Tom Konrad CFA
The model portfolio ended the second quarter up 9.7%, compared to its broad market benchmark, which was up only 4.4%. Its clean energy benchmark is a 40/60 blend of its growth oriented benchmark and its income-oriented benchmark, matching the 4/6 ratio of growth and income stocks in the portfolio. These two benchmarks are discussed below. The blended benchmark fell 5.1%.
For the month of June, the portfolio gained 3.1%, compared to only 0.8% for the broad market IWM and a 6.2% decline of the blended benchmark.
Value/Growth and Income Sub-Portfolio Performance
The four stock value and growth sub-portfolio reversed most of its previous losses in June, up 7.4% for the month to end the first half down only 0.4% for the year. Its benchmark, the Powershares Wilderhill Clean Energy ETF (NASD: PBW), fell 3.8% for the month but remains in the black with a 2.3% gain for the first half.
The six stock income sub-portfolio inched up another 0.3% on top of its already impressive gains, ending up 16.4% year to date, despite rising interest rates. The income benchmark fared much worse. This benchmark was The Global Utilities Index Fund, JXI for the first 5 months, replaced by the more clean-energy oriented Global X YieldCo Index ETF (NASD:YLCO) when that began trading at the end of May. It dropping 5.3% for the month for a loss of 7.7% year to date, despite the fact that YLCO fared better than JXI in June.
The chart below (click for larger version) gives details of individual stock performance, followed by a discussion of the month's news for each stock.
The low and high targets given below are my estimates of the range within which I expected each stock to finish 2015 when I compiled the list at the end of 2014.
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.
6/30/2015 Price: $20.05. YTD Dividend: $0.52 YTD Total Return: 44.6%.
Sustainable infrastructure financier and Real Estate
Investment Trust Hannon Armstrong started the month strong, and I
hope some of my readers took the opportunity and followed my lead
by taking some gains as it briefly rose above $21. At that
point, Bank of America broke it's long climb by lowering
its rating to Neutral based on valuation. This is
in-line with my own assessment: I like Hannon Armstrong for the
long term, but, because of its much higher price than when it
began the year, no longer feel that it deserves to be such a large
part of my managed portfolios.
Cable Corp. (NYSE:BGC)
12/31/2014 Price: $14.90. Annual Dividend: $0.72. Beta: 1.54. Low Target: $10. High Target: $30.
6/30/2015 Price: $19.73. YTD Dividend: $0.18 YTD Total Return: 33.6%.
International manufacturer of electrical and fiber optic cable
General Cable Corp. rose strongly on the news that it had sold
the rest of its Asia Pacific operations for $205
million. This was a significant step in its ongoing
reorganization, which has the goals of simplifying its geographic
portfolio, reducing debt, and improving profitability.
Renewables Inc. (TSX:RNW,
12/31/2014 Price: C$11.48. Annual Dividend: C$0.84. Low Target: C$10. High Target: C$15.
6/30/2015 Price: C$12.36. YTD Dividend: C$0.39 YTD Total C$ Return: 11.1%. YTD Total US$ Return: 3.3%.
Unlike most of the other income picks, Yieldco TransAlta
Renewables fell 2% in June, deepening the undervaluation which
made me predict it would rise in the last update. The
decline was likely in sympathy with the larger, interest rate
related, decline of Yieldcos and utilities in general (down 5.3%
and 7.7%, as discussed above.)
Capstone Infrastructure Corp (TSX:CSE.
12/31/2014 Price: C$3.20. Annual Dividend C$0.30. Low Target: C$3. High Target: C$5.
6/30/2015 Price: C$2.99. YTD Dividend: C$0.15 YTD Total C$ Return: -1.9%. YTD Total US$ Return: -8.8%.
New Flyer Industries (TSX:NFI, OTC:NFYEF).
12/31/2014 Price: C$13.48. Annual
Dividend: C$0.62. Low Target: C$10. High
6/30/2015 Price: C$15.48. YTD Dividend: C$0.30 YTD Total C$ Return: 17.1%. YTD Total US$ Return: 8.8%.
Leading North American bus manufacturer New
Flyer got a very favorable write-up at Seeking Alpha,
including speculation that its Brazillian partner, Marco Polo,
might acquire the 80% of the company it does not already own in a
buy-out. I'm a little skeptical about such buy-out
speculation- I think both companies seem to be benefiting well
from the alliance as it is, but I agree that New Flyer remains an
inexpensive company with a dominant position in the North American
bus industry, which continues to rebound from a long slump.
12/31/2014 Price: €13.60. Annual Dividend: €0.61. Low Target: €12. High Target: €20.
6/30/2015 Price: €16.65. YTD Dividend: €0.61 YTD Total € Return: 26.9%. YTD Total US$ Return: 16.8%.
Despite Greek wobbles, bicycle manufacturer Accell Group, which
makes most of its sales in Europe, maintained its balance with the
stock up 2% for the month and 17% for the first half. The
company is a leader in e-bikes, and introduced
its own "mid-motor" (i.e. near the pedals so that the motor
can take advantage of the bike's gears) with hardware supplied by
are a premium option, offering better balance, efficiency,
and handling than the more common hub motors, but are more complex
and come with a higher price tag.
Alone among my three predictions for stocks to perform well in June, biodiesel producer FutureFuel did not disappoint. The company gained 8% for the month on the EPA's proposed biomass-based diesel volumes for 2014-2017, which were announced on the last trading day of May. I predicted that the targets, which were good news for biodiesel producers, would continue to propel the stock upward in early May. That turned out to be the case, and the stock stayed above $13 for most of the month before giving back some of its gains in the recent market turmoil.
The two remaining issues in the lessee's civil case against it will go to trial in August.
The lessees, Norfolk Southern (NSC) and Wheelling and Lake Erie (WLE) claim that Power REIT and its CEO, David Lesser, acted fraudulently when Power REIT was created and the Pittsburgh and West Virginia (P&WV) (which owns the leased property) became its subsidiary through a reverse merger. They are claiming damages in the amount of approximately $140 thousand based on interest on funds withheld by third parties, which NSC and WLE claim is due to Lesser's actions. It seems to me that if interest is owed, it would be by the third parties. But, given my track record predicting the court's rulings, readers should form their own opinions.
Energy service contractor Ameresco released the usual press
releases about new contracts. Given the timing of the rally,
my best guess is that the company attracted the interest of one or
more institutional investors by presenting
at ROTH London Cleantech Day.
10. MiX Telematics
12/31/2014 Price: $6.50. Annual Dividend: $0. Beta: 0.78. Low Target: $5. High Target: $20.
6/30/2015 Price: $7.77. YTD Dividend: $0. YTD Total South African Rand Return: 26.3%. YTD Total US$ Return: 19.8%.
The Annual General Meeting was also set for September 11th.
Last month, I predicted TransAlta Renewables, Capstone Infrastructure, and FutureFuel would advance in June. The sharp decline in utility and Yieldco stocks prevented the advance and led to a small decline in the first two, but FutureFuel advanced strongly, pulling the average gain to 1.1% for the three stocks. Over the past four months, I've managed to pick 7 out of 9 monthly winners, my average pick has advanced each month.
While I'm satisfied with both my overall track record and my monthly picks, I don't encourage readers to trade based on my monthly hunches: Transaction costs would probably cost more than my market timing would help. That said, for readers new to the list, these monthly picks have so far proven to be among the best stocks to buy if you have new money to invest.
Since the monthly picks have so far seemed useful, I'll continue my predictions. Although it did not work out last month, I'll be sticking with Capstone and TransAlta Renewables. Despite rising interest rates, both are trading at excellent valuations. Also, I feel the rapid decline of income stocks over the last couple months is due for a pause or even a small rebound.
Disclosure: Long HASI, CSE/MCQPF, ACCEL/ACGPF, NFI/NFYEF, AMRC, MIXT, PW, PW-PA, FF, BGC, RNW/TRSWF, REGI. I am the co-manager of the GAGEIP 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.