcript of the oral argument for summary judgement in its civil case with its lessee Norfolk Southern Corporation (NYSE:NSC) and sub-lessee Wheeling & Lake Erie Railway (WLE) to its website. This argument did not seem to include anything which was not already in the written arguments, but the stock has rallied.
Analysts at Northland Securities began coverage on energy service
contractor Ameresco with an outperform rating. The stock's
decline seems to be due more to the general market decline than
10. MiX Telematics
12/31/2014 Price: $6.50. Annual Dividend: $0. Beta: 0.78. Low Target: $5. High Target: $20.
1/31/2015 Price: $5.87. YTD Dividend: $0. YTD Total South African Rand Return: -9.0%. YTD Total US$ Return: -9.7%.
In January, we saw a number of already very cheap stocks get even
cheaper. I thought the start of the year an excellent
time to initiate a position in any of these, and now I'm even more
Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC, MIXT, PW, FF, BGC, RNW/TRSWF. I am the co-manager of the GAGEEIP strategy.
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.
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