Stock Picks for US Energy Dominance

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Tom Konrad, Ph.D. CFA

Thursday night (Friday morning in Sinapore) CNBC Asia’s Street Signs program must have had an interview cancellation, because they needed someone to give them 3 energy stock picks in response the Trump’s “Energy Dominance” speech on last minute notice.  They sent me (and probably a bunch of other people) an email two and a half hours before air.  I did not see it until 20 minutes before the actual interview.  I warned them that I do clean energy, not fossil fuels, but apparently they had no other takers who were awake and able to give energy stock picks at 11:23pm ET on a moment’s notice.

I think they found me because I was on Capital Connection Asia in late January.  

I don’t think I was quite what the host, Martin Soong was looking for.  He improvised well by turning from the Trump clip saying “if you want to do something entirely different, you might invest in alternative energy…”

I’m still trying to get video, but here’s my memory of the interview.

MS: How is clean energy doing under Trump?
TK:  Great.  There was a little stumble after he was elected, but then the market figured out that he’s living in the 20th century while the economy has moved on to the 21st.  Clean energy has turned the corner, and is now the cheapest source of new electricity. The market is realizing that, even if Trump doesn’t.

MS: Do you have stock picks?

TK:  Atlantica Yield (ABY), Covanta Holding Co (CVA), and General Cable (BGC).  
I went on to describe why I like Atlantica – you can read about that and Covanta in my last 10 Clean Energy Stocks for 2017 update.
General Cable was a last minute add for me.  I’m very nervous about the market right now, so there are not many stocks I’m enthusiastic about.  I was tempted to mention Seaspan (SSW) Preferred shares (SSW-PRG), but they’d asked for energy stocks, not efficient transportation.  You can read about Seaspan Preferred in my recent update as well.  

My picks in January had been Pattern Energy Group (PEGI), and Hannon Armstrong (HASI.) Both have gained significantly (17% and 22%) since then, and so they’re still top holdings, but not the most likely to make further large gains in the near term.
     
I picked General Cable instead.  It’s a bit of a stretch to call it an energy stock, but at least the connection between the manufacturer of electric and communication cables and the energy sector is obvious.  Given more than 20 minutes, I might have picked something else, or just stuck with the two I’m most enthusiastic about.  

Martin Soong wanted to talk about ETFs, we did not talk about Covanta or General Cable at all.

MS: What about clean energy ETFs?  I’ve looked at six that are up about 10% for the year.

TK: ETFs are okay if you’re unwilling to pick stocks, but clean energy is such a new sector, pricing is not yet efficient, and there is a lot of room for stock pickers to get an edge.

MS: But the ETFs are up 10% for the year.  Why not just invest in those?

TK: My Green Global Equity Income Portfolio is up 17%.

MS: I have to admit, that’s good performance.

And he ended the interview.

Unfortunately, I had misstated my performance.  I don’t spend much time thinking about past performance: Future performance and how I can improve it is much more interesting.  For the record, my Green Global Equity Income Portfolio (GGEIP) was up 13.5% for the year to date…. not as good as I’d thought, but still ahead of the alternative energy ETFs he was looking at.  

Despite my mistake on my track record, I stick to my assertion that clean energy remains a stock picker’s market.  Until clean energy investing becomes main stream, there will be a lot of room for stock pickers like me to beat the indexes.  Perhaps I should have mentioned that GGEIP was  up 30.5% in 2016, although I achieved that using options and other strategies not available in clean energy ETFs, not just stock picking.

DISCLOSURE: Tom Konrad has long positions in ABY, CVA, BGC, PEGI, HASI, and SSW-PRG, and own puts on SSW (an effective short position.)

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