By Tom Konrad, Ph.D., CFA
With the launch of my (green dividend income focused) hedge fund early this year, I had to take a hiatus from publishing my annual list of 10 Clean Energy Stocks that I feel will do well in the coming year. Since my duty to clients takes precedence over readers, I could not tell people about stocks I liked before buying them for the fund.
As we complete the first half of the year, the fund is now largely invested, although I am still keeping some buying power back in anticipation that the overall market could easily fall further, leading to even better opportunities than we see today.
Since I’m not actively buying in the fund, I am now free to share my top picks with the public. Like everything in my hedge fund, these are all companies that, in my judgment, reduce the fossil fuel use, carbon emissions, or other pollution in the overall economy by operating and expanding their businesses.
I probably won’t be able to publish monthly updates to this list as I have in the past. If I am actively buying any one of these stocks, I will not be writing about it, and I will not want to tip my hand by writing about the others while just omitting one or two. But I plan to publish intermittent updates on the whole list when I can, and will do a recap in July 2023 to look at how the list did in the past year and why.
Valuation and Timing
The recent declines of the stock market are finally giving us decent valuations, better than anything we’ve seen since the short-lived market bottom in early 2020. That’s not to say that the market will not fall further, but it’s likely that many individual stocks are currently seeing their lows.
Whenever I see a stock I like trading at a good valuation, I buy some. If it falls further because of a continued general market decline (as opposed to bad news at the company itself), I buy more. These ten stocks have all reached the “buy more” stage. If the market keeps falling, I’ll soon be ready to invest everything I can, and even start using uncovered short puts to take on a bit of leverage.
10 Clean Energy Stocks for 2022-2023: The List
By Tom Konrad, Ph.D., CFA
Ten Green Stocks I expect to do well over the next year (7/1/2022 to 6/30/2023)
Prices are as of the close on 6/30/2022. 1€ = $1.0482, $1 = 7.0972 DKK = C$1.2876
Clean Transportation Stocks
- MiX Telematics (NASD:MIXT – $8.14) – A provider of vehicle tracking and telematics to large international vehicle fleets. The company is green because it both reduces accidents and fuel usage for its customers.
- Valeo, SA (FR.PA – €18.42 or US ADR: VLEEY or US foreign stock ticker: VLEEF) – a provider of electrified drive trains, sensors, and comfort systems for the automotive industry.
- NFI Industries (NFI.TO C$13.39 or US foreign stock ticker: NFYEF) – A leading international bus and motorcoach manufacturer selling a large and growing number of electrified vehicles. N
Green Building Stocks
Rockwool A/S (ROCK-B.CO 1597.50 DKK and ROCK-A.CO or US foreign stock ticker: RKWBF) – a manufacturer of fire and mold resistant building insulation.
Hannon Armstrong Sustainable Infrastructure (NASD:HASI) – A financier of solar, wind, biogas, and energy efficiency installations.
Green Municipal Infrastructure Stock
Veolia (VIE.PA €23.29 or US ADR: VEOEY or US foreign stock ticker: VEOEF) – A large international developer and operator of municipal infrastructure such as water, wastewater, recycling, and environmental remediation.
Enviva, Inc (EVA $57.22) – A vertically integrated wood pellet supplier to European and Japanese markets, where they mostly displace coal in electricity generation.
Umicore, SA (UMI.BR €33.32 or US ADR: UMICY or US foreign stock ticker: UMICF) – A vertically integrated recycler of hard-to-recycle and specialty metals used in clean energy industries such as batteries, solar, wind, and catalytic converters.
Green Electricity (Yieldcos)
Avangrid (NYSE: AGR $46.12) – one of the top producers and developers of renewable electricity in the United States.
Atlantica Sustainable Infrastructure (NASD: AY $32.26) – an international owner and developer of renewable energy, efficient natural gas, electric transmission line and water assets.
DISCLOSURE: Long all stocks in the 10 Clean Energy Stocks for 2022/23 portfolio.
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.
What is the case for buying Rock-A.CO as opposed to Rock-B.CO? The two seem to have had rather different long-term trajectories.
They seem to be on the exact same trajectory (3% difference in performance over 5 years) as far as I can tell. B shares are much more liquid and the only ones that have an ADR, so I plan to track ROCK-B for the perposes of list performance. I suspect (but am not sure) that A shares have more voting rights (this is trpically the case when companies have two very similar share classes with one more liquid (thinks CWEN and CWEN-A). I’ve been buying the A shares preferentially for that reason, but thanks for the prompt-I just sent a note to investor relations to find out for sure.
IR got back to me. As suspected, the only differences are liquidity and voting rights. A shares have 10x the voting rights of B shares.
Putting an insulation company in the list looks like an excellent idea to me: no energy is greener than that which is not spent to begin with. It is also clear that rock wool is now a popular product – it is now standard in France, and anecdotal evidence suggests it is making inroads in the US.
At the same time, while it is less of a respiratory irritant than fiberglass (which is itself much better than asbestos, say), it remains an irritant. The jury is out on whether it has any measurable carcinogenic effects – presumably meaning, at this stage of the game, that such effects would have to be very slight – but some other concerns remain.
I’ve been reading up on this because I’m carrying out a renovation project. In the end, I decided to use a “natural” (cellulose-based) insulation material instead of rock wool for my bedroom and study. A friend of mine in upstate NY read up on fiberglass and rock wool, and decided to start switching towards rock wool; that sounds like a good idea, except he has an open box of rock wool in the garage – I’ve told him that’s not great, but I doubt he will listen.
At any rate: perhaps we should look up at plant-based insulation materials as well?
When it comes to types of insulation, it’s really horses for courses… you want to use the right type for your application. On attic floors, it’s hard to beat blown-in cellulose. In walls, dense-pack cellulose is good. Home sheathing EPS, polyiso, XPS foam board. Where air-sealing is critical or there is limited space to achieve the required R-value like cathedral ceilings or the basement rim joist, closed cell spray foam or foam board sealed with spray foam. When you need fire or moisture resistance, rockwool is the choice. Fiberglass is not really best for anything.
But when it comes to insulation stocks, Rockwool is the only one I know where it’s a significant part of the company’s revenue. I’ve included a couple others in previous years, but they have both been bought out since. If you can find another one for me to consider, I’d be very interested. Johns-Manville is the closest I’ve currently found, but it’s more a general building construction material company.
(Right – I’ll use polyiso where I don’t have space. I also heard about moisture resistance from my Ithaca friend – it’s funny, in that plant-based insulation’s absorbing and releasing moisture is considered a *virtue* in France. Let me not veer off-topic, however…)
I’ll keep an eye out. I know several companies by now, but none that are publicly traded, AFAIK. I thought Fixit (which does aerogel-based products, not cellulose) might be, but I wasn’t able to find anything. I’ll get plant-based insulation from what looks like a medium-sized company that certainly isn’t publicly traded.
Aspen Aerogels (ASPN) is a publicly traded aerogel insulation company. I had forgotten about it because it is not profitable.
I don’t think it’s France so much as where you use the insulation. The ability to transpire moisture is good in an attic, where you want it to get out… not so much in a basement, where you want to keep it from getting in.