Tom Konrad CFAFor both the stock market and the weather, March was more lion than lamb. My broad market benchmark fell 2.2% to end up 1.5% for the quarter. Volatile clean energy stocks were down 4%, to end the quarter up 15.7%. My annual Ten Clean Energy Stocks model portfolio is designed to avoid much of the sector's notorious volatility, and fell only 0.6%, ending the quarter with a 3.9% total return.
In dollar terms, the first six (income oriented) picks returned an average of 3% in March and 9% for the quarter, while the last four (growth oriented) picks fell 8% in March and 4% for the quarter. The two speculative picks gained 21% in March and 17% for the quarter. Local currency returns were slightly higher due to the weak Canadian dollar so far this year.
Two of the companies in the portfolio, Capstone Infrastructure Corp (TSX:CSE. OTC:MCQPF) and Primary Energy Recycling Corp (TSX:PRI, OTC:PENGF), announced long-awaited contracts, as did speculative pick Finavera Wind Energy (TSX-V:FVR, OTC:FNVRF) which is not included in the model portfolio due to its speculative nature. Offsetting the gains from these announcements were disappointing earnings and forward guidance from Ameresco, Inc. (NASD:AMRC).
I discuss Ameresco's setback and other companies' progress after the performance chart.
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 rallied strongly
for the first three weeks of March, only to fall back as quickly
at the end of the month, all without any news. Eventually
investors are going to recognize that HASI is a stable income
stock which can be left in the back of a portfolio to gather dust
and dividends. Until that time, the volatility is giving
late-comers a chance to acquire this income stock at a very
2. PFB Corporation
Current Price: C$5.60. 12/26/2013 Price: C$4.85. Annual Yield: 4.5%. Low Target: C$4. High Target: C$6.
YTD Total C$ Return: 16.7%. YTD Total US$ Return: 12.9%
Capstone Infrastructure Corp (TSX:CSE.
Current Price: C$3.84. 12/26/2013 Price: C$4.05. Annual Yield: 7.4%. Low Target: C$3. High Target: C$5.
YTD Total C$ Return: 18.3% . YTD Total US$ Return: 14.4%
Independent power producer Capstone announced the long-awaited
contract for its Cardinal co-generation facility with the Ontario
Power Authority (OPA). I discussed my expectation for this
contract in detail last November in Capstone
Infrastructure: The Bad News Is Priced In. The actual
contract seems to fall somewhere between my low estimate (the "Bad
News") of the title and my "Expected" estimate.
The crucial variable will be the plant's capacity factor (the
percentage of time it is running and producing power), which will
in turn depend on electricity and natural gas market
conditions. A fixed payment will cover Cardinal's fixed
operating costs and return of capital, while the plant will
operate whenever the spread between electricity prices and natural
gas prices is sufficient for it to operate profitably.
Cardinal's relative efficiency will allow it to operate more
frequently than other natural gas turbines, and its capacity
factor is likely to increase as Ontario's Nuclear refurbishment
program periodically takes much of that capacity off the market.
While there are clearly many moving parts, management is
confident enough about the long term profitability of the new
contract to maintain the current C$0.075 quarterly dividend. This
will next be paid at the end of April to shareholders of record on
4. Primary Energy
Recycling Corp (TSX:PRI,
Current Price: C$5.44. 12/26/2013 Price: C$4.93. Annual Yield: 5.5%. Low Target: C$4. High Target: C$7.
YTD Total C$ Return: 18.4% . YTD Total US$ Return: 14.4%
Waste heat recovery firm Primary Energy also announced a long
awaited contract for its Cokenergy energy recycling plant.
There was not much doubt that this contract would be extended, and
so the stock would not have moved much, except that that
management also raised the quarterly dividend to US$0.08 from
$0.06. The next dividend payment is planned for May.
On an ongoing basis, this new dividend will amount to
approximately 45% to 55% of distributable income, and so there may
be room for further dividend increases after the end of Primary
Energy's current investment program to refurbish the Cokenergy
plant and increase its efficiency to take advantage of incentives
in the new contract.
Current Price: €14.86. 12/26/2013 Price: €13.59. Annual Yield: 3.7%. Low Target: €11.5. High Target: €18.
YTD Total € Return: 9.3% . YTD Total US$ Return: 9.5%
There was no significant news for bicycle manufacturer and
distributor Accell Group.
6. New Flyer Industries
Current Price: C$11.33. 12/26/2013 Price: C$10.57. Annual Yield: 5.2%. Low Target: C$8. High Target: C$16.
YTD Total C$ Return: 8.1% . YTD Total US$ Return: 4.5%.
Leading transit bus manufacturer New Flyer announced its annual
results on March 19th. Last quarter earnings were very strong, but
first quarter 2014 earnings will be very weak due to some
contracts signed during the extremely weak bus market in the
couple of years after the financial crisis. Going forward,
management feels the current bidding environment is "normalizing"
and they have been able to raise their prices in some cases.
Overall, the company seems to be setting the stage for long
term growth, as they consolidate their acquisitions and roll out
new products, such as their recently developed mid-sized ("MiDi")
bus for private shuttle fleets. Several insiders made significant
purchases of stock following the annual report, reconfirming my
view that short term weakness is providing a buying opportunity
before what I expect to be strong performance in the coming few
Energy performance contracting firm Ameresco announced its annual
results on March 13th. Ameresco had disappointing Q4
earnings due to a low margin mix. More importantly,
management's outlook for 2014 does not anticipate improvement this
year. They may be being cautious, but after two years of
saying that a turn around in the performance contracting climate
is just around the corner, it's no surprise the stock sold off
sharply on the weakened outlook.
Even if investors have been losing faith in the company, founder,
Chairman, CEO, and largest shareholder George Sakelleris bought
246,000 shares of stock between $7.50 and $8 following the
earnings announcement, demonstrating he still has faith in the
firm's long term prospects.
9. MiX Telematics Limited (NASD:MIXT).
Current Price: $10.73. 12/26/2013 Price: $12.17. Annual Yield: N/A. Low Target: $8. High Target: $25.
YTD Total US$ Return: -11.8%
Global provider of software as a service fleet and mobile asset management, MiX Telematics, continued to fall along with other emerging market stocks. I continue to feel the decline is unwarranted due to the global nature of MiX's revenues. Declines in the South African Rand help the company more than hurting it because they reduce expenses much more than revenue.
10. Alterra Power Corp.
Current Price: C$0.31 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: 10.7% . YTD Total US$ Return: 7.0%.
Renewable energy developer and operator Alterra Power announced
2013 annual results. There were few surprises. Going
forward, the company will be focusing its development efforts on a
recently acquired Texas wind farm rather than its British Colombia
hydropower projects, where BC Hydro has been working to reduce its
commitment to new power projects rather than bring projects on
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: -18.8% . YTD Total US$ Return: -21.5%.
Geothermal power developer Ram completed the remediation of its
San Jacinto-Tizate project on January 22nd, and stated it would to
complete a plant capacity test in March. We're still
awaiting the results of that test, and the stock has been selling
off because of the delay.
Finavera Wind Energy
Current Price: C$0.12 12/26/2013 Price: C$0.075. Annual Yield: N/A. Low Target: C$0.20. High Target: C$0.60.
YTD Total C$ Return: 60% . YTD Total US$ Return: 54.7%.
Wind project developer Finavera announced the execution of
agreements with BC Hydro to transfer the Electricity Purchase
Agreement for its Meikle Wind Energy Project to Pattern Energy
This was excellent news for Finavera's long-suffering investors,
not the least because the project had been re-designed to
accommodate 184 MW of wind turbines, a configuration which will
ensure the largest possible payment from Pattern.
I looked into the details
of this deal here, estimating that the company was worth
between C$0.21 and C$0.40 a share, most likely somewhere in the
lower half of that range.
I'm disappointed that Ameresco's investors will likely need yet more
patience before we see significant signs of life return to the
company's stock. However, Primary Energy, Capstone
Infrastructure, and Finavera Wind Energy all showed this month that
long patience is sometimes rewarded.
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 guaranteed.